Now on to the Senate

WASHINGTON — As political pundits debate the major
provisions of the House of Representatives’ health reform
legislation, passed by a narrow vote of 220-215 Nov. 7, home care
advocates parsed out the provisions in the $1.05-trillion bill that
affect the HME industry.

An analysis of the Affordable Health Care for America Act (H.R.
3962) from Cara Bachenheimer, senior vice president of government
affairs for Invacare, Elyria, Ohio, highlights nine areas of
particular concern to DME providers. Bachenheimer outlined the
following points:

1) Excise tax on medical device manufacturers (Section
552)

This provision would impose a 2.5 percent excise tax on medical
devices sold for use in the U.S. (See Choose Your Poison with DME Excise
Tax, Nov. 6.) The language states, “there is hereby imposed on
the first taxable sale of any medical device a tax equal to 2.5
percent of the price ….” Taxable sale means the first sale
(at the point of sale) for a purpose other than for resale, after
production, manufacture or importation. The tax would not apply to
exported devices or to “retail” sales.

2) GAO report to examine competitive bidding for HME
manufacturers (Section 1149B)

The provision would require the Government Accountability Office
(GAO) to evaluate the establishment of a competitive bidding program for
manufacturers of durable medical equipment and supplies. The report
would be due to Congress within one year of the law’s enactment.
(See
Competitive Bidding for Manufacturers?, Oct. 30.) The GAO study
mandated by the bill would include the following:

• Identification of types of DME and supplies that would be
  appropriate for bidding under such a program.

• Recommendations on how to structure such an acquisition program
  in order to promote fiscal responsibility while also ensuring
  beneficiary access to high-quality equipment and supplies.

• Recommendations on how such a program could be phased in and on
  what geographic level bidding would be most appropriate.

• In addition to price, recommendations on criteria that could be
  factored into the bidding process.

• Recommendations on how suppliers could be compensated for
  furnishing and servicing equipment and supplies acquired under such
  a program.

• Comparison of such a program to the current competitive bidding
  program under Medicare for durable medical equipment, as well as
  any other similar federal acquisition programs, such as the General
  Services Administration’s vehicle purchasing program.

• Any other consideration relevant to the acquisition, supply and
  service of durable medical equipment and supplies that is deemed
  appropriate by the Comptroller General.

3) Oxygen policy changes (Section 1147)

“Restoring the 36-Month Rental Period in the Case of
Provider Bankruptcy.”

In the case of a provider of oxygen who is declared bankrupt and
whose assets are liquidated, and if at the time of bankruptcy more
than 24 months of rental payment have been made, the beneficiary
may begin a new 36-month rental period with another provider of
oxygen.

“Ensuring Supply of Oxygen Equipment.”

The provision states that once a Medicare beneficiary has
reached the 27th month of oxygen service, the oxygen provider
furnishing equipment and services is responsible for the
beneficiary, either directly or through other arrangements, during
the remaining period of medical need for the remainder of the
useful life of the equipment, even if the beneficiary relocates.
This provision would not apply if another supplier has accepted
responsibility for continuing to furnish oxygen during the
remainder of the useful life period. The provision would be
effective upon enactment and would apply to beneficiaries for whom
the 27th month of continuous oxygen use occurs on or after July 1,
2010.

4) Elimination of first-month purchase option for standard
power wheelchairs (Section 1141)

The provision would eliminate the first-month purchase option
for power-driven wheelchairs, but would not apply the provision to
“complex rehab” power wheelchairs, which are defined as power
wheelchairs classified within the Group 3 or higher category. The
provision would be effective Jan. 1, 2011, and would apply to
wheelchairs furnished on or after that date.

5) Accept or decline of ownership of group 3 support surfaces
after rental cap (Section 1141A)

This provision would add the option for Medicare beneficiaries
to take ownership of Group 3 support surfaces after the 13-month
capped rental period ends. The bill states that “During the 10th
continuous month during which payment is made for the rental of a
Group 3 Support Surface under clause (i), the supplier of such item
shall offer the individual the option to accept or reject transfer
of title to a Group 3 Support Surface after the 13th continuous
month during which payment is made for the rental ….”

6. Limited exemption from surety bond for certain suppliers
(Section 1147)

DME suppliers that exclusively supply eyeglasses or contact
lenses would be exempt from the surety bond requirement, as long as they
have been a Medicare supplier for at least five years and have had
no adverse actions imposed on them.

7) Accreditation exemption for certain pharmacies (Section
1147)

DME suppliers/pharmacies that exclusively provide diabetic
testing supplies, canes, or crutches would be exempt from the
accreditation requirement. In addition, pharmacies that had
submitted an application for accreditation by Aug. 1, 2009, would
be deemed to meet the accreditation requirement until they receive
their accreditation. These pharmacies would also be deemed to meet
the accreditation requirement for purposes of submitting bids under
the DME competitive bid program.

8) Productivity adjustments (reduced CPI updates) (Section
1131)

This provision would implement annual productivity adjustments
(reductions) for home medical equipment, which would have the
effect of reducing payment levels by an unknown amount.

9. HME included in minimum essential benefits package (Section
222)

This provision states that durable medical equipment,
prosthetics, orthotics and related supplies would be included in
the minimum essential benefits package that qualified health
insurance plans must cover.

Industry Reacts

Industry reaction to the House bill was swift.

“The bill that narrowly passed the House speaks directly to the
way our industry has been targeted under reform,” said Georgie
Blackburn, vice president, government relations and legislative
affairs for Blackburn’s, Tarentum, Pa. “From the excise tax that is
likely to be passed on, (at least partially) to providers, causing
our costs to rise, to the elimination of the first-month purchase
option which impacts our cash flow, to the idea of a competitive
bidding program for manufacturers. All this makes it evident there
is a mission to reduce the size of the industry and reduce CMS’
costs at the risk of patient access to products, and the risk of
negatively affecting local economies.”

With limited time and resources, Seth Johnson, vice president of
government affairs for Pride Mobility Products, Exeter, Pa.,
believes the industry should focus on provisions that remain under
consideration in the Senate bill. He urged providers to
collectively express concern with the impact an excise tax on
medical devices would have on the DME segment, which is largely
tied to fixed Medicare payments.

“The excise tax provision is essentially another reduction for
the industry,” explained Johnson. “Senate and House leaders are
continuing to negotiate on this tax provision, and the final bill
will likely be a reflection of those negotiations. In addition, the
provision to eliminate the first-month purchase option for standard
power wheelchairs also remains in play as the Senate is looking to
complete work on its legislation.

“The industry has heard from Senate leaders that they remain
open to inserting a budget-neutral alternative that would preserve
the purchase option, while providing some level of savings,” added
Johnson. “We are working closely with Sen. Arlen Specter, D-Pa.,
and others to advance such an alternative during consideration of
the Senate legislation. Lastly, the industry needs to remain
vigilant in monitoring the development of the final legislation to
ensure no further reductions to oxygen or other DME are included
later in the process.”

Although Rose Schafhauser noted most of the House bill
provisions would have a negative effect on HME, she is particularly
concerned with the first-month purchase option elimination, the
manufacturer excise tax and productivity adjustments. “Providers
just can’t take any more cuts,” said Schafhauser, executive
director of the Midwest Association for Medical Equipment
Suppliers. Regarding stripping the purchase option for PWCs, she
said, to expect providers to wait for payment on an expensive item
that they have to pay for up front is a “big financial burden.” And
an excise tax that “we would have to assume” would be passed on to
providers would only increase their costs in an environment of
declining reimbursements.

As for exploration of competitive bidding for manufacturers,
Schafhauser said, “Although [it is] just a study at this juncture
and could be a ways out, competitive bidding in this industry,
period, is just not warranted for an industry that is this
small.”

While House approval moves the legislative process forward,
attention on reform of the nation’s health care system now shifts
to the Senate. But as debate continues, Bachenheimer reminded, the
House and Senate “will eventually have to reconcile their two
versions, and the final legislation could vary greatly from that
approved by the House.”

She said final action by both chambers is now expected in
January 2010.