WASHINGTON — Late March 21, the U.S. House of Representatives approved the Senate health care reform bill, the Patient Protection and Affordable Care Act, along with a reconciliation bill that makes changes to the Senate legislation.
After President Obama signs the measure, which could be as early as tomorrow, the Senate is expected to begin debate on the reconciliation bill.
According to Cara Bachenheimer, senior vice president of government relations for Invacare, Elyria, Ohio, that debate could be dominated by a series of procedural challenges from Republicans under the rules that govern the budget reconciliation process. Under the reconciliation rules, 51 votes are required for passage in the Senate.
As far as its impact on HME, Bachenheimer said, the reconciliation bill contains "few significant changes to the underlying Senate bill that directly impact the DME industry" with one notable exception: The reconciliation bill would replace the medical device tax provision in the Senate bill with a different provision that delays the tax until 2013 and exempts Class 1 devices (like canes and walkers) and other items that the HHS Secretary deems a "retail" item purchased for individual use.
Bachenheimer said details of the new provision are “really not 100 percent clear. There remains the possibility that DME items will be exempt under the ‘retail’ exemption, but we will have to await the Treasury secretary’s determination of what products will be classified as ‘retail.’”
The Senate bill includes a $2 billion-a-year tax on medical device makers that Invacare Chairman and CEO Mal Mixon has said would send more manufacturing jobs offshore and curtail the industry's research and development.
The Senate bill also includes an expansion of Round 2 of competitive bidding, elimination of the first-month purchase option for standard power wheelchairs and elimination of planned CPI increases for HME, none of which are changed in the reconciliation bill.
Following is Bachenheimer's explanation of the new device tax provision and others in both bills affecting HME.
In the reconciliation bill
(passed by the House with Senate debate expected this week)
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Excise tax on medical device manufacturers. Delays the tax by three years to 2013 and converts the industry fee to an excise tax on the first sale for use of medical devices at a rate of 2.3 percent. Exempts from the tax Class I medical devices, eyeglasses, contact lenses, hearing aids, and any device of a type that is generally purchased by the public at retail for individual use. The tax is tax-deductible and would apply to sales of covered devices that occur after Dec. 31, 2012.
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Funding to fight fraud, waste and abuse. Increases funding for the Health Care Fraud and Abuse Control Fund by $250 million over the next decade. Indexes funds to fight Medicaid fraud based on the increase in the Consumer Price Index.
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90-day period of enhanced oversight for initial claims of DME suppliers. Requires a 90-day period to withhold payment and conduct enhanced oversight in cases where the HHS Secretary identifies a significant risk of fraud among DME suppliers.
In the Patient Protection and Affordable Care Act (H.R. 3590)
(passed by the Senate and House of Representatives)
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Annual fee on manufacturers and importers of medical devices. This provision would impose an annual fee on the medical device manufacturing sector beginning in 2011, based on 2010 sales. The tax would raise $2 billion starting in 2011, and $3 billion starting in 2017. This non-deductible fee would be allocated across the industry according to market share. The fee would not apply to any sale of a Class I product or any sale of a Class II product that is primarily sold to consumers at retail for not more than $100 per unit (under the FDA product classification system).
Small manufacturers, defined as those companies with sales of medical devices in the U.S. of $5 million or less, would be exempt, and firms with U.S. sales between $5 million and $25 million would pay the tax on 50 percent on the sales.
The Secretary of the Treasury would require manufacturers to file an annual report of its covered domestic sales for the prior calendar year. The Secretary would establish individual assessments by determining the relative market share for each covered entity. A covered entity's relative market share would be the entity's covered domestic sales as a percentage of the total reported covered domestic sales for all covered entities.
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Expansion of Round 2 and beyond of the competitive bidding program. This provision will expand Round 2 of the competitive bid program by 21 additional metropolitan areas. It also requires the HHS Secretary to bid all areas of the country or apply bid rates nationwide by 2016.
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Elimination of the first-month purchase option for standard power wheelchairs. Effective for services beginning Jan. 1, 2011, beneficiaries will no longer have the option to have Medicare purchase a standard power wheelchair in the first month of medical need. Instead, the Medicare program will pay on a rental basis for 13 months, and ownership will transfer at that time. DME suppliers will be paid 15 percent of the purchase price in months one through three, and 6 percent of the purchase price in months four through 13.
Complex rehab power wheelchairs will retain the first month purchase option. This provision will not apply to any contracts entered into prior to Jan. 1, 2011, under the competitive bid program.
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Elimination of CPI increases; imposition of annual productivity adjustment. The provision will eliminate 2 percent add-on payment (above CPI) for DME in 2014 that Congress provided for in last year's Medicare Improvements for Patients and Providers Act. Instead, DME fee schedules updates will be reduced each year by a "productivity adjustment" estimated to result in a minus 1 percent applied to the annual update factor for DME items.
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Accreditation exemption for certain pharmacies. This provision will exempt from the accreditation requirement pharmacies with less than 5 percent of revenues from Medicare DMEPOS billings until the Secretary of HHS develops pharmacy-specific standards.