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:
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Identification of types of DME and supplies that would be appropriate for bidding under such a program.
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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.
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Recommendations on how such a program could be phased in and on what geographic level bidding would be most appropriate.
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In addition to price, recommendations on criteria that could be factored into the bidding process.
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Recommendations on how suppliers could be compensated for furnishing and servicing equipment and supplies acquired under such a program.
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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.
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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.
