Medicare's cap on DME and oxygen: The finer points

Wednesday, January 31, 2007

On Nov. 9, 2006, CMS implemented a final rule that capped oxygen reimbursement at 36 months and DME reimbursement at 13 months--retroactive to Jan. 1, 2006. The final rule states that beginning Jan. 1, 2007, suppliers will be responsible for ensuring that the equipment they provide to beneficiaries will be in good working order for five years from the date of initial issue. Under Medicare's definition, five years represents the "useful life" of equipment. If equipment fails during this time, suppliers could be responsible for replacing it at their own expense. With that in mind, here are some of the final rule's finer points:
* This requirement will apply to capped rental equipment such as hospital beds, manual wheelchairs, CPAPs, nebulizers and oxygen equipment. Medicare will continue its policy of paying for replacement items when the item is lost or irreparably damaged; suppliers will be compensated for providing a new rental item if the item is needed as a result of circumstances beyond the supplier's control.
* Even though the 13-month DME cap and the 36-month cap for home oxygen reimbursement began Jan. 1, 2006, the new 5-year requirement, as explained in the final rule, kicks in for rental periods beginning Jan. 1, 2007. Therefore, items that began a rental period in 2006 are not affected by this requirement.
* If the carrier determines that an item will not last for five years, the supplier will be responsible for furnishing replacement equipment at no cost to the beneficiary or to the Medicare program. The final rule gives the carriers discretion to determine whether replacement equipment is warranted and whether the supplier will be financially responsible for furnishing the replacement equipment. In making the determination, carriers may consider whether repair costs will exceed 60% of the replacement cost. Replacement cost of a capped rental item is equal to 10 times the first month's rental fee schedule amount; replacement cost of oxygen equipment will be established by the carrier on a case-by-case basis. Therefore, if the carrier determines that repair costs will exceed 60% of the replacement cost, the carrier will likely require the supplier to replace the item at his own expense.
* Medicare will pay for "reasonable and necessary" replacement parts and labor for repairs that require a technician--as long as the item is not under warranty. Current Medicare payment rates are about $12 for every 15 minutes of labor; payment rates for parts are not generally known. Since Medicare has historically not paid for parts and labor for capped rental and oxygen equipment, it is difficult to predict what Medicare will pay under the new payment system. hme
Cara Bachenheimer is vice president of government relations for Invacare.