OIG/CMS support capped rental for O2

Sunday, October 31, 2004

WASHINGTON - The OIG’s Medicare oxygen report not only compared pricing between Medicare, FEHPB and Medicare+Choice plans but also sought information concerning alternative payment rates and methodologies for oxygen equipment.

In other words, the OIG checked out the viability of moving oxygen concentrators to capped rental, a proposition that one recently retired supplier deemed “ugly, very dangerous, and not really in the best interest of the government.”

Regarding capped rental arrangements for oxygen, the OIG obtained detailed information from just two plans. (Comparatively, the OIG looked at payment rates for concentrators at 49 plans.)

One plan considered the item purchased after 10 months and then allowed $400 annually for maintenance and repair. A Medicare+Choice plan pays $100 per month for the first 10 months, and then $30 per month thereafter.

CMS likes the idea. In an Aug. 19 letter to the OIG, CMS Administrator Mark McClellan wrote that CMS agreed “that the monthly payments for oxygen equipment be capped at some point after the average purchase price of the equipment has been exceeded.”

To make such a change, Congress would have to pass an amendment to section 1834 of the Social Security Act. Under that scenario, CMS would continue making payments for the oxygen contents of gas and liquid systems.

Suppliers say capped rental makes no sense for oxygen equipment.

“The equipment is a fraction of the total cost of serving the patient,” said Peter Kelly, president of Pacific Pulmonary Services in Novato, Calif. “There are refills, service calls, maintenance, checking the concentrators, replacing the cannulas every couple of weeks. The service costs are so high.”