Senators suggest taxing manufacturers to help pay for healthcare reform

Sunday, September 13, 2009

WASHINGTON - The Senate Finance Committee blind-sided HME manufacturers last week when it proposed taxing them and all other medical device makers $4 billion a year to help pay for healthcare reform.

"That provision was a surprise to many, especially to those in the manufacturing area, because that has not been talked about in any way in the past," said Seth Johnson, Pride Mobility's vice president of government affairs. "

The portion of the Senate "framework" for healthcare reform that refers to the tax reads as follows:

Medical device manufacturers fee: Under this proposal, an annual fee raising $4 billion would be imposed on the medical devices manufacturing sector beginning in 2010. The fee would be allocated by market share in the United States.

"We (estimate) that the U.S. device market is about $131 billion, and companies would be responsible for their portion of that $4 billion based on their market share," said Cara Bachenheimer, Invacare's senior vice president of government relations. "On average, it would be about a 3.1% tax, which is not insignificant."

Johnson said that any tax would just increase the overall cost of health care.

"It seems counterproductive to many of Congress's and the Administrations goal as far as healthcare reform is concerned," he said.

The Finance Committee's framework for a healthcare reform also includes numerous other sections that would cause "severe hardships" for HME stakeholders if implemented, according to AAHomecare.

Here is AAHomecare's analysis of the framework:

Oxygen payment reforms: This provision would repeal the 36-month rental cap, reduce the current rental amount paid through the fee schedule for stationary equipment and contents, and increase the rental amount paid through the fee schedule for portable oxygen contents.

Though not contained in the framework released by Sen. Max Baucus, D-Mont., AAHomecare believes that the Finance Committee is looking to modify monthly payment rates as follows: concentrator-only rate: $80; traditional combined portable rate: $185 ($80 concentrator + $105 portable add-on); oxygen generating portable equipment rate: $227.

In addition, AAHomecare believes the oxygen proposal under consideration in the Finance Committee would save approximately $1 billion in savings over 10 years, define services and patient protections along the lines of what is being discussed in the House oxygen reform proposal, keep inflation updates intact in future years, and maintain oxygen as a competitively bid category. 

Power wheelchair payment improvement: This provision would eliminate the option for a wheelchair supplier to purchase a power-driven wheelchair with a lump-sum payment (except for complex, rehabilitative power wheelchairs). Though not contained in the framework, AAHomecare believes that the Finance Committee is looking to front-load monthly rental payments in the first few months of rental under the 13-month rental period.

Durable medical equipment outlier payment rule: This provision would reduce payments in non-competitive-bidding metropolitan statistical areas (MSAs) with spending levels that exceed a benchmark of 110% of the national average. MSAs above the benchmark would have payment rates reduced by an amount equal to 75% of the difference between its spending and the benchmark. This appears to allow CMS to apply competitive bidding rates in non-bid areas. (AAHomecare is seeking additional information to confirm this analysis.)

Accreditation exemption: Small pharmacies would be exempt from the Oct. 1, 2009, DME accreditation requirement in Medicare.

Part B productivity adjustments: This provision would reduce payment updates for Part B providers by an estimate of increased productivity. We believe the effect of this proposal would be to reduce the CPI update for DME by about 1% each year. (AAHomecare is seeking additional information to confirm this analysis.)

Fraud, waste, and abuse: Fraud, waste, and abuse in Medicare and Medicaid would be reduced by a series of provisions to prevent and deter wasteful or fraudulent activity as well as assist in the identification and prosecution of such activity once it has occurred. These policies include: a new enrollment process for providers and suppliers, including an application fee; data matching and data sharing across federal health care programs; increased civil monetary penalties; increased authority to suspend payment during creditable investigations of fraud; and new procedures to disclose and repay overpayments.

Medicare Commission: This provision would establish an independent Medicare Commission (MC) that would submit proposals to Congress to extend Medicare solvency and improve quality in the Medicare program. Congress would have an opportunity to amend the proposal or pass an alternative proposal with an equivalent amount of budgetary savings. Should Congress not pass an alternative measure, the Secretary of HHS would be required to implement the provisions included in the original MC proposal.