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This article was originally published in The Gray Sheet

Executive Summary

Payments for durable medical equipment under Medicare would be cut by $700 mil. over five years under the Clinton Administration's fiscal year 1994 budget proposal. The administration is asking Congress to "implement refinements [in Medicare reimbursement] to reduce excessive payments for durable medical equipment making Medicare policy more consistent and reasonable," according to an HHS document on the fiscal 1994 budget proposal. Although not specified in the budget document, the "refinements" proposed by the administration are apparently in reference to DME payment revisions suggested in the President's economic stimulus package ("The Gray Sheet" Feb. 22, p. 1). The economic plan recommended initiating competitive bidding by DME suppliers, adjusting DME fee schedules based on the national median, and allowing the Health Care Financing Administration to revise DME rates based on "market factors." These measures would trim $510 mil. in DME payments over four years, the administration estimates. At a March 31 House appropriations hearing, the National Association of Medical Equipment Suppliers opposed all three proposals. Richard Doherty, vice chair of NAMES' board of directors, also stated that the proposed $510 mil. in cuts were "in frightening addition to reimbursement reductions" of $80 mil. in 1990 and $215 mil. in 1991. DME payment reduction is among several Medicare Part B revisions being proposed in the FY 1994 budget. Changes in radiology, anesthesiology and pathology services reimbursement and a ban on physician self-referral are projected to save an additional $1 bil. between fiscal 1994 and 1998. The Clinton Administration is proposing to "move payment for radiology, anesthesiology, and pathology services from the Part B fee schedule to the Part A prospective payment system," according to an HHS budget document. The administration believes the move will save $600 mil. over five years by encouraging physicians and hospitals "to be cost-conscious, provide only medically necessary services, and eliminate the provision of marginal services." Extending physician ownership and referral prohibitions to "additional services, including radiation therapy and durable medical equipment" will save $400 mil. over the same time period by "reducing unnecessary utilization of services," according to the HHS document. The total budget request of $240 bil. for HCFA in 1994 reflects an increase of $27 bil. over the previous year. Spending for Medicare and Medicaid, projected to increase 12.5%, represents 22.5% of the total. The increase comes even though there are proposals totaling $2.5 bil. in outlay reductions in the budget, according to HHS. Cost containment measures include "slowing estimated baseline spending, controlling yearly program increases, and extending money-saving legislative provisions that otherwise expire." HHS says the goal in this area "is not only to reduce spending while preserving benefits, but improving and simplifying the delivery of health care services to Medicare and Medicaid recipients."

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