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This article was originally published in The Gray Sheet

Executive Summary

A House proposal to cap Medicare durable medical equipment reimbursement rates based on the median of national payments will be taken under consideration by the Senate Finance Committee in the next several weeks as it begins work on a fiscal 1994 budget reconciliation package. The House version of the budget reconciliation (H.R. 2264), passed on May 27 by a 219-213 vote, includes two sets of proposals to achieve savings in the Medicare DME program. Under the proposal developed by the House Energy and Commerce Committee, a national DME payment cap "based on the national median of all local payment amounts" would be put into effect in fiscal 1994, which begins Oct. 1, 1993. The version developed by the Ways and Means Committee, on the other hand, does not include the national median provision. Currently, DME reimbursement is calculated based on a weighted mean average. Differences between the two House DME proposals, as well as any differences in the House and Senate budget reconciliation bills, will be hammered out in a House/Senate conference after the Senate passes budget legislation. The Senate bill is expected to be marked up in the Finance Committee in the next several weeks before moving to the floor for consideration. The proposal for a national median-based DME fee schedule has been strongly opposed by DME suppliers since its appearance in President Clinton's budget plan in February ("The Gray Sheet" Feb. 22, p. 1). The National Association of Medical Equipment Suppliers plans to meet with Senate Finance Committee members in the coming weeks in an effort to ensure the provision is excluded from the Senate budget bill. Several other provisions of the administration's budget plan that were opposed by NAMES did not survive in the House bill. Proposals to require Medicare supplier competitive bidding and to allow the Health Care Financing Administration to adjust DME reimbursement levels based on "market factors" have both been dropped by the House. The Ways and Means Committee proposal includes a two-year overall payment update freeze on Medicare provider payments, a proposal the supplier industry likely would prefer over cuts that are targeted to specific programs such as DME. The Energy and Commerce reconciliation does not include an update freeze. Senate Finance Committee members, including Chairman Daniel Moynihan (D- N.Y.), are said to favor targeted program cuts instead of an update freeze. The House budget reconciliation contains a number of provisions to limit DME payments that were included in H.R. 11, a tax bill that was vetoed in November. For example, the Ways and Means proposal calls for creation of uniform national coverage and utilization review criteria for 200 medical equipment and supply items and for establishment of national payment limits for ostomy, tracheostomy and urological supplies. The Energy and Commerce version includes a "new provision" for determining payments of surgical dressings "under which payments are made in a lump sum in an amount equal to 80% of the lesser of the actual charge for the item or the national payment limit." Ways and Means Committee and Energy and Commerce Committee budget provisions also would move aspirators and nebulizers from the "frequent and substantial servicing" DME category to the "routinely purchased" category and would reduce payment for transcutaneous electrical nerve stimulators by 30%.

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