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This article was originally published in The Gray Sheet

Executive Summary

MEDICARE ORTHOTIC/PROSTHETIC DEVICE PAYMENT UPDATE FREEZE and enteral and parenteral supplies and equipment update freeze will save an estimated $472 mil. in fiscal years 1994 and 1995 under a House/Senate budget agreement. The budget compromise that emerged from the reconciliation conference Aug. 3 retains House provisions to "eliminate updates for orthotics and prosthetics and parenteral and enteral nutrients, supplies, and equipment" in 1994 and 1995. The Senate budget did not include these provisions. The Senate passed the budget by a 51-50 margin late on Aug. 6, with Vice President Gore casting the decisive vote. Senate approval clears the way for enactment of the measure (HR 2264) by President Clinton. The House narrowly passed the budget bill (HR 2264) in a 218-216 vote on Aug. 5. The package, designed to reduce the federal deficit by $496 bil., would trim a total of $55.8 bil. from the Medicare program over the next five years. The Senate had cleared Medicare cuts of $58.4 bil., the House $50 bil. ("The Gray Sheet" June 28, p. 5). In addition to the orthotic/prosthetic and enteral/parenteral update freezes, the bill contains a number of other cuts in the area of durable medical equipment. For example, the measure would base DME payment limits on the national median of local payments rather than a weighted mean average. The switch to a median-based fee schedule is expected to save $228 mil. The provision, which has been strongly opposed by DME suppliers, was included in both the Senate bill and the Energy and Commerce Committee's portion of the House bill. The House Ways and Means Committee version of the budget did not include a national median fee schedule proposal ("The Gray Sheet" June 7, p. 9). The measure would trim an additional $137 mil. from the Medicare budget by moving aspirators, nebulizers and ventilators "that are either continuous airway pressure devices or intermittent assist devices with continuous airway pressure devices" from the category of devices requiring frequent and substantial servicing. Accessories used with aspirators, nebulizers, and the specified ventilators would be reimbursed separately "as inexpensive or routinely purchased items." Intermittent positive pressure breathing systems will remain in the frequent servicing category. In addition to aspirators and nebulizers, the Senate measure would have moved all ventilators and intermittent positive pressure breathing systems out of the frequent servicing category. The budget measure also would subject ostomy supplies, tracheostomy supplies and urologicals to national payment limits. The devices currently are included in the prosthetics and orthotics fee schedule, which is based on regional payment limits. In addition, payment for surgical dressings "would be made in a lump sum in an amount equal to eighty percent of the lesser of the actual charge for the item or the national payment limit," according to the agreement. The two measures are expected to generate savings of $97 mil. Payment for transcutaneous electrical nerve stimulators would be reduced an additional 30% above the 15% reduction already in place, for an additional $16 mil. in budget cuts. Payment for intraocular lenses implanted at ambulatory surgery centers during or subsequent to cataract surgery, currently $200, would be cut to $150 effective Jan. 1, 1994. ASCs also face a two-year payment freeze under the bill. The two measures are expected to trim $629 mil. from the budget. Clinical laboratories will see $3.3 bil. in payment reductions under the budget, $1.2 bil. from a two-year update freeze and $2.2 bil. from a progressive three-year reduction in payments to 76% of the median by 1996. The conference bill also extends the prohibition on physician self-referral to a wide variety of health services. Current law bans physicians from referring patients to clinical laboratories in which they have ownership or compensation arrangements. The budget measure would extend the ban to services such as radiology and other diagnostic services, radiation therapy, DME, and home health services. The broader ban is expected to result in Medicare savings of $350 mil. Payments for home health services would be cut by $2.8 bil. under the measure by imposing a two-year freeze on cost limits for home health visits and eliminating additional payments for hospital-based home health agencies. Several proposals intended to reduce Medicare DME fraud and abuse were dropped in the conference agreement. House provisions requiring DME supplier certification and prohibiting use of multiple billing numbers were deleted, as were proposals to standardize certificates of medical necessity and require development of uniform national coverage and utilization review requirements for 200 items of medical equipment and supplies.

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