Senate Hearing on Overcharging Medicare for Medical Equipment

Senate Hearing on Overcharging Medicare for Medical Equipment

NAAOP

6/15/2002

M E M O R A N D U M

TO: OANDP-L

FROM: Peter Thomas, NAAOP General Counsel
      Dustin May, Director of Government Relations, PPSV

DATE: June 15, 2002

RE: Senate Hearing on Overcharging Medicare for Medical Equipment

On June 12, 2002, the Senate Appropriations Subcommittee on Labor, HHS,
Education, and Related Agencies held a hearing on Medicare payments for
medical equipment and supplies. The witnesses included:
- Janet Renquest, Inspector General, Department of Health & Human
Services;
- Leslie Aronovitz, director, Health Care Program, Administration and
Integrity Issues, General Accounting Office;
- Thomas Scully, Administrator, Centers for Medicare and Medicaid
Services
- David Williams, Director of Government Operations, Invacare
Corporation

NAAOP attended this hearing and offers this summary of the proceedings.
The hearing focused on a report from the Department of Health and Human
Services (HHS) Office of the Inspector General (IG) that was published
in response to a request by Senator Tom Harkin (D-IA), Chairman of the
Subcommittee, on Medicare payment for durable medical equipment (DME)
and supplies as it compares to other payers.

Both Chairman Harkin and Ranking Member Arlen Specter (R-PA) expressed
support for competitive bidding as a means to hold down costs to the
Medicare program and to provide savings to beneficiaries. The IG report
was used as a justification by Chairman Harkin to expand competitive
bidding beyond two demonstration sites authorized under the Balanced
Budget Act of 1997. Throughout the hearing, Senator Harkin also
referred to the oxygen reimbursement debate several years ago as further
reason competitive bidding for DME and medical supplies would save money
for Medicare and beneficiaries.

The IG report contains estimated savings to the Medicare program if
purchased at the rates obtainable by other payers such as the Veterans
Administration (VA), Medicaid, the Federal Employees Health Benefits
Program (FEHBP), or on the retail market. The report highlights 16
particular DME and supply items, no orthotic or prosthetic devices or
services. For instance, as Chairman Harkin described with a box of
blood glucose testing strips (Medicare Code A4253), Medicare pays a
median price of $38.42, whereas the VA pays $19.50-a 49% difference.
Also included on the list are two types of wheelchairs, the standard
(K0001) and the motorized/programmable wheelchair (K0011). The standard
wheelchair is 78% lower in price than Medicare reimbursement when
purchased by the VA and the motorized/programmable wheelchair is 47%
less.

CMS Director Scully spoke about the need to reestablish inherent
reasonableness authority to control Medicare overpayments. He then said
that CMS is promulgating a rule which will be published soon to
reestablish the authority; such a rule is required by law before
inherent reasonableness may be used to alter reimbursement rates.

Chairman Harkin was adamant about the need to prevent Medicare from
overpaying for DME and medical supplies and repeatedly invoked
competitive bidding as the answer. He sharply disagreed during
questioning with Scully as to why Medicare cannot simply source DME and
supplies directly from the VA. Scully responded that various antitrust
issues would pose a problem since the VA represents 2-5% of market share
and Medicare can represent up to 100% in a given market. He stressed
that Congress should not have any unrealistic expectations for savings,
such as those obtained by the VA. Also, Scully often praised the two
DME competitive bidding demonstration projects in San Antonio, TX, and
Polk County, FL as being success stories of how competitive bidding has
worked, bringing reimbursements down by 22%.

Absent from the hearing was any specific discussion of orthotics and
prosthetics, a good sign that the message to exempt O&P from competitive
bidding is beginning to take hold. In fact, Chairman Harkin remarked
early on in the hearing that competitive bidding should not include
items of a customized nature and that he was strictly speaking of
items that are mass produced, such as saline solution and glucose
testing supplies. When Scully discussed a hypothetical competitive
bidding system for hip replacements, Harkin was quick to distinguish the
necessity to exclude services as opposed to generic equipment.

Ms. Aronovitz from the General Accounting Office testified about the
barriers CMS faces in properly reimbursing for DME and supplies. On
several occasions she stressed the fact that CMS has no flexibility to
adjust reimbursement consistent with market rates nor does CMS have
access to a credible price database that can provide reference prices
from the VA, Medicaid, and the FEHBP.

David Williams, Director of Government Operations for Invacare,
testified after the panel of government witnesses to represent the DME
industry. Mr. Williams used a power wheelchair as he appeared before
the committee. He spoke about the nature of the current reimbursement
system and how economies of scale, such as the VA, can have a lowering
effect on prices. He also said the companies selling to Medicare must
supply personnel to do fittings, patient training and adjustments on the
use of various items at no extra charge, but the costs of such services
performed by the VA after it buys the items are not included in the
price used in the comparison. However, he stated, when Medicare is the
dominant purchaser of DME, competitive bidding for certain supplies can
cause less choice for the consumer and at worst put innovative companies
out of business.

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