PAYMENTS FOR DURABLE MEDICAL EQUIPMENT, PROSTHETIC DEVICES, ORTHOTICS, AND PROSTHETICS.

SEC. 4062. PAYMENTS FOR DURABLE MEDICAL EQUIPMENT, PROSTHETIC DEVICES, ORTHOTICS, AND PROSTHETICS. (a) 1-Year Freeze on Charge Limitations.— (1) In general.— In imposing limitations on allowable charges for items and services (other than physicians’ services) furnished in 1988 under part B of title XVIII of such Act and for which payment is made on the basis of the reasonable charge for the item or service, the Secretary of Health and Human Services shall not impose any limitation at a level higher than the same level as was in effect in December 1987. (2) Transition.— The provisions of section 4041(a)(2) (other than subparagraph (D) thereof) of this subtitle shall apply to suppliers of items and services described in paragraph (1), and directories of participating suppliers of such items and services, in the same manner as such section applies to physicians furnishing physicians’ services, and directories of participating physicians. (b) Amount and Frequency of Payment for Durable Medical Equipment, Prosthetic Devices, Orthotics, and Prosthetics.— Part B of title XVIII of the Social Security Act is amended by inserting after section 1833 the following new section: “special payment rules for particular services “Sec. 1834. (a) Payment for Durable Medical Equipment, Prosthetic Devices, Orthotics, and Prosthetics.— “(1) General rule for payment.— “(A) In general.— With respect to a covered item (as defined in paragraph (13)) for which payment is determined under this subsection, payment shall be made in the frequency specified in paragraphs (2) through (7) and in an amount equal to 80 percent of the payment basis described in subparagraph (B). “(B) Payment basis.— The payment basis described in this subparagraph is the lesser of— 101 STAT. 1330–101 “(i) the actual charge for the item, or “(ii) the payment amount recognized under paragraphs (2) through (7) of this subsection for the item; except that clause (i) shall not apply if the covered item is furnished by a public home health agency (or by another home health agency which demonstrates to the satisfaction of the Secretary that a significant portion of its patients are low income) free of charge or at nominal charges to the public. “(C) Exclusive payment rule.— This subsection shall constitute the exclusive provision of this title for payment for covered items under this part. “(2) Payment for inexpensive and other routinely purchased durable medical equipment.— “(A) In general.— Payment for an item of durable medical equipment (as defined in paragraph (13)(A))— “(i) the purchase price of which does not exceed $150, or “(ii) which the Secretary determines is acquired at least 75 percent of the time by purchase, shall be made on a rental basis or in a lump-sum amount for the purchase of the item. The payment amount recognized for purchase or rental of such equipment is the amount specified in subparagraph (B) for purchase or rental, except that the total amount of rental payments with respect to an item may not exceed the payment amount specified in subparagraph (B) with respect to the purchase of the item. “(B) Payment amount.— For purposes of subparagraph (A), the amount specified in this subparagraph, with respect to the purchase or rental of an item furnished in a carrier service area— “(i) in 1989 is the average allowed charge in the area for the purchase or rental, respectively, of the item for the 12-month period ending on June 30, 1987, increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 6-month period ending with December 1987; or “(ii) in a subsequent year, is the amount specified in this subparagraph for the preceding year increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of that preceding year. “(3) Payment for items requiring frequent and substantial servicing.— “(A) In general.— Payment for a covered item (such as ventilators , aspirators, IPPB machines, and nebulizers) for which there must be frequent and substantial servicing in order to avoid risk to the patient’s health shall be made on a monthly basis for the rental of the item and the amount recognized is the amount specified in subparagraph (B). “(B) Payment amount.— For purposes of subparagraph (A), the amount specified in this subparagraph, with respect to an item or device furnished in a carrier service area— “(i) in 1989 is the average allowable charge in the area for the rental of the item or device for the 12-101 STAT. 1330–102 month period ending with June 1987, 3333Copy read “June, 1987,” increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 6-month period ending with December 1987; or “(ii) in a subsequent year, is the amount specified in this subparagraph for the preceding year increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of that preceding year. “(4) Payment for certain customized items.— Payment with respect to a covered item that is uniquely constructed or substantially modified to meet the specific needs of an individual patient shall be made in a lump-sum 3434Copy read “lump sum”. amount for the purchase of the item in a payment amount based upon the carrier’s individual consideration for that item, and for the reasonable and necessary maintenance and service for parts and labor not covered by the supplier’s or manufacturer’s warranty, when necessary during the period of medical need, and the amount recognized for such maintenance and service shall be paid on a lump-sum, as needed basis based upon the carrier’s individual consideration for that item. “(5) Payment for oxygen and oxygen equipment.— “(A) In general.— Payment for oxygen and oxygen equipment shall be made on a monthly basis in the monthly payment amount recognized under paragraph (9) for oxygen and oxygen equipment (other than portable oxygen equipment), subject to subparagraphs (B) and (C). “(B) Add-on for portable oxygen equipment.— When portable oxygen equipment is used, but subject to subparagraph (D), the payment amount recognized under subparagraph (A) shall be increased by the monthly payment amount recognized under paragraph (9) for portable oxygen equipment. “(C) Volume adjustment.— When the attending physician prescribes an oxygen flow rate— “(i) exceeding 4 liters per minute, the payment amount recognized under subparagraph (A), subject to subparagraph (D), shall be increased by 50 percent, or “(ii) of less than 1 liter per minute, the payment amount recognized under subparagraph (A) shall be decreased by 50 percent. “(D) Limit on adjustment.— When portable oxygen equipment is used and the attending physician prescribes an oxygen flow rate exceeding 4 liters per minute, there shall only be an increase under either subparagraph (B) or (C), whichever increase is larger, and not under both such subparagraphs. “(6) Payment for other covered items (other than durable medical equipment).— Payment for other covered items (other than durable medical equipment and other covered items described in paragraph (3), (4), or (5)) shall be made in a lump-sum amount for the purchase of the item in the amount of the purchase price recognized under paragraph (8). 101 STAT. 1330–103 “(7) Payment for other items of durable medical equipment.— “(A) In general.— In the case of an item of durable medical equipment not described in paragraphs (2) through (6)— “(i) payment shall be made on a monthly basis for the rental of such item during the period of medical need (but payments under this subparagraph may not extend over a period of continuous use of longer than 15 months), and, subject to subparagraph (B), the amount recognized for each such month is 10 percent of the purchase price recognized under paragraph (8) with respect to the item; “(ii) during the succeeding 6-month period of medical need, no payment shall be made for rental or servicing of the item; and “(iii) during the first month of each succeeding 6-month period of medical need, a service and maintenance payment may be made (for parts and labor not covered by the supplier’s or manufacturer’s warranty, as determined by the Secretary to be appropriate for the particular type of durable medical equipment) and the amount recognized for each such 6-month period is the lower of (I) a reasonable and necessary maintenance and servicing fee established by the carrier, or (II) 10 percent of the total of the purchase price recognized under paragraph (8) with respect to the item. The Secretary shall determine the meaning of the term ‘continuous’ in subparagraph (A). “(B) Range for rental amounts.— “(i) For 1989.— For items furnished during 1989, the payment amount recognized under subparagraph (A)(i) shall not be more than 115 percent, and shall not be less than 85 percent, of the prevailing charge established for rental of the item January 1987, increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 6-month period ending with December [------].34a34aCopy not legible. “(ii) For 1990.— For items furnished during 1990, the payment amount recognized under subparagraph (A)(i) shall not be more than the maximum amount established under clause (i), and shall not be less than the minimum amount established under such clause, for 1989, each such amount increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June 1989. “(8) Purchase price recognized for miscellaneous devices and items.— For purposes of paragraphs (6) and (7), the amount that is recognized under this paragraph as the purchase price for a covered item is the amount described in subparagraph (C) of this paragraph, determined as follows: “(A) Computation of local purchase price.— Each carrier under section 1842 shall compute a base local purchase price for the item as follows: “(i) The carrier shall compute a base local purchase price, for each item described— 101 STAT. 1330–104 “(I) in paragraph (6) equal to the average allowable charge in the locality for the purchase of the item for the 12-month period ending with June 1987, or “(II) in paragraph (7) equal to the average of the purchase prices on the claims submitted on an assignment-related basis for the unused item supplied during the 6-month period ending with December 1986. “(ii) The carrier shall compute a local purchase price, with respect to the furnishing of each particular item— “(I) in 1989, equal to the base local purchase price computed under clause (i) increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 6-month period ending with December 1987, or “(II) in 1990, 1991, or 1992, equal to the local purchase price computed under this clause for the previous year increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of the previous year. “(B) Computation of regional purchase price.— With respect to the furnishing of a particular item in each region (as defined in section 1886(d)(2)(D)), the Secretary shall compute a regional purchase price— “(i) for 1991, and for 1992, equal to the average (weighted by relative volume of all claims among carriers) of the local purchase prices for the carriers in the region computed under subparagraph (A)(ii)(II) for the year, and “(ii) for each subsequent year, equal to the regional purchase price computed under this subparagraph for the previous year increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of the previous year. “(C) Purchase price recognized.— For purposes of paragraphs (6) and (7) and subject to subparagraph (D), the amount that is recognized under this paragraph as the purchase price for each item furnished— “(i) in 1989 or 1990, is 100 percent of the local purchase price computed under subparagraph (A)(ii)(I); “(ii) in 1991, is the sum of (I) 75 percent of the local purchase price computed under subparagraph (A)(ii)(II) for 1991, and (II) 25 percent of the regional purchase price computed under subparagraph (B) for 1991; “(iii) in 1992, is the sum of (I) 50 percent of the local purchase price computed under subparagraph (A)(ii)(II) for 1992, and (II) 50 percent of the regional purchase price computed under subparagraph (B) for 1992; and “(iv) in 1993 or a subsequent year, is the regional purchase price computed under subparagraph (B) for that year. “(D) Range on amount recognized.— The amount that is recognized under subparagraph (C) as the purchase price for an item furnished— 101 STAT. 1330–105 “(i) in 1991, may not exceed 130 percent, and may not be lower than 80 percent, of the average of the purchase prices recognized under such subparagraph for all the carrier service areas in the United States in that year; and “(ii) in a subsequent year, may not exceed 125 percent, and may not be lower than 85 percent, of the average of the purchase prices recognized under such subparagraph for all the carrier service areas in the United States in that year. “(9) Monthly payment amount recognized with respect to oxygen and oxygen equipment.— For purposes of paragraph (5), the amount that is recognized under this paragraph for payment for oxygen and oxygen equipment is the monthly payment amount described in subparagraph (C) of this paragraph. Such amount shall be computed separately (i) for all items of oxygen and oxygen equipment (other than portable oxygen equipment) and (ii) for portable oxygen equipment (each such group referred to in this paragraph as an ‘item‘). “(A) Computation of local monthly payment rate.— Each carrier under this section shall compute a base local payment rate for each item as follows: “(i) The carrier shall compute a base local average monthly payment rate per beneficiary as an amount equal to (I) the total reasonable charges for the item during the 12-month period ending with December 1986, divided by (II) the total number of months for all beneficiaries receiving the item in the area during the 12-month period for which the carrier made payment for the item under this title. “(ii) The carrier shall compute a local average monthly payment rate for the item applicable— “(I) to 1989, equal to 95 percent of the base local average monthly payment rate computed under clause (i) for the item increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with December 1987, or “(II) to 1990 and to 1991, equal to the local average monthly payment rate computed under this clause for the item for the previous year increased by the percentage increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of the previous year. “(B) Computation of regional monthly payment rate.— With respect to the furnishing of an item in each region (as defined in section 1886(d)(2)(D)), the Secretary shall compute a regional monthly payment rate— “(i) for 1991, and 1992, equal to the average (weighted by relative volume of all claims among carriers) of the local monthly payment rates for the carriers in the region computed under subparagraph (A)(ii)(II) for the year, and “(ii) for each subsequent year, equal to the regional monthly payment rates computed under this subparagraph for the previous year increased by the percent-101 STAT. 1330–106age increase in the consumer price index for all urban consumers (U.S. city average) for the 12-month period ending with June of the previous year. “(C) Monthly payment amount recognized.— For purposes of paragraph (5), the amount that is recognized under this paragraph as the base monthly payment amount for each item furnished— “(i) in 1989 and in 1990, is 100 percent of the local average monthly payment rate computed under subparagraph (A)(ii)(I) for the item; “(ii) in 1991, is the sum of (I) 75 percent of the local average monthly payment rate computed under subparagraph (A)(ii)(II) for the item for 1991, and (II) 25 percent of the regional monthly payment rate computed under subparagraph (B)(i) for the item for 1991; “(iii) in 1992, is the sum of (I) 50 percent of the local average monthly payment rate computed under subparagraph (A)(ii)(II) for the item for 1992, and (II) 50 percent of the regional monthly payment rate computed under subparagraph (B)(i) for the item for 1992; and “(iv) in a subsequent year, is the regional monthly payment rate computed under subparagraph (B) for the item for that year. “(D) Range on amount recognized.— The amount that is recognized under subparagraph (C) as the base monthly payment amount for an item furnished— “(i) in 1991, may not exceed 130 percent, and may not be lower than 80 percent, of the average of the base monthly payment amounts recognized under such subparagraph for all the carrier service areas in the United States in that year; and “(ii) in a subsequent year, may not exceed 125 percent, and may not be lower than 85 percent, of the average of the base monthly payment amounts recognized under such subparagraph for all the carrier service areas in the United States in that year. “(10) Exceptions and adjustments.— “(A) Areas outside continental united states.— Exceptions to the amounts recognized under the previous provisions of this subsection shall be made to take into account the unique circumstances of covered items furnished in Alaska, Hawaii, or Puerto Rico. “(B) Adjustment for inherent reasonableness.— For covered items furnished on or after January 1, 1991, the Secretary is authorized to apply the provisions of paragraphs (8) and (9) (other than subparagraph (D)) of section 1842(b) to covered items and suppliers of such items. “(C) Transcutaneous electrical nerve stimulator (tens).— In order to permit an attending physician time to determine whether the purchase of a transcutaneous electrical nerve stimulator is medically appropriate for a particular patient, the Secretary may determine an appropriate payment amount for the initial rental of such item for a period of not more than 2 months. If such item is subsequently purchased, the payment amount with respect101 STAT. 1330–107 to such purchase is the payment amount determined under paragraph (2). “(11) Improper billing and requirement of physician order.— “(A) Improper billing for certain rental items.— Notwithstanding any other provision of this title, a supplier of a covered item for which payment is made under this subsection and which is furnished on a rental basis shall continue to supply the item without charge (other than a charge provided under this subsection for the servicing of the item) after rental payments may no longer be made under this subsection. If a supplier knowingly and willfully violates the previous sentence, the Secretary may apply sanctions against the supplier under subsection (j)(2) in the same manner such sanctions may apply with respect to a physician. “(B) Requirement of physician order.— The Secretary is authorized to require, for specified covered items, that payment may be made under this subsection with respect to the item only if a physician has communicated to the supplier, before delivery of the item, a written order for the item. “(12) Regional carriers.— The Secretary may designate, by regulation under section 1842, one carrier for each region (as defined in section 1886(d)(2)(D)) to process all claims within the region for covered items under this section. “(13) Covered item.— In this subsection, the term ‘covered item’ means— “(A) durable medical equipment (as defined in section 1861(n)), including such equipment described in section 1861(m)(5); “(B) prosthetic devices (described in section 1861(s)(8)), but not including parenteral and enteral nutrition nutrients, supplies, and equipment; and “(C) orthotics and prosthetics (described in section 1861(s)(9)); but does not include intraocular lenses. “(14) Carrier.— In this subsection, any reference to the term ‘carrier’ includes a reference, with respect to durable medical equipment furnished by a home health agency as part of home health services, to a fiscal intermediary.”, (c) Study and Evaluation.— (1) The Secretary of Health and Human Services shall monitor the impact of the amendments made by this section on the availability of covered items and shall evaluate the appropriateness of the volume adjustment for oxygen and oxygen equipment under section 1834(a)(5)(C) of the Social Security Act (as amended by subsection (b) of this section). The Secretary shall report to Congress, by not later than January 1, 1991, on such impact and on the evaluation and shall include in such report recommendations for changes in payment methodology for covered items under section 1834(a) of such Act. (2) Before January 1, 1991, the Secretary may not conduct any demonstration project respecting alternative methods of payment for covered items under title XVIII of the Social Security Act. (3) In this subsection, the term “covered item” has the meaning given such term in section 1834(a)(13) of the Social Security Act (as amended by subsection (b) of this section). 101 STAT. 1330–108 (4) The Secretary shall, upon written request, provide the data and information used in determining the payment amounts for covered items under section 1834(a) of the Social Security Act. (5) The Comptroller General shall conduct a study on the appropriateness of the level of payments allowed for covered items under the medicare program, and shall report to Congress on the results of such study (including recommendations on the transition to regional or national rates) by not later than January 1, 1991. Entities furnishing such items which fail to provide the Comptroller General with reasonable access to necessary records to carry out the study under this paragraph are subject to exclusion from the medicare program under section 1128(a) of the Social Security Act. (d) Conforming Amendments.— (1) Section 1814 of such Act (42 U.S.C. 1395f) is amended— (A) in subsection (j)(2)(B), by amending subparagraph (B) to read as follows: “(B) Section 1834(a)(1)(B).”, and (B) in subsection (k), by striking all that follows “shall be” and insert “the amount described in section 1834(a)(1).”. (2) Section 1832(a) of such Act (42 U.S.C. 1395k(a)) is amended— (A) in paragraph (2)(A), by inserting “(other than items described in subparagraph (G))” after “services”; (B) in paragraph (2)(B), by inserting “(other than items described in subparagraph (G))” after “medical and other health services”; and (C) in paragraph (2)— (i) by striking “and” at the end of subparagraph (E), (ii) by striking the period at the end of subparagraph (F) and inserting “; and”, and (iii) by adding at the end the following new subparagraph: “(G) covered items (described in section 1834(a)(13)) furnished by a provider of services or by others under arrangements with them made by a provider of services.”. (3) Section 1833(a) of such Act (42 U.S.C. 13951(a)) is amended— (A) in paragraph (1)— (i) by striking “; and” at the end of clause (G) and inserting a comma, and (ii) by adding at the end the following: “and (I) with respect to covered items (described in section 1834(a)(13)), the amounts paid shall be the amounts described in section 1834(a)(1),”; (B) in paragraph (2)— (i) by striking “and (F)” and inserting “(F), and (G)”, and (ii) in subparagraph (A), by striking “(other than durable medical equipment)”; 34b34bCopy read “(B)”. (C) by striking “and” at the end of paragraph (3); 34c34cCopy read “(C)”. (D) by striking the period at the end of paragraph (4) and inserting “; and”; and 101 STAT. 1330–109 34d34dCopy read “(D)”.(E) by adding at the end the following new paragraph: “(5) in the case of covered items (described in section 1834(a)(13)) the amounts described in section 1834(a)(1).”. (4) Section 1866(a)(2)(A) of such Act (42 U.S.C. 1395cc(a)(2)(A)) is amended by adding at the end the following new sentence: “Notwithstanding the first sentence of this subparagraph, a home health agency may charge such an individual or person, with respect to covered items subject to payment under section 1834(a), the amount of a n y deduction imposed under section 1833(b) and 20 percent of the payment basis described in section 1834(a)(2).”. (5) Section 1889 of such Act (42 U.S.C. 1395zz) is repealed. (e) Effective Date.— The amendments made by this section shall apply to covered items furnished on or after January 1, 1989.