Medicare Part B Reforms
Summary

Clarifying Medicare Payment Policies for Part B Services

HIMA Position

HIMA urges Congress to modify several Medicare Part B policies that could restrict the availability of important health care services for beneficiaries:

• HIMA recommends that Congress spell out common-sense due process rules regarding HCFA's ability to invoke "inherent reasonableness" price adjustments.

• HIMA urges Congress to require fair and impartial evaluation of alternative approaches in two key areas of purchasing and billing for home care services.

Background

The Balanced Budget Act of 1997 contained new provisions designed to increase Medicare's effectiveness in being a prudent purchaser of certain Part B services. This included additional authority for HCFA to reduce prices that it considered not "inherently reasonable" and new authority to carry out demonstration projects through competitive bidding. HCFA is also implementing tighter billing procedures for home care equipment and supplies.

Though HIMA supports improved efficiencies in Medicare, HCFA's plan for carrying out each of these endeavors suffers from flaws:

• HCFA and its contractors are using the inherent reasonableness authority to propose price reductions without providing appropriate due process protections.

• HCFA's competitive bidding projects have far-reaching implications, but there is need for a full understanding of the potential impact on beneficiaries or consideration of alternative approaches.

• HCFA's requirement that certificates of medical necessity be on file before home care bills can be submitted are imposing burdensome and costly compliance requirements on physicians and suppliers and could, in turn, increase the costs of care and slow or limit patient access.

Summary of HIMA Recommendations

To address such problems, HIMA urges Congress to take the following steps:

• Clarify HCFA's inherent reasonableness authority to encourage greater fairness in the agency's exercise of this important authority.

• Require a broad and impartial evaluation of HCFA's competitive bidding projects that also explores possible alternatives and their potential impact on beneficiary access.

• Require evaluation of alternative approaches such as electronic transmissions, for satisfying certificate of medical necessity requirements in an effort to seek greater efficiencies for physicians and suppliers and to better protect beneficiary access.

 

Medicare Part B Reforms
Inherent Reasonableness

Recommendation

Clarify HCFA's inherent reasonableness authority to encourage greater fairness in the agency's exercise of this important authority.

Background

The Balanced Budget Act of 1997 expanded HCFA authority to adjust payment levels that it considered "inherently unreasonable," either because it found them "grossly excessive" or "grossly deficient." The law specified that payment for a service could not be changed by more than 15 percent in any year, unless the agency determined that certain criteria were met and unless it solicited public input. In 1998, HCFA's Durable Medical Equipment Regional Carriers, or DMERCs (these are four private insurers who handle claims processing for Medicare), invoked inherent reasonableness authority in proposing a reduction in the reimbursement levels for a number of products including test strips used in home blood glucose monitors. This proposal illustrates the flaws that exist in key elements of HCFA's inherent reasonableness authority, as well as in how the agency and its contractors are invoking this authority:

• The survey of blood glucose test strips that HCFA and the DMERCs used as the basis of the proposed reduction failed to use representative samples, contained statistical flaws, and was weighted improperly.

  For example, the DMERCS failed to:

  • Eliminate significant statistical outliers in survey data, thereby falsely skewing the median results;
  • survey states or cities with significant populations in favor of surveying smaller, more rural areas;
  • take into account differences in the estimated number of adults with diabetes by state for ages 65 and older; and
  • to gather reliable retail price information. (For example, where phone interviews were conducted, only one or two prices were gathered. In contrast, site visits resulted in multiple price observations.)

• The survey is seriously flawed. If the DMERC test strip survey data were more accurately weighted to reflect population and sales, the sample prices would be about 9 percent higher than those reported by the DMERCs. Further, if the DMERCs had followed the inherent reasonableness regulation in evaluating their own survey data, they would have been required to increase prices for test strips significantly in 21 states. The DMERCs only proposed downward adjustments.

• The DMERCs also failed to follow HCFA's own regulatory procedures by proposing a de facto national payment limit through the DMERCs to avoid their own more rigorous process required for national decisions, and failing to permit the required public comment and due process procedures.

• In the case of test strips, the DMERCs proposed the reduction even though Congress had already cut Medicare payments for such test strips by 10 percent and had frozen reimbursement for all diabetes supplies for five years.

• In a related diabetes supply issue¾lancets¾the agency proposed a 20 percent reduction for lancets in 1998. To avoid more rigorous agency procedures required for payment adjustments over 15 percent, the agency proposed reducing the payment for lancets by 15 percent in the first year and 5 percent in the second year.

HIMA Proposal

To ensure fairness and due process and to ensure that patients can continue to count on appropriate access to Part B services, HIMA recommends that HCFA's inherent reasonableness authority and process be clarified to:

• Preclude HCFA or its carriers from proposing an inherent reasonableness adjustment after a statutory payment change — unless it is shown that the statutorily set payment level has become grossly deficient or excessive since enactment.

• Require HCFA to publish a description of the survey using credible and unbiased statistical methodology that the agency or its carriers will use both to determine that payments are grossly excessive or grossly deficient, and to propose realistic and equitable payment levels.

• Require national-level due process procedures to apply when two or more local carriers make a concurrent determination that a reduction is necessary.

• Require HCFA to use national-level due process procedures if payment levels are proposed to be changed by more than 15 percent over five years — not just over one year, as provided under current law.

Medicare Part B Reforms
Competitive Bidding
Certificates of Medical Need

Competitive Bidding

Recommendation

Require a broad and impartial evaluation of HCFA's competitive bidding projects that also explores possible alternatives and their potential impact on beneficiary access.

Background

The Balanced Budget Act of 1997 required HCFA to implement no more than five competitive bidding demonstration projects, including one for oxygen and oxygen equipment. It also directed the agency to evaluate the degree of access, product diversity, and quality of each demonstration project, and it permitted the agency to expand a project to other sites if it appeared effective. The law requires all demonstrations to be completed by the end of 2002, with a requirement that the General Accounting Office study their effectiveness.

HIMA Proposal

HIMA recommends that a broad and impartial analysis of the competitive bidding projects be completed by the Institute of Medicine and that the study explore not just the impact of competitive bidding, but also possible alternatives and their likely effects. Further, HIMA believes that no expansion in the use of competitive bidding should take place until this analysis has been completed and submitted to HCFA.

Competitive bidding is a powerful tool. If Medicare decides to apply it widely in the future, it will have far-reaching effects on patients, manufacturers, and providers. Therefore, a broad, independent study of this kind is essential in making certain that all the facts are in. HIMA believes that this type of analysis should be conducted by the Institute of Medicine of the National Academy of Sciences because of this organization's reputation for thoroughness, objectivity, and analytical expertise in health policy issues. The IOM review should examine demonstration methodology, analyze the effect of competitive bidding on beneficiary access, and recommend alternatives to competitive bidding in light of both patient needs and Medicare's fiscal constraints. As noted, HCFA should not expand competitive bidding in any way until the results are fully evaluated and understood.

Certificates of Medical Need

Recommendation

Require evaluation of alternative approaches for satisfying certificate of medical necessity requirements in an effort to seek greater efficiencies for physicians and suppliers and to better protect beneficiary access.

Background

When physicians prescribe home medical equipment, HCFA's rules require that they also complete a detailed form certifying that such services or equipment are medically necessary. This is called a certificate of medical necessity (CMN). Once physicians have completed this form, it must then be transmitted to the home equipment supplier, which is required to retain the original document in its own files. Suppliers cannot submit bills to Medicare until the original is in their possession. Though these requirements seem simple enough in the abstract, complying with them in the real world of health care delivery takes a substantial amount of time both for physicians and equipment suppliers —from making sure that all the details on the form are properly completed, to seeing to it that the original document itself is acquired and placed in the supplier's files. Such requirements can also result in timelags that increase the likelihood of delays in patient access to the care they need.

HIMA Proposal

HIMA recommends that HCFA develop and test alternative arrangements for satisfying these certificate of medical necessity requirements. The agency should evaluate the effect of alternative approaches on the availability of medical services, the timeliness of patient access to such services, the potential to lower the costs of regulatory compliance, and the impact on Medicare program integrity. Such a review is especially timely in light of the power of today's electronic and telecommunications (e.g., internet and facsimile) technologies and their widespread use in such industries as banking, retailing, and information dissemination. HIMA also recommends that each Durable Medical Equipment Regional Carrier (DMERC) should test one of the alternative approaches on at least one type of medical equipment.

March 26, 1999