Medicare:

Orthotics Ruling Has Implications for Beneficiary Access and Federal and State Costs

GAO-02-330: Published: May 22, 2002. Publicly Released: May 22, 2002.

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In the late 1980s and early 1990s, the Health Care Financing Administration (HCFA), now called the Centers for Medicare and Medicaid Services (CMS), became concerned that some suppliers were improperly billing Medicare for items that attach to wheelchairs and other equipment. Some suppliers were billing for such items using codes for orthodic devices, including arm, back, and neck braces that provide support for or immobilize weak or injured limbs, while others were billing using codes for durable medical equipment, which includes equipment such as wheelchairs and crutches that can withstand repeated use and is appropriate for home use. Whether an item is billed as an orthotic or DME device can affect whether such claims are paid. To clarify Medicare's payment policy on orthotics, HCFA issued a ruling stating that Medicare considered such items to be durable medical equipment rather than orthotics. HCFA issued Ruling 96-1 to clarify the circumstances under which certain items would be classified as orthotics or as DME for Medicare part B payment purposes. A federal appellate court found that HFCA had followed appropriate procedures to issue the rule as an interpretation of Medicare policy, the interpretation in the ruling was wholly supportable, and the treating of seating systems as DME was consistent with congressional intent. HCFA's ruling that attached bracing devices were in the DME benefits category and could no longer be billed as orthotics affects beneficiaries residing in Medicare-certified skilled nursing facilities and other institutions primarily engaged in providing skilled nursing care (SNF). Because Medicare part B does not cover DME in SNFs and other institutions primarily engaged in providing skilled nursing care, claims for such items are no longer paid for residents in nursing homes. This ruling affects residents of all nursing homes, not just SNFs. If HCFA's ruling were rescinded and Medicare's policy changed so that attached bracing devices were classified as orthotics, how much Medicare and Medicaid would spend for orthotics is uncertain. The increase in Medicare spending would depend on how extensively attached bracing devices would be provided to nursing home residents following the ruling's recission. The distinction between DME and orthotics would become less clear, which could lead to inappropriate billing. Therefore, if the ruling were rescinded, additional controls, such as closely monitoring billing and reviewing medical justification for customized items prior to payment, would be vital to help curb potentially inappropriate billing.

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