Medicare Durable Medical Equipment: Class III Devices Do Not Warrant a Distinct Annual Payment Update
Highlights
Medicare fee schedule payments for durable medical equipment (DME) that the Food and Drug Administration (FDA) regulates as class III devices, those that pose the greatest potential risk, increased by 215 percent from 2001 through 2004. From 2004 through 2006, and for 2008, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) provided for a payment update for class III DME equal to the increase in the consumer price index for all urban consumers (CPI-U). For 2007, MMA requires the Secretary of Health and Human Services to determine the payment update. MMA also requires that other DME receive a 0 percent update from 2004 through 2008. MMA directed GAO to report on an appropriate payment update for 2007 and 2008 for class III DME. In this report, GAO (1) examined whether class III devices have unique premarketing costs and (2) determined how the fee schedule rate-setting methodology accounts for the premarketing costs of such devices.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress may wish to consider establishing a uniform payment update to the DME fee schedule for 2008 for class II and class III devices. |
Closed – Implemented
|
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directed GAO to report on an appropriate payment update percentage for 2007 and 2008 to the durable medical equipment (DME) fee schedule for class III devices. In March 2006, we reported that payment updates for class II and class III differed in recent years, despite the Medicare DME fee schedule rate-setting methodology accounting for all pre-marketing costs of class II and class III devices in a consistent manner. We also reported that regardless of classification, the Medicare DME fee schedule payment rate for a device is based on either the manufacturer's retail price or historic reasonable Medicare charges, which CMS considers equivalent measures. We recommended that the Secretary of Health and Human Services establish a uniform payment update to the DME fee schedule for 2007 for class II and class III devices. The Department of Health and Human Services agreed with our recommendation to establish a uniform payment update to the DME fee schedule for 2007 for class II and class III devices. In November 2007, CMS published a final rule adopting the same payment update methodology for both class II and class III devices - this resulted in a zero percent update for 2008. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Health and Human Services | The Secretary of Health and Human Services should establish a uniform payment update to the DME fee schedule for 2007 for class II and class III devices. |
Closed – Implemented
HHS/CMS released a proposed rule on July 2, 2007 that would implement the class III DME payment update for 2008 at 0 percent, the same percentage update as that of class II DME, as GAO recommended. In November 2007, CMS published a final rule adopting the same payment update methodology for both class II and class III devices - this resulted in a zero percent update for 2008.
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