Traditionally, Medicare pays for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) using a fee schedule that is based on historic supplier charges from the 1980s.  Numerous studies from the Department of Health and Human Services Office of Inspector General and the Government Accountability Office have shown these fee schedule prices to be excessive and that taxpayers and Medicare beneficiaries bear the burden of these high payments. CMS has worked for many years to improve how Medicare pays for DMEPOS items with the goal of ensuring that people with Medicare get the equipment they need while reducing costs for beneficiaries and taxpayers.

Since 2011, we have operated the DMEPOS competitive bidding program to set payment amounts for covered DMEPOS items in certain areas in the country. The Program has saved more than $580 million in nine markets at the end of the Round 1 Rebid’s three-year contract period (January 1, 2011 through December 31, 2013). And, after the first two years of Round 2 and the national mail-order programs (July 1, 2013 – June 30, 2015), Medicare has saved approximately $3.6 billion. Health monitoring data indicate that its implementation is going smoothly with few inquiries or complaints and no negative impact on beneficiary health outcomes.   By all measures, the DMEPOS competitive bidding program has been a great success for beneficiaries and taxpayers.

At the beginning of this year, in compliance with statute, we phased in new rates in non-competitive bidding areas based on information from the DMEPOS competitive bidding program. We phased in these new rates with a blend of 50 percent of the unadjusted payment rates and 50 percent of the adjusted payment rates on January 1, 2016.  We are also using the same real-time monitoring system we use in competitive bidding areas to ensure beneficiaries are receiving the equipment they need.  This data monitoring tracks access to items and services and a number of clinical outcome measures such as mortality, hospitalizations, and emergency room visits.

Today, we posted monitoring data that shows our efforts succeeded in saving the Medicare program money while continuing to provide equipment to those who need it. The data reveals that suppliers in these non-competitive bidding areas have continued to accept the new, adjusted DMEPOS payment rates as payment in full. If the new, lower fee schedule amounts do not cover the suppliers’ costs, these suppliers could require beneficiaries to pay the difference between the new and old rates. But according to the data, barely any of them did so. This suggests that the adjusted fee schedule rates continue to be more than adequate to cover the costs of furnishing the DMEPOS items in all areas.

Overall, there has been no change in the percentage of claims for which suppliers are accepting the new payment rates as payment in full.  For the first four months in 2016, suppliers accepted the new rates as payment in full for 99.88 percent of the claims submitted, compared to 99.87 percent for the first four months in 2015. The rate of acceptance remained at 99.90 percent for items furnished in rural areas in 2016, while the rate of acceptance in non-contiguous areas changed only slightly in 2016 (99.81 percent) compared to 2015 (99.90 percent).

The data are broken out for eight geographic regions of the contiguous United States, as well as non-contiguous areas (i.e., Alaska, Hawaii, Puerto Rico, Virgin Islands, etc., combined). It also compares the rate of assignment of claims for DMEPOS items furnished in rural areas versus non-rural areas. The rate of assignment of claims in 2016 continues to be very high overall in both rural and non-rural areas. Finally, the data is broken out for several different categories of DMEPOS items. The monitoring data are available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSFeeSched/Fee-Adjustment-Monitoring.html.

We expect to post additional data on assignment rates, access to items and services, and health outcomes in the near future.

Based on our monitoring efforts, and the continued high voluntary acceptance of assignment across all non-competitive bidding areas, including rural areas and non-contiguous areas, we believe that the partially adjusted fees implemented in January have had no negative impact on beneficiary access to quality items and services. We will continue to monitor all data very closely leading up to and following implementation of the phase in of the fully adjusted DMEPOS fee schedule adjustments on July 1, 2016.

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