Spring Update

Ostomy Allowables Increased

   Last year, the Medicare allowables for several categories of ostomy supplies were increased. Four HCPCS code categories were not included in the 2003 update with the understanding that they would be considered later. Increases for the following four HCPCS codes were published with the second quarter 2004 Medicare fee schedule updates.

   A5063 - two-piece drainable pouch $2.70 each
   A4426 - two-piece drainable pouch w/locking flange $2.73 each
   A4427 - two-piece drainable pouch w/locking flange and filter $2.78 each
   A4423 - two-piece closed pouch w/locking flange and filter $1.85 each

   Medicare allowables (including those for ostomy supplies, surgical dressings, support surfaces, and urological supplies) have been frozen through 2008.

Former CMS Administrator Predicts Difficulties Ahead for Home Health

   Tom Scully, the former Administrator for the Centers for Medicare and Medicaid Services (CMS) is now serving as a consultant to the American Association of Homecare. At the organization's Leadership Conference this past February, Scully warned home medical equipment (HME) providers to expect the road ahead to be very bumpy. His reasons for the caveat were 1) the passage of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA); 2) the national $500 billion budget deficit; and 3) a Congress that is "shockingly" under-informed about the home care industry.

   Congress will be challenged with implementing the initiatives in the MMA at the same time they struggle with an enormous budget deficit. Regardless of the administration, Scully predicts that Congress will be considering a large budget deficit reduction bill that has historically included cuts to the Medicare program. Interestingly, last month Federal Reserve Chairman Alan Greenspan recommended cuts to Social Security and Medicare benefits as a way to control the deficit. Scully echoed this concern when he stated he believes a 2005 deficit reduction bill will hit Medicare especially hard. On top of the cutbacks already included in the MMA, the proposed plan could be a "double whammy" for the HME industry. Because CMS' main focus will likely be on the prescription drug benefit contained in the MMA, issues related to the home care industry could easily be overlooked. He called on providers and manufacturers to become vocal and involved with Congress by providing education about the home care industry and its impact on beneficiaries and providers.

CMS Proposes Medicaid Budget Process

   Medicaid provides benefits to more than 50 million low-income eligible individuals and families. Federal grants to the states (including Medicaid funding) are currently the highest in history and represent 18% of the federal government's budget.

   Unlike the federal government, states are required to balance their budgets. They are struggling to do so while continuing to meet minimal Medicaid program requirements. The current process for determining the amount of federal funds a state needs for its Medicaid program is conducted on a historical, retrospective basis. This process is reactive rather than proactive in that CMS is unable to identify improper payments until after they have been paid to the state. In an effort to control Medicaid costs, CMS has proposed a prospective budget process that would permit the federal government to determine state Medicaid budgets before payment.

   This proposal changes the state budget reporting process and allows CMS to obtain information on state Medicaid budget financials up front. Opposition to the proposal is based on the belief that CMS is attempting to impose reform through an administrative change. Some states believe that current accounting methods are required to prevent cutting state Medicaid benefits.

High Response for Drug Discount Card Sponsors

   In 2004, CMS will offer Medicare-approved discount drug cards to beneficiaries. The purpose of the cards is to provide some savings to beneficiaries during the period of time before the new prescription drug benefit is implemented in 2006. The Centers for Medicare and Medicaid Services has received 106 applications from companies and organizations wishing to sponsor the program.

   Two types of cards will be available to Medicare beneficiaries beginning in June: one for any qualifying beneficiary who lives in the service area covered by the card and another for beneficiaries who are enrolled in Medicare Advantage plans (formerly Medicare + Choice). Half of the sponsor applications received are for the first type of card and half are proposing to offer a national card. The Centers for Medicare and Medicaid Services will announce the endorsed drug sponsors this spring, and beneficiary enrollment will begin in May.

1. HomeCare Monday. Primedia. 2004;10(6). Available at: www.homecaremag.com. Accessed March 3, 2004.

2, CMS Office of Public Affairs. Medicare reports high response by companies to sponsor approved drug discount cards. Available at: www.cms.hhs.gov/media/press/release.asp?. Accessed March 4, 2004.