In the 2002 election, the Republicans managed to win control of the Senate and retain control of the House. Will a Republican-led House and Senate be an advantage or a disadvantage for the HME industry and why?

Cuervo: The fact that Republicans have a majority in both the House and Senate is significant for HME providers because Republican control of Congress increases the likelihood of Medicare reform in conjunction with a prescription drug benefit. We have known now for years that many Republicans view market-based reforms, such as competitive bidding, as the “fix” for the Medicare program. We also know from recent experience that the staggering cost of a prescription drug benefit will be offset by “reforms” to other benefits. Together, the drive for reforms by a Republican-controlled Congress and the need to pay for prescription drugs raise the stakes for providers.

Bachenheimer: A Republican-led Congress will likely lead to expedited passage of so-called Medicare “reforms,” which may well include competitive bidding for DME. If you look at the historical record of Republicans versus Democrats, the Republicans are less likely to provide benefits for the elderly. Our industry has generally been better served by Democrats in Congress, who tend to be more sympathetic toward ensuring that the elderly have access to health benefits. The Republicans must, for the 2004 elections, show the American public that they can pass a Medicare drug benefit. While the Republicans are likely to do so, the sum and substance of the package may not be sufficient to meet most seniors’ needs.

Parver: It’s more a question of shoring up friends, be they Republican or Democrat, rather than both Houses of Congress being from the same party. It certainly will be more difficult to advocate for and win a position the Republicans do not favor because the threat of a veto now is absent, as it was when the Clinton Administration was in power with a Republican-controlled Congress, or even with a divided Congress providing the capability of lobbying the other side. Thus, for any component of the health care industry, it will be a disadvantage if Republicans across the board do not favor an issue. I think it is more important that the industry think in terms of building coalitions within the House and the Senate of “friends”—both Republican and Democrat—and focusing on the centrists of both parties rather than leaning to the extremes.

Is competitive bidding likely to pass in 2003 and why or why not?

Cuervo: While the possibility that competitive bidding could pass in 2003 remains high, I don’t think we can diminish our efforts by saying that it is a foregone conclusion. The industry did a good job in 2002 of explaining to Congress why a Medicare-run competitive bidding program for Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) would be anticompetitive and would not save Medicare money when the long-term effects are considered. We need to build on that work in 2003, and we need to be ready to participate meaningfully in the Medicare reform debate.

Bachenheimer: Competitive bidding is quite likely to pass in 2003 for the following two reasons:

1. Its lead proponent in the House is Bill Thomas (R-Calif), chairman of the House Ways and Means Committee.

2. It was only logistical, not philosophical hurdles that prevented passage of competitive bidding in 2002.

In order to prevent passage of competitive bidding, the industry must mount an unprecedented lobbying effort and gain significant opposition in the Senate to prevent its inclusion in a Medicare package in 2003.

Parver: Competitive bidding has been on both the back burner and the front burner for 20 years. Because it was favored strongly by significant Republican leadership in the House and the Senate, I would fully expect it to be on the agenda for 2003—especially because, rightly or wrongly, the Congressional Budget Office (CBO) has scored very high numbers for savings with competitive bidding.

With the new Senate Majority Leader, Bill Frist, MD, (R-Tenn), beginning to set his agenda, we soon will start to identify his top priorities. For example, there may be an impetus for a modest prescription drug benefit or other health care benefit that is provider friendly. If so, this could provide a legislative initiative that a proposal like competitive bidding could be attached to. If competitive bidding is attached to one of those “trains leaving the station,” it very likely would pass in 2003.

Could the government hit the industry with other forms of reimbursement reductions in 2003 and, if so, what form may those reimbursement reductions take?

Cuervo: The Centers for Medicare & Medicaid Services (CMS) published an interim final Inherent Reasonableness (IR) regulation at the end of 2002. The rule has some improvements over the rule CMS published in 1998, such as a clear demarcation of what it will consider “grossly excessive or deficient” payments and better defined procedures for the Durable Medical Equipment Regional Carriers (DMERCs) to follow in their data collection.

Even so, IR remains an extraordinary authority that can be carried out in a mostly informal manner. It may take the DMERCs several months to implement the procedures outlined in the rule, but the industry could see attempts by the DMERCs or CMS to perform IR later in 2003.
While CMS has stated that it does not have a list of items that it intends to subject to IR, we have seen numerous reports in the past year from the Office of Inspector General (OIG) identifying items it believes are overpaid. I would not be surprised if some of those items were the subject of an IR determination in 2003.

Bachenheimer: IR is absolutely at the top of the list; it is the only real existing mechanism for the Administration to reduce reimbursement for DME. With publication of the interim final rule in December 2002, CMS is likely to delegate its IR authority to the DMERCs within the first 6 months of 2003. Will there be widespread/across-the-board reductions? I don’t believe so. But I do believe the DMERCs will target a few suspect items that they believe they have the data to support up to 15% reimbursement reductions on.

Parver: CMS has been working on IR for years and finally it looks like it is going to be here. There are no solid opponents on Capitol Hill against IR, so opposition to its implementation will depend on how severe the reductions in pricing are and how the beneficiary community reacts to IR, perhaps curtailing their access to equipment and care by causing suppliers to close their businesses. There will not be a major reaction to counter equipment price reductions, be they competitive bidding or IR, until the involved Medicare beneficiaries are hurt in some way. Further attention by the industry therefore must focus on revising the system more globally to account for recognition and payment for services rendered, not solely products provided.

Besides possible reimbursement reductions, are there other legislative issues readers should pay special attention to in 2003?

Cuervo: Health Insurance Portability and Accountability Act (HIPAA) implementation will continue to be a big issue for providers in 2003. Both the privacy regulations and the regulation on standard transactions and code sets go into effect in 2003. There will be many implementation issues that the industry will need to address as these rules begin to take effect.

Bachenheimer: Any health and/or Medicare legislative package is worth tracking closely. Provisions like competitive bidding could be placed in a variety of legislative packages.

Parver: The DMEPOS/rehab technology industry should focus on trying to develop a new mechanism for reimbursement that will be attractive to both CMS administrators and legislators on Capitol Hill. Years ago, the Six-Point Plan served the purpose of curtailing massive cuts in favor of an entirely new system of coverage and payment. In essence, the Six-Point Plan responded to efforts to cut payment and, in fact, delayed those cuts for many years.

The approach needed now seems clear: Develop initiatives that speak to the benefits of home health care. Such initiatives could include a credentialling mechanism to certify or accredit suppliers, so that only reputable, credentialled companies actually are paid.

When facing competitive bidding and IR, it behooves the home health care industry to form coalitions with providers, beneficiary groups, and insurers/payors to craft a realistic method to bundle a service component together with the technology to better serve the growing Medicare population.

Legislative Insider With the threat of reimbursement reductions, manufacturers also became increasingly involved in lobbying in 2002—a trend likely to continue this year. These companies bring their own perspective to the Medicare debate, as Dealer/Provider found out when it posed the same questions asked of our Washington insiders to Darren Jernigan, who was named government relations director for the US division of Permobil Corp, Lebanon, Tenn, in 2002. Q Will a Republican-led House and Senate be an advantage or a disadvantage for the HME industry and why? A Whether or not a Republican-led House and Senate would be advantageous to the HME industry would really depend on the issue. For instance, the Republican Party traditionally sides with business. What is good for business is good for America, such as lower taxes, steady minimum wage, and less government involvement and regulations put on the industry. This would provide more freedom to the HME trade and its business practices. However, there are possible disadvantages, such as Medicare cuts. An appropriations bill that normally would have trouble passing committee would survive and find its way to the floor for a vote. This means a cut in Medicare spending, resources, and staff to save money, which in turn means less funding and customer service for HME. Congress may also cut funding directly linked to the HME industry. For example, a bill that would mandate HME to consumers that medically qualify and ask for it would be good. The bill, however, may have trouble getting out of committee due to the increase in government funding. Traditionally, the Republican Party supports a reduction in government and spending. It boils down to losing and having no surplus and finding ways to make up the ground by cutting. I think the HME industry in the new Congress will have to look at each particular bill and try to determine the impact on the industry on a case by case basis. Many feel that with a Republican controlled Congress and White House issues will pass with great ease. Do not underestimate the minority. In 1992, there was a Democratic controlled Congress and White House and the minority was able to filibuster many bills and the required 60 votes for passage never occurred. It will be curious if the Democrats follow the same strategy. Q Is competitive bidding likely to pass in 2003 and why or why not? A Does anyone have a coin to flip? Obviously, competitive bidding will be hanging around worse than those chads did in Florida in November 2000. What will be interesting is the reaction of the House to competitive bidding. Compromise is always in play but the tremendous outcry from the health care industry, particularly the blitz on the Senate last fall, not to mention the grassroots effort at the state level, may have opened a few eyes. The lack of ability to compromise between Republicans and Democrats played a major role in 2002 concerning competitive bidding. Had the Senate already had a majority of Republican control, then House bill HR 4954 with the competitive bidding attachment would have had a better chance to reach 60 votes for cloture. When competitive bidding surfaces again in 2003, I don’t see it as a stand-alone bill but as an attachment as it was in HR 4954. The good news is that the issue is on the radar screen now in both chambers of Congress and should not be blindly attached to a bill without debate. Currently, competitive bidding is waiting in the wings and timing is everything. With a possible war with Iraq and a shaky economy, there is a slight possibility the issue never makes it to the floor this session. I predict that in a couple of months some form of modernizing Medicare bill will emerge with competitive bidding in it. It would have to be one bipartisan bill. Prediction: Not this session. Q Could the government hit the industry with other forms of reimbursement reductions in 2003, and, if so, what form may those reimbursement reductions take? A The Centers for Medicare & Medicaid Services (CMS) recently ruled that inherent reasonableness (IR) determinations will set a 15% threshold to determine whether a Medicare payment rate is “grossly excessive or deficient.” This interim ruling will give way for a better understanding of the IR process. Further, CMS will withdraw proposed payment cuts under IR authorization in 1998 and 1999. This was a positive step for CMS. Tom Scully, administrator of CMS, recently made statements that CMS may introduce new cost-effectiveness considerations concerning the Medicare decision-making process in regard to new medical technology. The thought here is that CMS would deny access to new procedures and technologies due to the perception of being too costly. This type of reduction could really see a slow in growth and new products in the HME industry.