CMS Implements Cures Legislation Saving Millions On DME Items

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During recent Medicaid audits, it was determined that selected durable medical equipment supplies (DME items) cost dramatically less through CMS than State Medicaid Agencies. Due to the Omnibus bill of 2015 (H.R. 2029-P.L. 114-113), a provision limits the federal portion of funding for state Medicaid programs to the Medicare rates for Durable Medical Equipment. This implementation is based on the September 2015 OIG report titled “State Medicaid Agencies Can Significantly Reduce Medicaid Costs for DME and Supplies”. According to this report, “select State Medicaid agencies could have saved an estimated $30.1 million on selected durable medical equipment and supplies by obtaining pricing similar to Medicare’s Competitive Bidding Program and similar opportunities may be available to other State Medicaid agencies.”

Save On Selected DME Items

According to the OIG report, audits were conducted in California, Minnesota, New York, and Ohio to determine whether opportunities exist for State Medicaid agencies to achieve savings for selected DME items. A review of each State’s Medicaid reimbursement rate (for the selected DME items) was compared to Medicare rates to determine the amount of potential savings had those states used a competitive bidding program similar to the Medicare program.

Ultimately, it was determined that the states could have achieved savings of approximately $18.1 million on the purchase of selected DME items, had they obtained pricing comparable to Round 1 of Medicare’s Competitive Bidding Program and $12 million in additional cost savings for the selected DME items under Medicare’s Round 2 Competitive Bidding and National Mail-Order Programs.

Additionally, the audit revealed Medicaid provider reimbursement rates for selected DME items varied significantly among the four states reviewed.  Hence, it was determined that opportunities exist for these states to lower provider reimbursement rates resulting in approximately $30.1 million in potential cost savings for the States and the Federal Government.  As a result, the OIG recommended the Centers for Medicare & Medicaid Services (CMS) “seek legislative authority to limit State Medicaid DME reimbursement rates to Medicare program rates and encourage a further reduction of Medicaid reimbursement rates through competitive bidding or manufacturer rebates.”

CMS concurred with their recommendations. On December 13, 2016, President Obama signed into law the 21st Century CURES legislation (PL 114-255) that moved the effective date of this provision to January 1, 2018.

Preliminary Discussion/Guidance from CMS

  • CMS will issue a letter to State Medicaid Directors soon.
  • Effective with Dates of Service 1/1/2018, the legislation mandates that the calculation for the Federal Financial Participation match (FFP) for Medicaid service cannot be based on rates higher than the Medicare allowable.
  • Impacts all E and K HCPCS codes covered by Medicare and Medicaid. Further analysis is being completed by CMS on the specific list of HCPCS codes that will be provided in the guidance letter.
  • State Medicaid programs DO NOT have to set their rates at Medicare allowable. States have the flexibility to set their own rates to ensure access to care.
  • Calculations will be based on aggregate expenditures for all Medicare/Medicaid covered HCPCS codes.
  • Items currently priced by Medicaid programs below Medicare allowable will be included in the aggregate reconciliation and can make up for the items priced above Medicare allowable.
  • The Medicare allowable will be calculated in the aggregate and more guidance is forthcoming on which Medicare rate should be used (i.e. CBA SPA Rate, Rural Rate, Regional Rate). It has been discussed by CMS that states will have to calculate this based on area patient lives.
  • Due to Medicaid MCO contracts being paid as capitated agreements from the state, they are exempt from this legislation. However, the Medicaid MCO plans that follow Medicaid fee schedules will be impacted based on rate setting decisions made by the state.
  • State Medicaid Programs that have questions regarding this legislation should contact their CMS Regional Office. Contact information for these offices can be found here. 

Preliminary Proposed Process by CMS

  • States will continue to obtain their quarterly match with the current system.
  • Annual reconciliation will be required from the states to compare their claims paid to the Medicare allowable and new FFP amount established.
  • States must reimburse the federal government the difference in the initial FFP match and the newly calculated FFP match based on Medicare allowable.

    The information outlined in this article is based on preliminary CMS discussions and is subject to change before official guidance is offered by CMS.

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