Other items are  covered under the Medicare DME benefit based on CMS’s interpretation  of the statute, which does not elaborate on the meaning of “durable.” By  regulation, CMS has defined DME as equipment that (1) can withstand  repeated use; (2) has an expected lifetime of at least 3 years; (3) is used  primarily to serve a medical purpose; (4) is not generally useful in the  absence of an illness or injury; and (5) is appropriate for use in the  home. Some Potential Disposable Substitutes for DME Exist, and These Substitutes May Have Benefits in Some Cases Some Potential Examples of Disposable Substitutes for DME Exist, according to Industry Stakeholders

We identified a limited number of disposable medical devices that could  potentially substitute for DME, based on our literature review and  interviews with industry stakeholders. These  devices fall into existing DME categories used by Medicare—infusion  pumps, including insulin pumps; blood glucose monitors; sleep apnea  devices; and nebulizers. Despite the potential benefits of disposable substitutes, stakeholders also  noted limitations to using these devices regarding health outcomes and  potential cost-savings. Stakeholders Identified Market Incentives for Developing Potential Disposable DME Substitutes, but Cited Medicare Payment Policy as a Disincentive

Stakeholders we spoke with—including representatives from device  manufacturers, Medicare beneficiary advocate groups, providers, and  insurers—cited several market incentives for developing potential  disposable DME substitutes. Specifically,  13 of the 21 stakeholders cited lack of insurance coverage as a  disincentive to developing disposable DME substitutes, including  representatives from all of the manufacturer organizations and two-thirds  of the manufacturers we interviewed. Five  of these stakeholders specifically cited CMS’s definition of DME as a  disincentive to technological innovation, such as the development of  disposable substitutes. Federal  internal control standards state that management should identify, analyze,  and respond to change, including anticipating and planning for significant  changes using a forward-looking process. Without such consideration for Medicare  coverage, CMS and other insurers that follow Medicare payment policy  may not be taking advantage of the possible benefits of these devices. CMS Would Need to Consider Issues Related to Benefit Categorization, Including Legal Authority and Potential Payment Methodologies, If Medicare Coverage Were Expanded to Disposable DME Substitutes

If Medicare coverage were expanded to include disposable DME  substitutes, CMS would need to consider issues related to benefit  category designation. We identified three possible options that CMS could  consider as benefit categories for expanding coverage: (1) using the DME  benefit, (2) using the home health benefit, or (3) establishing a new  benefit. Under each scenario, CMS would need to consider  its authority to provide for such expanded coverage. Conclusions

Some disposable medical devices may have the potential to substitute for  DME and may offer advantages in some cases, such as cost-savings and  better health outcomes. However,  Medicare currently does not cover most disposable DME substitutes  because they do not meet Medicare’s definition of durability. CMS officials  stated that they continue to regard this definition as appropriate and have  not considered the possibility of extending DME coverage to these  substitutes. According to federal  internal control standards, management should anticipate and plan for  significant changes using a forward-looking process. Recommendation for Executive Action

We recommend that the Administrator of CMS evaluate the possible  costs and savings of using disposable devices that could potentially  substitute for DME, including options for benefit categories and payment  methodologies that could be used to cover these substitutes, and, if  appropriate, seek legislative authority to cover these devices.
Why GAO Did This Study

In 2015, Medicare spent $6.7 billion for DME. CMS's definition of DME generally precludes potential disposable DME substitutes from coverage. Congress included a provision in law for GAO to review the potential role of disposable medical devices as substitutes for DME.
This report examines (1) potential disposable DME substitutes and their possible benefits and limitations; (2) the incentives and disincentives stakeholders identified for developing these substitutes, including the possible influence of health insurance coverage; and (3) issues related to benefit category designation—including legal authority and potential payment methodologies—if Medicare coverage were expanded to include disposable DME substitutes. GAO reviewed agency documents and literature on disposable DME substitutes and Medicare payment policy; interviewed CMS officials; and interviewed various stakeholders, including representatives of device manufacturers, beneficiary advocates, health care providers, and insurers, for their perspectives.

What GAO Found

While disposable medical devices are generally not covered by Medicare, GAO identified eight that could potentially substitute for durable medical equipment (DME) items that are covered. These disposable DME substitutes fall into existing Medicare DME categories—infusion pumps, including insulin pumps; blood glucose monitors; sleep apnea devices; and nebulizers. Stakeholders GAO interviewed identified multiple benefits of using disposable substitutes, such as better health outcomes and potential cost-savings. However, they also cited factors that limit their use, including that these substitutes may not lead to cost-savings in all cases.
Stakeholders identified several market incentives, such as a growing demand, as reasons to develop disposable DME substitutes, but mostly cited lack of coverage by Medicare as a disincentive to development. Disposable DME substitutes are generally precluded from Medicare coverage under the DME benefit because they do not meet the Centers for Medicare & Medicaid Services' (CMS) regulatory definition of “durable”—able to withstand repeated use, with an expected lifetime of at least 3 years. Stakeholders noted this also decreases their chances of obtaining coverage from other insurers, which may follow Medicare payment policy. Some stakeholders noted that CMS's DME definition is a disincentive to technological innovation, and the agency has already faced challenges making coverage decisions with some devices. According to federal internal control standards, management should anticipate and plan for significant changes using a forward-looking process, but CMS officials said the agency has not considered the possibility of reexamining its definition. As a result, the agency may not be taking advantage of the potential benefits of these devices.
If Medicare coverage were expanded to include disposable DME substitutes, CMS would need to consider issues related to benefit category designation. GAO identified three possible options for covering disposable DME substitutes: an expansion of the current DME benefit, an expansion of the current home health benefit, or establishment of a new benefit category. The table lists the options GAO identified, which are not exhaustive. CMS would also need to consider its authority to provide for expanded coverage and evaluate potential reimbursement options.

What GAO Recommends

GAO recommends that CMS, within the Department of Health and Human Services (HHS), evaluate the possible costs and savings of using disposable devices as substitutes for DME, and, if appropriate, seek legislative authority to cover them. HHS stated that such an evaluation was premature. However, GAO continues to believe an evaluation is needed to help HHS anticipate and plan for significant changes using a forward-looking process.