The beneficiary is  responsible for a 20 percent copayment for DME and orthotics covered  under part B.

	HCFA’s Ruling Issued to Clarify Medicare Policy for Orthotics and DME

HCFA issued its orthotics ruling in September 1996 to clarify the  distinction between certain DME and orthotics for Medicare part B billing  purposes. Attached devices that brace  individuals, such as items that attach to wheelchairs, would not be paid  under Medicare’s orthotics benefit. HCFA’s Ruling Clarified the Distinction Between Orthotics and DME

In the late 1980s and early 1990s, HCFA and its contractors had become  increasingly concerned about how certain suppliers were billing Medicare. HCFA’s ruling limited payment  for orthotics under Medicare part B to leg, arm, back, and neck braces that  can be used independently of other equipment. As a result of the ruling, attached  bracing devices, such as OrthoConcepts’ items and other attached devices,  were placed in the DME benefit category and could no longer be billed as  orthotics. Furthermore, the  court found that the interpretation in the ruling was wholly supportable  and that the ruling’s treatment of seating systems as DME was consistent  with congressional intent. HCFA’s Ruling Affects Beneficiaries Who Reside in Nursing Homes

As a result of HCFA’s ruling, attached bracing devices are now clearly  classified as DME and cannot be billed as orthotics, which affects  beneficiaries who live in nursing homes. Suppliers used  these codes to bill for such items under Medicare’s orthotics benefit  category and DMERCs paid such claims. 1.) Some suppliers—such as those providing  OrthoConcepts’ products—were billing for attached bracing devices using  codes for nonattached braces. Some beneficiaries who reside in SNFs and other institutions primarily  engaged in providing skilled nursing care and need attached bracing  devices that are not paid for through Medicare can obtain them through  other sources. This is true even if the nursing facility could be  considered the patient’s permanent residence.” CMS officials noted that  DMERCs do not pay for DME in nursing homes because DMERCs presume  that these facilities meet the criteria for being primarily engaged in  providing skilled nursing care for DME part B payment purposes and,  therefore, cannot be considered as a beneficiary’s home. It is difficult to predict with confidence how much Medicare payments  might increase if the ruling were rescinded. Therefore, should the ruling  be rescinded, additional controls would be needed. Practitioners reported that such uncertainty affects suppliers’ willingness  to provide customized items to beneficiaries. Concluding Observations

HCFA’s 1996 ruling on orthotics more clearly delineated the circumstances  under which Medicare would consider an item as an orthotic or DME for  payment policy, and HCFA’s issuance of the ruling was found to be proper  in court.
What GAO Found

In the late 1980s and early 1990s, the Health Care Financing Administration (HCFA), now called the Centers for Medicare and Medicaid Services (CMS), became concerned that some suppliers were improperly billing Medicare for items that attach to wheelchairs and other equipment. Some suppliers were billing for such items using codes for orthodic devices, including arm, back, and neck braces that provide support for or immobilize weak or injured limbs, while others were billing using codes for durable medical equipment, which includes equipment such as wheelchairs and crutches that can withstand repeated use and is appropriate for home use. Whether an item is billed as an orthotic or DME device can affect whether such claims are paid. To clarify Medicare's payment policy on orthotics, HCFA issued a ruling stating that Medicare considered such items to be durable medical equipment rather than orthotics. HCFA issued Ruling 96-1 to clarify the circumstances under which certain items would be classified as orthotics or as DME for Medicare part B payment purposes. A federal appellate court found that HFCA had followed appropriate procedures to issue the rule as an interpretation of Medicare policy, the interpretation in the ruling was wholly supportable, and the treating of seating systems as DME was consistent with congressional intent. HCFA's ruling that attached bracing devices were in the DME benefits category and could no longer be billed as orthotics affects beneficiaries residing in Medicare-certified skilled nursing facilities and other institutions primarily engaged in providing skilled nursing care (SNF). Because Medicare part B does not cover DME in SNFs and other institutions primarily engaged in providing skilled nursing care, claims for such items are no longer paid for residents in nursing homes. This ruling affects residents of all nursing homes, not just SNFs. If HCFA's ruling were rescinded and Medicare's policy changed so that attached bracing devices were classified as orthotics, how much Medicare and Medicaid would spend for orthotics is uncertain. The increase in Medicare spending would depend on how extensively attached bracing devices would be provided to nursing home residents following the ruling's recission. The distinction between DME and orthotics would become less clear, which could lead to inappropriate billing. Therefore, if the ruling were rescinded, additional controls, such as closely monitoring billing and reviewing medical justification for customized items prior to payment, would be vital to help curb potentially inappropriate billing.