MA Organizations Have the Right to Limit DME Coverage to Certain Brands and Manufacturers

For some time now Medicare Advantage (MA) organizations have been asking the Centers for Medicare & Medicaid Services (CMS) for guidance on whether they can limit enrollees to specified durable medical equipment (DME) manufacturers and brands. Some of these MA organizations have asked CMS whether they could offer lower cost-sharing for ‘‘preferred’’ DME products or brands versus ‘‘non-preferred’’ DME products or brands.

In section 50.1 of Chapter 4 of the Medicare Managed Care Manual, ‘‘Benefits and Beneficiary Protections,’’ CMS specified that, beginning in calendar year 2011, plans could establish several cost-sharing levels (tiers) for DME items, supplies, and Part B drugs, provided that: (1) the highest cost-sharing tier is at or below the relevant cost-sharing threshold established by CMS for DME and Part B drugs; and (2) plans ensure access to all products through the established network of providers. However, in this guidance, CMS did not specify whether network-based MA plans may, with a specific category of DME, limit coverage to the DME brands, items, and supplies of specific “preferred” manufacturers.

Because some MA organizations have already begun limiting DME coverage to certain brands and manufacturers, CMS has decided to establish a formal regulatory framework to ensure adequate MA enrollee access to DME brands, items, and supplies and so that MA plans are positioned to increase MA program efficiencies by allowing plans to negotiate bulk discounts for high-quality items.

Accordingly, effective June 1, 2012, CMS will now require MA organizations that wish to limit coverage within a specific category of DME to specific brands, items, and supplies of ‘‘preferred’’ manufacturers take the necessary steps to ensure that enrollees have access to all preferred manufacturer items and brands through their contracts with their network of DME suppliers. The new regulations also provide MA organizations guidance on the issues of medical necessity, a fair transition process, midyear coverage changes, enrollee appeals, coverage disclosures to enrollees, and annual review of DME categories.

 The “Medically Necessary” Requirement

MA organizations, to the extent that they elect to limit coverage of DME brands, items, and supplies to preferred manufacturers, must provide coverage of any DME brands, items and supply deemed “medically necessary,” including DME brands, items, and supplies made by non-preferred manufacturers.

While the medical necessity process concerning brand/manufacturer of DME items is the same as that for any health care service offered by a plan, the medical-necessity status may be initiated by the enrollee’s provider if the provider believes that a particular brand of DME is medically necessary.  Plans, of course, have the right to deny medical-necessity requests made by the enrollee’s provider. The enrollee, however, has the right to an appeal or expedited appeal if the plan denies the provider’s medical-necessity determination. Of course, requests for medically-necessary items must be responded to by the MA plan in a timely fashion.

 90-Day Transition Period

CMS is also requiring MA organizations to continue to ensure access to DME brands, items and supplies of non-preferred manufacturers for a 90-day transition period. Similar to the Part D transition process, CMS expects that MA organizations will provide one refill during the 90-day transition period. CMS is also requiring that, during this 90-day transition period, MA organizations cover repairs to DME brands, items, and supplies of non-preferred manufacturers, including providing a loaner. Alternatively, the enrollee could immediately switch to a brand, item, or supply of a preferred manufacturer.

 Are Midyear Coverage Changes Allowed?

 MA organizations are prohibited from making ‘‘negative changes,’’ that is, eliminating coverage of a Medicare-covered DME brand, item or supply of a preferred manufacturer, in the middle of a plan year (midyear).  MA plans, however, would not be responsible for involuntary negative changes such as those resulting from supplier terminations or sanctions. Of course, CMS will allow MA organizations to make ‘‘positive changes,’’ that is, adding coverage of Medicare-covered DME brands, items or supplies, midyear. Plans will also be able to add new suppliers midyear.

 Appeals of Non-Coverage of Product or Brand

As indicated previously, a plan’s denial of a medical necessity determination initiated by the enrollee’s provider could then lead to an appeal or expedited appeal. As a result, CMS has clarified in the MA regulations that a plan’s non-coverage of a particular manufacturer’s product or brand of a DME constitutes an organization determination under 42 C.F.R. section 422.566.

 Disclosure of Coverage Limits to Enrollees

For MA plans that choose to limit DME coverage to brands, items, and supplies of preferred manufacturers, CMS is requiring that they include in their annual notice of change/evidence of coverage (ANOC/EOC) disclosures about these DME coverage restrictions and enrollee rights to the MA appeals process for requests to obtain medically necessary DME brands, items, and supplies from non-preferred manufacturers. The information must be available via a toll-free customer service call center and Internet Web site, and in writing upon request.

 Benefits of Annual CMS Review

CMS is now providing additional flexibility for it to annually review DME categories. CMS also plans to review complaint data and appeals and grievances data. This will allow it to require full coverage of certain categories of DME without limitation in brand and manufacturer. This flexibility will allow CMS to consider and respond to emerging new technologies, as well as to require full coverage of categories of DME items typically tailored to meet individual needs.