Medicare & Cochlear Implants

Medicare & Cochlear Implants

Questions regarding coverage and payment of cochlear implants by Medicare may be sent by e-mail to cochlearimplant@pobox.com.

Medicare is a Federal government program that provides basic health insurance coverage for approximately 39 million Americans. However, it is not solely a program for the elderly. Nearly 13 percent of all Medicare beneficiaries qualify because of disability. Roughly the same percentage of all cochlear implant users in the United States are currently Medicare beneficiaries.

Eligibility under Medicare is automatic for any United States citizen over the age of 65, or if they meet the Social Security Administration definition of disability and have been receiving Supplemental Security Income (SSI) payments for at least two years (see http://www.ssa.gov.)

Carrie Lucas of the Colorado Cross-Disability Coalition writes us to tell us this is not correct. That SSI recipients receive Medicaid for as long as they are on SSI. Social Security Disability Insurance (SSDI) recipaints receive Medicare after 2 years of benefits.

Medicare laws and regulations are enormous and complex. They create unique challenges for cochlear implant patients, providers, and manufacturers. The following summarizes the Medicare requirements that may assist all of these entities in securing appropriate Medicare reimbursement for cochlear implants services:

COCHLEAR IMPLANTS

Medicare defines cochlear implants as a prosthetic device, covered under the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) benefit. Under Medicare regulations, prosthetic devices are those that "replace all or part of an internal body organ….or all or part of the function of a permanently inoperative or malfunctioning internal body organ [42 CFR 410.36(a)(2) and 414.202]."

Medicare has established a national coverage policy for cochlear implant services under the Medicare Coverage Issues Manual (CIM) §65-14¹. These criteria are binding on all Medicare intermediaries and carriers, and consistent with the Food and Drug Administration (FDA) criteria for cochlear implant candidates.

The FDA has approved cochlear implants for marketing in adults since 1985, and children since 1990. Effective May 1, 1998, Medicare expanded its coverage criteria to include prelingual and perilingual populations, subsequent to FDA approval for these populations in 1995.

Cochlear implant surgery

The cochlear implant surgery may be covered under either Part A or B, depending on whether the surgery is performed on an inpatient or outpatient basis. Medicare payment under Part A is significantly lower than Part B. As a result, the majority of cochlear implant surgeries under Medicare are generally performed as an outpatient procedure, and reimbursed under Part B.

Hospitals purchase the device directly from the manufacturer, and are directly reimbursed from Medicare. Because neither Part A or Part B payment reimburse the full acquisition cost of the device, hospitals generally incur a significant financial loss from Medicare cochlear implant surgeries.

Part A

Part A reimburses for inpatient hospital services on the basis of diagnosis related groups (DRGs).

Cochlear implantation performed on an inpatient basis has been assigned to DRG 49, Major Head and Neck procedures. Reimbursement to hospitals under DRG 49 averages under $9,000 nationwide, and are billed using ICD-9 diagnosis code 20.98. This all-inclusive global fee represents Medicare reimbursement for all inpatient costs, with the exception of the physician’s professional fee that is paid separately under Part B using CPT code 69930. There is no separate payment for the cost of the cochlear implant system.

However, all post-operative cochlear implant services performed by audiologists after 90 days from inpatient surgery are reimbursed under Part B.

Hospital charges not reimbursed by Medicare may not be billed to the patient, who is responsible only for the Part A deductible ($768 in 1999).

Part B

The cochlear implant system is reimbursed a lump-sum amount under Part B, according to the recognized purchase price established by the Medicare Part B fee schedule.

The entire system is billed by the hospital under HCPCS code L8614. The 2000 Medicare Part B fee schedule payment for L8614 ranges between $13,162 and $17,550 nationwide (manufacturer invoice prices to the hospital now exceed $20,000).

Hospital costs for the surgery are billed separately by the hospital under numerous different billing codes, and reimbursed according to established fee schedule amounts. This includes the costs of anesthesia and non-physician operating room personnel. The physician’s professional fee is also reimbursed separately under CPT code 69930.

Under Part B, patients are liable for their Medicare coinsurance, which is currently 20 percent of the total hospital charges. Effective July 1, 2000, Medicare regulations under the outpatient hospital prospective payment system (PPS) will begin to reduce coinsurance amounts to 20 percent of actual Medicare payments. However, in the interim a cochlear implant patient under Part B may be liable for amounts approaching 50 percent of the cost of their care.

The patient’s total financial liability under Part B hinges on whether the providers (such as physicians, hospitals, and audiologists) accept assignment on the claims submitted to Medicare. Physicians commonly accept assignment, while hospitals and audiologists do not.

A provider may elect to have "participating" status, in which case it must accept assignment. The provider may then be reimbursed directly by Medicare, but cannot bill the patient for any amount above the 20 percent Part B coinsurance.

A non-participating provider has the option whether to accept assignment. If it does not accept assignment, it may bill the patient for amounts not reimbursed by Medicare for physician services, but only up to the Medicare limiting charge which currently is 115 percent of 95 percent of the Medicare fee schedule amount for the item or service.

The limiting charge does not apply to DMEPOS items such as the cochlear implant system because these are not physician services under Medicare law. However, the limiting charge does apply to the servicing of these items.

Repair or replacement of cochlear implant device components

Repair or replacement of all cochlear implant device components are a covered benefit under Medicare Part B.

Medicare covers all "supplies that are necessary for the effective us of a prosthetic device", as well as "services necessary to design the device, select materials and components, measure, fit, and align the device, and instructions to the patient [42 CFR 410.11(f)(2)]." For example, fitting and programming of the external components of a cochlear implant are Medicare-covered services, as is aural rehabilitation subsequent to implantation, so long as it is provided outside the 90-day period following surgery (services within 90 days are included in the global payment for the surgical procedure.)

Medicare covers replacements of any item of DMEPOS that has been in continuous use by a beneficiary and is beyond its useful lifetime, or is lost or irreparably damaged. Unless HCFA has established a useful lifetime for an item, Medicare carriers have discretion to set a useful lifetime which is at least five years or greater [42 CFR §414.210(f)].

Medicare requires all cochlear implant manufacturers to enroll in Medicare Part B, and meet all standards for DMEPOS suppliers. As a result, repair or replacement of cochlear implant device components are billed by the manufacturer and not the audiologist (either directly or through the physician). Since January 1, 1996, repair or replacement of the cochlear implant speech processor is billed by the manufacturer using HCPCS code L8619, and currently reimbursed between $5,650 and $7,533 by Medicare according the Part B fee schedule for 2000.

Since January 1, 1996, local Medicare carriers do not cover upgrades to new generation cochlear implant speech processors unless these criteria are met. Replacement speech processors are only covered if the equipment is lost or irreparably damaged.

If a Medicare beneficiary’s device is serviced by a manufacturer, the manufacturer must submit a claim on to Medicare on behalf of the beneficiary within 12 months from the date of service, regardless of the level of service performed, as mandated by the Omnibus Budget Reconciliation Act (OBRA) of 1989 and 1990 [Social Security Act §1848(g)(4)]. The manufacturer may not charge the beneficiary any fee for completing or filing the claims.

The manufacturer may elect to accept assignment and bill the beneficiary the applicable Part B coinsurance. Or it may not accept assignment, and bill the beneficiary up to the limiting charge. However, the manufacturer may not bill the beneficiary a pre-determined flat repair fee regardless of the actual expenses incurred.

C. Pre and post-operative cochlear implant services

Pre and post-operative audiologic tests and services are reimbursed according the Medicare Part B fee schedule. Audiologists may be reimbursed directly by Medicare only for certain diagnostic services [see Medicare Carriers Manual (MCM), Section 2070.3].

Aural rehabilitation following cochlear implantation is covered by Medicare when performed by either an audiologist or speech-language pathologist. Effective January 1, 1996, claims for both aural rehabilitation and speech processor programming are covered by local Medicare carriers under CPT code 92510, and paid an average of approximately $90 per visit under the fiscal year 2000 Part B fee schedule.

However, Medicare currently does not interpret programming of the speech processor as a diagnostic service, and will not reimburse claims for CPT 92510 when billed directly by an audiologist. Speech processor programming should be billed under the "incident to a physician's service" provisions of the MCM.

Pursuant to Section 15300 of the MCM, services billed under CPT 92510 are not included within the 90-day global fee for cochlear implantation paid under CPT 69930.

D. Service contracts

The Social Security Act Amendments of 1994 (effective January 1, 1995) prohibit manufacturers from selling service contracts to Medicare beneficiaries that duplicate Medicare-covered benefits. Beneficiaries that purchased service contracts that include Medicare-covered benefits such as repairs or replacements to cochlear implant components are entitled to a full refund by the manufacturer.

E. Impact of outpatient hospital PPS

Under Section 201(e) of the Balanced Budget Refinement Act (BBRA) of 1999, implantable prosthetic devices (such as cochlear implants) which are furnished in an outpatient hospital setting on or after July 1, 2000 will be paid under a new Medicare prospective payment system according to Ambulatory Patient Classifications (APC). However, HCFA has identified the cochlear implant device has a "new technology" eligible for pass-through payments, and has yet to establish a reimbursement amount.

The physician’s professional fee under CPT 69930 will be reimbursed approximately $1,231. All audiologic services related to cochlear implantation are also included under the outpatient hospital PPS, with the exception of CPT code 92510 (see above) which Medicare currently considers a speech-language pathology code².

F. Behind-the-ear speech processors (BTE)

Cochlear implant users receive an entire cochlear implant system at the time of surgery. This includes the internal implantable component, the external hip-worn speech processor, and the headset.

The Medicare CIM §65-14 limits Medicare coverage to only one speech processor with the initial cochlear implant system. However, the "standard package" system that the hospital receives from the manufacturer may often contain a second speech processor worn behind the ear. Medicare does not provide benefits for this extra processor, which has a list price of approximately $6,000.

Medicare regulations do not permit any manufacturer or hospital to inflate the invoice price of the cochlear implant system by $6,000 (or any amount) to reflect an additional speech processor, unless the inclusion of the additional processor is disclosed to Medicare. If the additional processor is not disclosed, the patient is forced to pay 20 percent of the inflated charge as his or her Part B coinsurance (see above). Because the patient is paying more for an item that is not a Medicare-covered benefit, this practice is prohibited.

G. Inherent reasonableness

During calendar year 1998, all HCFA regional offices collected invoice prices from cochlear implant manufacturers to determine if HCFA should exercise its "inherent reasonableness" authority to make either an upwards or downwards correction to the Medicare Part B fee schedule payment for the cochlear implant system (L8614)³.

Any payment correction resulting from of HCFA’s determination has been indefinitely postponed. However, this correction will not affect payment for audiologic or rehabilitation services related to cochlear implantation.

Failed devices

Approximately two percent of all cochlear implant devices currently experience device failure and must be explanted from the patient. Manufacturers and providers are required to report all device failures and other adverse events to the Food and Drug Administration (FDA). Copies of these reports can be viewed by at http://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfMAUDE/search.CFM.

Medicare does not make reimbursement for the costs of new device which is not covered under the manufacturer’s warranty. However, Medicare does cover the costs associated with medical, surgical, or hospital expenses incurred in through reimplantation of a functional device.

A manufacturer may reimburse the beneficiary directly for costs which are not reimbursed by Medicare. However, the manufacturer may not reimburse the hospital, physician, or audiologist for any medical, surgical, or hospital expenses incurred by those entities, other than for the cost of the device itself [see 42 C.F.R. §1001.952(g)].

The Federal government’s position is that reimbursement for these costs may inappropriately influence the provider’s clinical judgment in determining which manufacturer’s device is appropriate for reimplantation.

Choice of cochlear implant device

The selection of a brand of cochlear implant device is ultimately up to the patient. The physician and audiologist play a prominent and valuable role in assisting cochlear implant candidates with this difficult decision. However, a cochlear implant provider may not restrict the patient’s choice of device based on expected or actual financial renumeration or benefit from a manufacturer.

Any renumeration (including offers of free goods or services) which are intended to influence referrals that are not based solely on the clinical judgment of the provider may be considered an illegal inducement. These inducements are prohibited by Federal laws not limited to the Anti-Kickback Statute at Section 1128(b) of the Social Security Act (and the self-referral prohibitions at Section 1877(b)).

INVESTIGATIONAL OR EXPERIMENTAL DEVICES

As of November 1, 1995, Medicare contractors may provide benefits for devices that are not approved for marketing by the Food and Drug Administration (FDA). See 42 CFR Part 405, Subpart B.

If a device still in clinical trials has been granted an Investigational Device Exemption (IDE) by the FDA, it is eligible for Medicare reimbursement if the device is deemed by the FDA to be not truly investigational or experimental, as underlying questions of safety or effectiveness have previously been resolved. The FDA assigns these devices to "Category B".

Any Medicare carrier or intermediary is granted discretion to cover "Category B" devices, so long as coverage is not prohibited by other HCFA coverage requirements. Devices that currently fall into this category included the auditory brainstem implant (ABI), or new generation versions of cochlear implants still in clinical trials.

III. MEDICARE AS SECONDARY PAYER

Medicare regulations at 42 CFR §411.33 allow Medicare to be secondary to a limited number of additional third party payers (TPPs).

For persons under age 65 who qualify for Medicare due to disability (other than End Stage Renal Disease) and have other coverage under an employee health plan through them or their spouse, Medicare is secondary if the employee has 100 or more employees.

Medicare is secondary for services covered by any liability or no-fault insurance, and group health plans that cover individuals who have end stage renal disease (ESRD). Medicare beneficiaries age 65 or older who are covered under a group health plan (with at least one participating employer that employs 20 or more persons), and who are covered under the plan by virtue of their current employment status or their spouse, also have Medicare as a secondary payer.

Medicare secondary payment pays the lowest of (a) the actual charge(s) by the provider less the amount paid by a TPP, (b) the amount Medicare would pay if it were primary, or (c) the higher of the Medicare fee schedule, Medicare reasonable charge, or other amount payable under Medicare (without regard to beneficiary cost-sharing) or the TPP’s allowable charge (with regard to cost-sharing), less the amount actually paid by the TPP.

IV. MEDICARE APPEALS PROCESS

Providers and beneficiaries (or any representative designated on their behalf, including providers) may appeal Medicare coverage or payment decisions.

For Part A intermediary decisions, the appeal process is governed by 42 CFR Part 405, Subpart G (provider reimbursement under the Part A reasonable cost and prospective payment methodologies are under Subpart R). In general, the following process applies:

1) Within 60 days of the notice of initial determination by the Part A intermediary, the beneficiary or provider must file a request for reconsideration with the intermediary.

2) Within 60 days of receipt of the reconsidered determination, a beneficiary or provider my request a hearing with HCFA, provide the amount of controversy is at least $100.

3) The final decision of the hearing officer may be appealed to the Department Appeals Board (with subsequent judicial review for amounts in controversy of at least $1,000) pursuant to 20 CFR §404.967 and §422.210).

For Part B carriers, the appeal process is governed by 42 CFR Part 405, Subpart H. In general, the following process applies:

1) Part B claim denials may be appealed to the applicable carrier within 180 days from the initial carrier determination.

2) The carrier must review 95 percent of these appeals within 45 days (HCFA data shows the average review took carriers an average of 33 days in1998).

3) For amounts in controversy of at least $100, the beneficiary or provider can request a hearing within 180 days of a final decision by the carrier. 90 percent of requested hearings must be complete within 120 days. (HCFA data shows hearing officer appeals took an average of 116 days in 1998).

4) For amounts in controversy of at least $500, the beneficiary or provider can appeal the final decision of a hearing officer to an Administrative Law Judge (ALJ). There is no limit on how long ALJs have to review cases, and HCFA data shows it took an average of 524 days to issue decisions for cases decided in 1998.

5) Within 60 days of an ALJ opinion, the beneficiary or provider can appeal to the Departmental Appeals Board for the Department of Health and Human Services. The Board can decline to hear the appeal.

6) For amounts in controversy of at least $1,000, the beneficiary or provider can seek judicial review in Federal court.

¹See HCFA Internet website at http://www.cms.hhs.gov/manuals/default.asp?.
²Rehabilitation services are excluded from the outpatient hospital PPS pursuant to the Balanced Budget Act (BBA) of 1997.
³See HCFA Program Memorandum AB-98-9 on the HCFA Internet website at www.hcfa.gov/pubforms/transmit/ab98960.htm. *** Web Note: The HCFA site has been folded into The Centers for Medicare & Medicaid. This link no longer works ***