January 9, 1998

Obtaining Durable Medical Equipment for Persons Eligible for Both Medicare and Medi-Cal.

This memo is prepared with funding provided through California Assistive Technology project supported by funds from the National Institute of Disability and Rehabilitation Research (NIDRR), US Dept. of Education, Grant No. H224A3008-94.

The Problem: For years, people who were eligible for both Medicare and Medi-Cal had a difficult time obtaining payment through these entities for medical equipment and supplies. Medi-Cal required them to exhaust Medicare for funding first. However, Medicare does not provide prior approval for durable medical equipment and supplies, recipients were required to obtain the item first and then seek reimbursement from Medicare.

Requiring recipients to purchase covered equipment and supplies prior to reimbursement presented a barrier for most Medi-Cal recipients who have limited resources and income. Moreover, Medicare, the primary insurer for dually eligible people, is required by law to pay the first 80% of medical expenses it deems reasonable. Medi-Cal, as the secondary insurer, must then pay the remaining 20%. The amount Medicare authorizes for many items of durable medical equipment (DME) has been very low and Medi-Cal paid only 20% of these unrealistic rates. Thus, DME suppliers would incur a significant monetary loss by accepting these claims. The result was that dually eligible consumers did not have a means of obtaining equipment and supplies.

By contrast, recipients who only have Medi-Cal have not faced this problem.

Medi-Cal, as their sole insurer, pays DME suppliers 100% of the cost of the approved items, and its reimbursement rates are based on the fair market value of the equipment.

1. What is the Charpentier injunction?

In October 1990, in the case of Charpentier v. Kizer, the Federal District Court for the Eastern District of California issued an order prohibiting Medi-Cal from continuing its practice of reimbursing only 20% of the Medicare approved rate for durable medical equipment and supplies.

The Charpentier injunction restates the federal requirement that persons with dual eligibility are entitled to receive medical services which are equal in amount, duration and scope to those provided to recipients who only have Medi-Cal. They are also entitled to procedural protections including prior approval of requests for equipment and supplies, notice of denial and the right to an administrative hearing.

The Charpentier injunction precludes Medi-Cal from substituting Medicare's low rates for its own. Medi-Cal must now pay the same reimbursement rate on claims of persons with dual eligibility as the rate it pays on straight Medi-Cal claims. Since Medi-Cal's rates are generally higher than Medicare's, this requirement of the Charpentier injunction should lead to a greater willingness by DME suppliers to serve dually eligible individuals.

In addition, before requiring a person with dual eligibility to seek payment from Medicare, Medi-Cal must approve or deny the recipient's request for durable medical equipment or medical supplies. In this way, when Medi-Cal approves a request under the Charpentier injunction, the provider is assured of full payment because, if Medicare either denies or pays only partially for the equipment, Medi-Cal remains responsible to pay for equipment it has authorized. If Medi-Cal denies a request, both the recipient and the provider can exercise their separate rights of appeal to challenge Medi-Cal's unfavorable decision right away.

2. What is the impact of the Charpentier injunction on dual eligibility claims?

The most significant outcome of the Charpentier injunction is that persons with dual eligibility can now access durable medical equipment and medical supplies as readily as individuals who only have Medi-Cal. Given that Medi-Cal's coverage is more extensive and its reimbursement rates are higher than Medicare's, the injunction has increased access to medically necessary equipment and supplies for dually eligible recipients. Moreover, the Charpentier injunction affords these individuals the opportunity to challenge an unfavorable

Medi-Cal decision at the outset, rather than be required to purchase equipment and then claim Medicare reimbursement. If the recipient succeeds in overturning the denial on appeal, Medi-Cal will be required to authorize and pay for the purchase of the requested equipment.

The Charpentier injunction should serve durable medical equipment suppliers well. Prior to the injunction, Medi-Cal limited payments on DME claims to 20% of Medicare's reimbursement rates. The Charpentier injunction required Medi-Cal to abandon this practice and to pay 20% of the Medicare rate plus any additional amount by which its approved rate exceeds Medicare's. DME suppliers are thus guaranteed reimbursement from Medi-Cal for the full Medi-Cal reimbursement rate on an item. In addition, since a Treatment Authorization Request (TAR) denial also gives the provider the right to initiate an appeal on his/her own behalf, under the Charpentier injunction, DME suppliers have the right to file a provider appeal if Medi-Cal denies the TAR of a recipient with dual eligibility.

3. How do the Charpentier injunction procedures work?

Under the Charpentier injunction, a dually eligible individual first applies for prior approval for medical equipment and supplies, e.g. a customized wheelchair, to Medi-Cal by submitting a TAR. When this is approved, the provider delivers the equipment and bills Medicare. After Medicare pays (usually at a rate much lower than Medi-Cal's approved rate), Medi-Cal is electronically cross-billed for the 20% co-payment that represents the beneficiary's portion and pays that amount. The provider then applies to Medi-Cal for any difference between Medicare's and Medi-Cal's approved rates.

If Medicare denies the request or fails to pay within ninety days of billing, the provider may seek reimbursement for the entire cost of the device from Medi-Cal. There is no requirement to appeal a Medicare denial before a provider may request payment from Medi-Cal. The provider must submit a claim to Medicare. If the provider has not received an Explanation of Benefits letter in which Medicare denies the service within 90 days, a provider can then bill Medi-Cal without appealing the Medicare denial or its failure to act.

4. Are there ongoing problems faced by dually eligible consumers?

Some DME suppliers still do not accept assignments on the claims of dually eligible beneficiaries. The principal reason is the length of time it takes for suppliers to receive full payment. Since Medicare and Medi-Cal separately review the merits of each request, a supplier must wait the combined periods necessary to secure authorization and payment from each agency. Where a claim has a Charpentier crossover portion i.e. where Medi-Cal's rate is higher than Medicare's, it adds even more time since the provider must bill Medi-Cal separately for the crossover portion after receiving payment from Medicare.

The process can be complicated further by different standards, procedures, guidelines and policies or inconsistent decisions in the two agencies. Lack of awareness of these differences often leads to non-compliance with required procedures and submission of medical justifications that are inadequate.

Medicare and Medi-Cal can defer or deny requests without regard to the standards and prior decisions of the other agency. Deferrals are routine and are usually made when an agency needs more information about a patient's condition or the equipment before it can make a decision. Deferrals are time consuming for both providers and clinicians.

A denial of a request is more serious, requiring the beneficiary and/or the supplier to initiate the appeal process. This usually takes several months and may involve the coordinated efforts of multiple parties including an advocate.

Many DME suppliers have stated that Medicare routinely lowers the codes for the requests for medical equipment particularly wheelchairs. This practice, known as downcoding, results in Medicare authorizing a wheelchair or a medical device which is different from, and invariably less expensive than, the one prescribed for the recipient. On its face, Medicare's action in downgrading the needed equipment raises serious concerns regarding whether Medicare-only beneficiaries as well as persons with dual eligibility are receiving the appropriate equipment through Medicare.

A unilateral determination by a reviewing agency like Medicare as to what is medically necessary without conducting an independent assessment may, in many instances, result in the provision of equipment that is not appropriate to address the needs of the recipient. Medicare's authorization of a substitute device should be accompanied by a medical explanation as to the reason the approved alternative is as appropriate or more appropriate than the prescribed one. In order to track Medicare's practice more accurately, PAI would like to hear from counselors, DME suppliers and therapists of cases where the equipment approved by Medicare is inconsistent with the recommendation prepared by a qualified occupational/physical therapist and is inadequate for the needs of the patient.

5. Are there new time-lines associated with the Charpentier injunction?

The injunction does not create any new time-lines. The law governing each agency dictates its time lines and other procedural requirements. For instance, Medi-Cal is required to take action on a TAR within 30 days from receipt. If it fails to do so, the request is deemed approved and Medi-Cal must pay for the equipment requested. Medicare, on the other hand, is not bound by a specific time period to act on a request for medical equipment.

6. Is there a special appeal process associated with the Charpentier injunction?

The injunction does not create new appeal rights for dually eligible recipients. Federal and state laws already provide administrative and judicial review rights for recipients who are denied benefits. For instance, before receiving equipment, Medi-Cal beneficiaries are entitled, under federal law, to receive notice and an opportunity for a hearing if their claim for benefits is denied.

Since the Charpentier injunction says that recipients need only obtain prior approval from Medi-Cal, they no longer need to exhaust Medicare's administrative process before appealing a Medi-Cal denial.

7. What can a durable medical equipment provider do to ensure successful processing of a Charpentier claim?

Successful completion of a claim using the procedures established by Charpentier requires careful documentation of the medical justification of the DME being requested. Justification is primarily achieved through teamwork between a qualified clinician and DME provider. Below are some strategies that have worked.

a. When conducting an assessment, make sure the assessment team includes a qualified allied health practitioner (e.g. occupational or physical therapist) experienced in evaluating the durable medical equipment needs of consumers.

b. When identifying a specific item of DME, recommend a device that has previously been paid for by Medicare and Medi-Cal whenever possible. Since Medi-Cal has traditionally provided more devices, and is ultimately responsible to pay for a Charpentier claim, it is wise to give primary consideration to Medi-Cal's approved list of equipment and supplies. If the needed device is not on either agency's list, the therapist should use the medical necessity standard to justify the recommendation with the assistance of the provider.

c. Submit all documentation at the same time (evaluation report, prescription, TAR and other supporting documents).

d. Do not take "Denied" or "Deferred" as an answer. Always respond to the "deferrals" in a timely manner. Always appeal a "denial". When applicable, it is best to involve the therapist when responding to a "deferral" or preparing for an appeal. Remember, if Medicare denies the request, you need not appeal the denial. You should send Medicare's denial letter together with the approved TAR to Medi-Cal for full payment.

e. For DME providers, capitalize on the therapist's clinical experience. Get a clear understanding of the clinical justification from the therapist for a specific item of DME and be prepared to offer alternatives that provide similar therapeutic benefits. Remember, in some instances the therapist might need to rely on Medicare's and Medi-Cal's definitions of medical necessity to justify a recommended device that does not appear on either agency's formulary. In such instances, the provider's technical expertise about the functional potentials of the device can be a valuable source to the therapist.

8. What is the role of the therapist in developing a Charpentier claim?

As in all other cases, a therapist plays a critical role in processing a Charpentier claim. The therapist is generally responsible for three principal tasks: evaluating a client's condition, selecting an appropriate device and preparing a medical justification report. However, since a Charpentier claim must satisfy two separate standards, the therapist's job becomes more complicated.

A medical justification report consists of a doctor's prescription, and an explanation by a therapist or other health professional how the requested device will treat the client's disability or condition, (the word "treatment" is a medical term that represents all clinical interventions that are applied to reduce functional limitations of a disability. The therapist should describe the justification for a medical device as a treatment). The therapist's role is to show that,

(1) the device being sought is necessary to meet a medical need; and

(2) that it is the least costly and most appropriate means to achieve the desired result.

Establishing the "medical need," or "medical purpose" of a device is the most important task a therapist must accomplish. The absence of medical necessity is the most frequently cited reason for denying requests for medical equipment and supplies. Both Medicare and Medi-Cal have formal definitions for medical need. It is critical that every therapist be familiar with these definitions and use key words in the justification report. In some cases, either agency may have specific service criteria regarding an item of DME. These criteria provide more precise requirements than the medical necessity standard, and are used by agency personnel in reviewing service requests. Therapists should be familiar with agency criteria, identify them in the report, and show that a client satisfies the conditions and requirements stated in the criteria.

The medical report should contain a detailed description of the therapist's evaluation and selection actions. The therapist must identify a client's mental and/or physical impairments which the requested device will address, using clinical diagnostic terminology. In addition, the therapist should describe the severity of the disability and whether alternative medical services can enhance a client's functional abilities. An illustration of the diagnostic methods used to identify the disability and measure its severity should be provided. The therapist should also answer the following questions:

Who referred the client?

What information was reviewed about the client prior to the evaluation?

What records were reviewed?

Who was interviewed?

How long did the evaluation take?

Where did the evaluation occur? (A clinic or rehabilitation center based assessment will be more likely to be approved than a home evaluation).

Did the evaluation follow a standardized protocol?

What devices and services were considered as alternatives and why were the alternatives not chosen?

Was there a trial use period? If so, was the trial a success?

The medical report is a comprehensive document that gives Medicare and Medi-Cal information about the beneficiary, the device, and the treatment plan. It should consist of three distinct parts. The first section is for information about the patient, such as:

The second part of the report should contain a detailed description of the recommended device, such as:

The last portion of the report should have (1) the doctor's prescription and (2) the treatment plan. In the plan, the therapist describes:

The report should clearly describe how the requested device will lessen, eliminate or slow down the progress of a client's current functional limitations. The report should describe the features of the device, how they augment a client's abilities and reduce his or her limitations, and how a client will be able to use each component of the device effectively. The therapist should also explain whether and how the device will increase the user's independence, self-care, self-determination, personal safety, integration in the community, facility activities or potential for discharge from a facility and whether it will improve a client's emotional state, prevent the onset of secondary impairments, and/or decrease a client's need for supervision.

It is important to bear in mind that Medicare and Medi-Cal reviewers often know very little about most medical equipment and supplies. It is the therapist's responsibility to educate them about the medical applications of a recommended device. A therapist should clearly identify the service that covers the recommended device, and must explain how the device constitutes a "treatment" within the scope of the identified service. The therapist should conclude by indicating awareness of the expectation that the least costly appropriate device meeting the client's needs will be recommended. (See the attached list of issues to be addressed in the medical justification report).

It is the therapist's responsibility to inform the client about DME options, features, clinical benefits and product limitations. In selecting a device, the therapist should give consideration to a client's preferences. A successful rehabilitative outcome is contingent on a client's comfort and satisfaction with use of the device. It is much harder to secure approval for a subsequent device when a previously authorized device proves inappropriate for a given client.

The input from a DME supplier is always useful as well. Based on his/her experience, a supplier can suggest less costly alternatives, recommend a device that is likely to be authorized, one that is functionally equivalent to an alternative that has been rejected previously, or give anecdotal reports of consumer satisfaction with particular medical equipment or supplies.

Finally, the therapist and the DME vendor should keep a close watch on the length of time it takes for Medi-Cal and Medicare to act on a request. Some of the important time lines to remember are:

a. Medi-Cal is required to process a TAR in a timely manner. California legislature defines "timely manner" as meaning an average of five working days following the receipt of the TAR.

b. Medi-Cal must act on a TAR (i.e. approve, deny, modify or ask for more information) within thirty days of receipt. If it fails to do so, the TAR is deemed approved and Medi-Cal must pay for all or part of the cost of the device under the Charpentier formula.

c. If the action on the TAR is a denial or modified approval (i.e., you did not get all you asked for), the Medi-Cal beneficiary must receive a notice of action in addition to the notice sent to the provider. The Medi-Cal beneficiary has ninety days from the date of the notice of action to appeal the denial or modified approval. No beneficiary notice is sent when there is an approval or a request for additional information.

d. For reimbursement, a Charpentier claim should first be submitted to Medicare. If the claim is not paid within ninety days of billing, the provider may submit a claim for payment to Medi-Cal. Later, if Medicare provides payment for the medical equipment or supply which was previously paid by Medi-Cal, the beneficiary must reimburse Medi-Cal.