  Durable Medical Equipment, Prosthetics/Orthotics, and Supplies
                      (DMEPOS) Fee Schedules


Medicare payment for durable medical equipment (DME), prosthetics and orthotics (P&O), and
surgical dressings is equal to 80 percent of the lower of either the actual charge for the item or
the fee schedule amount calculated for the item, less any unmet deductible.  The beneficiary is
responsible for 20 percent of the lower of either the actual charge for the item or the fee schedule
amount calculated for the item, plus any unmet deductible.  The DME and P&O fee schedule
payment methodology is mandated by section 4062 of the Omnibus Budget Reconciliation Act
(OBRA) of 1987, which added section 1834(a) to the Social Security Act.  OBRA of 1990 added
a separate subsection, 1834(h), for P&O.  The DME and P&O fee schedules were implemented
on January 1, 1989 with the exception of the oxygen fee schedules, which were implemented on
June 1, 1989.  Section 13544 of OBRA of 1993, which added section 1834(i) to the Social
Security Act, mandates a fee schedule for surgical dressings; the surgical dressing fee schedule
was implemented on January 1, 1994.

DME Fee Schedule Payment Methodology

The DME fee schedules are calculated for the following DME payment classes:  

o    INEXPENSIVE AND OTHER ROUTINELY PURCHASED ITEMS (Section
     1834(a)(2))    

     These items have a purchase price of $150 or less, or are generally purchased 75 percent
     of the time or more, or are accessories used in conjunction with certain nebulizers,
     aspirators, and ventilators.  If covered, these items can be purchased new or used and can
     be rented; however, total payments cannot exceed the purchase new fee for the item.

o    FREQUENTLY SERVICED ITEMS (Section 1834(a)(3))

     These items require frequent and substantial servicing.  Examples of such items are
     provided in section 1834(a)(3)(A).  If covered, these items can be rented as long as they
     are medically necessary.

o    OXYGEN AND OXYGEN EQUIPMENT (Section 1834(a)(5))

     Medicare payment for oxygen and oxygen equipment is made on a monthly basis.  One
     bundled monthly payment amount is made for all covered stationary equipment,
     stationary and portable contents, and all accessories used in conjunction with the oxygen
     equipment.  If the beneficiary owns her equipment and oxygen contents are covered, a
     monthly payment is made for oxygen contents only.  An additional monthly payment
     may be made for those beneficiaries who require portable oxygen.  If the beneficiary
     owns their portable equipment, then a monthly payment may be made for portable
     contents only.

o    OTHER COVERED ITEMS (OTHER THAN DME) (Section 1834(a)(6))

     These are supplies that are necessary for the effective use of DME.  Medicare payment is
     made for the purchase of these supplies, if covered.

o    CAPPED RENTAL ITEMS (Section 1834(a)(7))

     These are items of DME which do not fall under any of the other DME payment
     categories.  They are generally expensive items which have historically been routinely
     rented.  In general, Medicare pays for the rental of these items, when covered, for a period
     of continuous use not to exceed 15 months.  The beneficiary can decide to purchase the
     item in the tenth month of rental.  In this case, Medicare rental payments are "capped out"
     at 13 months instead of 15 months.  Power wheelchairs can be purchased in the first
     month of use.  

     The fee schedule amount is calculated based on 10 percent of the base year purchase price
     increased by the covered item update.  This is the fee schedule amount for months 1 thru
     3.  Beginning with the fourth month, the fee schedule amount is equal to 75 percent of the
     fee schedule amount paid in the first three rental months.  The purchase fee schedule
     amount for power wheelchairs is equal to the rental fee (for months 1 thru 3)  multiplied
     by ten.  

Fee schedule amounts are not calculated for customized DME:  

o    CERTAIN CUSTOMIZED ITEMS (Section 1834(a)(4))

     If covered, Medicare payment is made in a lump-sum amount for the purchase of the
     item; this payment amount is based on the carrier's individual consideration for that item.

National Ceiling And Floor Limits for DME and Surgical Dressings

The fee schedule amounts for DME and surgical dressings are calculated on a statewide basis and
are limited by national ceilings and floors.  The fee schedule ceiling is equal to the median or
mid-point of the statewide fee schedule amounts.  The fee schedule floor is equal to 85 percent of
the median of the statewide fee schedule amounts.

Covered Item Updates for DME and Surgical Dressings

The fee schedules for DME and surgical dressings are updated annually by a covered item update
established through legislation.  The covered item updates for 1990 through 1998 are:  

1989      Initial Year of Fee Schedules
1990      0.0 percent
1991      3.7 percent
1992      3.7 percent
1993      3.1 percent
1994      3.0 percent
1995      2.5 percent
1996      3.0 percent
1997      2.8 percent
1998      0.0 percent  

P&O Fee Schedule Payment Methodology

Regional purchase (new) fee schedule amounts are calculated for P&O (section 1834(h)).  The
P&O payment class includes: ostomy, tracheostomy, and urological supplies; orthotics;
prosthetics; prosthetic devices; and certain vision services.  The regional fees are equal to the
weighted average of the statewide fees in each HCFA Region.

*    Per OBRA of 1993, effective January 1, 1994, the purchase (new) fee schedule amounts
     for ostomy, tracheostomy, and urological supplies are calculated using the same
     methodology as the purchase (new) fee schedule amounts for inexpensive or routinely
     purchased items of DME.  As a result, these items are not subject to regional fee
     schedules.  A fee schedule ceiling and floor, based on the median and 85 percent of the
     median, respectively, of the local fee schedule amounts are calculated for each item.  The
     fee schedule amounts for these items are updated by the DME/surgical dressing covered
     item updates.  

National Ceiling And Floor Limits for P&O

The P&O regional fee schedule amounts are limited by a ceiling (120% of the average of the
regional statewide fees) and a floor (90% of the average of the regional statewide fees).

Covered Item Updates for P&O

The fee schedules for P&O are updated annually by a covered item update established through
legislation.  The covered item updates for 1990 through 1999 are:  

1989      Initial Year of Fee Schedules
1990      0.0 percent
1991      0.0 percent
1992      4.7 percent
1993      3.1 percent
1994      0.0 percent
1995      0.0 percent
1996      3.0 percent
1997      2.8 percent
1998      1.0 percent
1999      1.0 percent