• National Coverage Decision
  Medicare expands coverage to include moderate hearing loss
• Programming Denials
  Medicare denials for speech processor programming
• Nationwide Medicare
  Nationwide Medicare Part B Carrier Policy on Cochlear Implants
• Medicare Managed Care
  Medicare Managed Care
• Medicare as Secondary Payer
  Rules when Medicare is your secondary health plan
• Investigational Devices
  Medicare payment for investigational or experimental devices
• Non-Discrimination Regulations
  Federal Regulations Prohibiting Discrimination Based on Medicare Status
• Medicare Appeals
  
• Auditory Brainstem Implants
  Medicare policy for Auditory Brianstem Implants
• Osseointegrated Devices
  Medicare policy for osseointegrated auditory devices

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 14 percent of all Medicare beneficiaries will qualify because of disability in 2008. Roughly the same percentage of all cochlear implant users in the United States are currently Medicare beneficiaries. According to a 2001 Cochlear Americas survey of surgeons, approximately 23 percent of cochlear implant surgeries are covered under Medicare. As shown below, hospitals must incur a loss of between $6,000 and $12,000 every time they accept a Medicare-covered cochlear implant surgery. As a result, cochlear implant surgeries are generally only performed in large, urban hospitals with budgets that can sustain such significant losses.

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 Social Security disability payments for 24 consecutive months.

Hearing loss is the fourth most prevalent medical condition for Medicare beneficiaries over age 65, accounting for about 29 percent of this group. Otolaryngologists (ear, nose, and throat doctors that do cochlear implant surgeries) make up about 22 percent of all physician income under Medicare, earning about $250,000 per year.

Although it consumed 17 percent of all national health expenditures in 2003, Medicare only covers about 53 percent of a person's health care expenses. Most beneficiaries are covered under secondary or supplemental health plans.

Secondary health plans are typically retirement plans through an employer, or plans through a spouse. These plans may pick up costs not covered by Medicare.

Supplemental plans are typically Medicaid or Medigap plans that must pick up at least the coinsurance and deductibles that beneficiaries are required to pay under Medicare.

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:

1. 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) §65-14. 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.

1. 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).

Medicare reimbursement for cochlear implant serivces historically has been very low. This is because cochlear implantation is lumped in with other very expensive head and neck procedures under DRG 49. Congress has refused to move cochlear implants into a more appropriate DRG because they constitute only 7 percent of the total cases in DRG 49. The MedPAR database for fiscal year 2003 showed only 120 cochlear implant cases billed to Medicare Part A (with average charges of approximately $44,366.)

The low frequency of Part A cochlear implant claims is partially a result of surgeons becoming more proficient at outpatient surgeries since Part B reimburses over $10,000 more than Part A. Over 60 percent of all cochlear implant surgeries are now performed on an outpatient basis.

However, the low frequency is also due to poorly coded claims. The MedPAR database for Part A claims consistenly shows that cochlear implant claims are miscoded by hospitals into other DRGs. While this may sometimes lead to higher payment on individual claims, it also causes inpatient cochlear implant payments under DRG 49 to remain low, due to limited charge history.

Reimbursement to hospitals under DRG 49 averages only about $9,500 nationwide. (The procedure is billed using ICD-9 diagnosis code 20.98.) As a result, hospitals lose about $12,000 just on the purchase of the device from the manufacturer.

Medicare is the single largest payer for hospital services, accounting for over 30 percent of hospital expenses. As a result, hospitals have a strong disincentive to perform Medicare inpatient surgeries for cochlear implants.

The all-inclusive DRG 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 (the initial fitting of the processor within 90 days is also paid separately, as discussed below).

Hospital charges not reimbursed by Medicare may not be billed to the patient, who is responsible only for the Part A deductible ($812 for 2002.)

Part B

Cochlear implant surgery performed on an outpatient basis (hospital stay of 23 hours or less) are reimbursed under Part B. Payment under Part B is over $10,000 higher for inpatient surgeries under Part A.

Cochlear implants traditionally were paid under the Part B fee schedule. Payment for the device ranged from about $13,000 to $17,000 under the 2001 fee schedule.

However, as of August 1, 2000 the Balanced Budget Refinement Act (BBRA) of 1999 required that implantable prosthetic devices (such as cochlear implants) furnished in an outpatient hospital setting be paid under the new Medicare prospective payment system (PPS) according to Ambulatory Patient Classifications (APCs). Similar to the DRG system under Part A, APCs are a global, flat fee for most costs incurred with the cochlear implant surgical procedure.

As a result of advocacy efforts by Advanced Bionics Corporation, cochlear implants were initially identified as a "new technology" item under the PPS, even though they technically did not meet the requirement of not being on the market prior to December 31, 1996. This pass-through classification resulted in a dramatic increase in Part B payment. Between August 1, 2000 and April 1, 2002, the device was reimbursed separately from the PPS payment rate of $5,591.

Pass-through payment was at or near the manufacturer invoice price to hospitals, which now exceeds $20,500 for one-processor systems and $24,000 for two processor systems. So total payment for the procedure exceeded $26,000.

In August 2001, Medicare sought to eliminate the pass-through payment for cochlear implantation and proposed a flat APC fee of approximately $15,500 for the procedure, or similar to the most recent fee schedule payment amount (eliminating the $11,000 windfall under the pass-through methodology).

Rocky Stone (former president of Self Help for Hard of Hearing) initiated collaborative efforts between the American Speech-Language-Hearing Association and cochlear implant manufacturers that resulted in an increase in the payment amount for APC 259 to just over $19,200 for the surgical procedure. The physician professional fee was then billed and paid separately under the 2002 Part B fee schedule at $1,120 (CPT code 69930.) Effective January 1, 2005, Medicare finally increased the payment level to under APC 259 to $26,000, or roughly the same amount identified by RAND in 2000 as the average total cost of the procedure incurred by hospitals (this amount was downgraded to $25,500 for 2007). The physician professional fee is paid separately at $1,246.45.

Audiologic services furnished post-operatively are now paid a separate flat fee, as shown below. However, CPT code 92510 for speech processor programming and aural rehabilitation following cochlear implantation is not included in the PPS, as Medicare currently considers it a speech-language pathology code (click here for more information.)

Under Part B, patients are liable for their Medicare coinsurance, which is currently 20 percent of the total hospital charges. Effective August 1, 2000, Medicare regulations under the outpatient hospital PPS began reducing 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 regulations, and are not paid under the fee schedule. However, the limiting charge does apply to the servicing of these items.

2. 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 use 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 410.100(f)(2)and Medicare Carriers Manual, Section 2130(D)]." For example, fitting and programming of the external components of a cochlear implant are Medicare-covered services, as are replacements of batteries, coils, and microphones.

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 $5,706 and $7,609 by Medicare according the 2001 Part B fee schedule (this is far above the invoice price for these items).

Also since January 1, 1996, Medicare carriers do not cover upgrades to new generation cochlear implant speech processors. Replacement speech processors are only covered if the equipment is lost or irreparably damaged. Medicare will not cover a new generation speech processor if the existing one is still functional.

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. Medicare carriers require that the manufacturer submit an itemization of charges for labor (under HCPCS code K0285) and parts (HCPCS code L7510). For example, see the Local Medical Review Policy for Adminastar Federal.

Effective July 1, 2005, HCPCS code L8620 for replacement of cochlear implant batteries will be split for Medicare claims only into the following two codes for hip-worn and behind-the-ear speech processors:

• K0731 Lithium ion battery for use with cochlear implant device speech processor, other than ear level, replacement.
• K0732 Lithium ion battery for use with cochlear implant device speech processor, ear level, replacement.

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 an audiologist. Since January 1, 1996, claims for both aural rehabilitation and speech processor programming were covered by local Medicare carriers under CPT code 92510, and paid approximately $133 per visit (non-facility rate) under the 2002 Part B fee schedule.

However, Medicare traditionally has not interpreted programming of the speech processor as a diagnostic service, and many carriers 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, and may not be furnished without a physician on the premises (defined as within the office suite).

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.

Effective March 1, 2003, Medicare finally recognized programming as a diagnostic service when billed under the following new CPT codes adopted for all payers by the American Medical Association (AMA):

92601 Cochlear implant follow-up exam (under age 7)
92602 Reprogramming of cochlear implant (under age 7)
92603 Cochlear implant follow-up exam (age 7 or more)
92604 Reprogramming of cochlear implant (age 7 or more)

Medicare will only reimburse audiologists directly for these codes when performed in the non-facility setting. Payment under the 2005 Medicare physician fee schedule is as follows:

92601 $135.29
92602 $92.85
92603 $83.75
92604 $53.81

Aural rehabilitation following cochlear implantation moved back in 2003 to the generic CPT code 92507 for aural rehabilitation, as it was prior to 1996. These services can now only be provided by a speech-language-pathologist, and not an audiologist. Payment under the 2005 Medicare physician fee schedule is $62.53. Payment amounts under 92507 are significantly lower than the prior 92510 code. However, if programming and aural rehabilitation are performed on the same day, both can be billed to Medicare. Click here for more information on these new CPT codes. When performed in the outpatient hospital setting, CPT codes 92601-92604 are now included in new APC code 0366 (Level III Audiometry)as of January 1, 2005, and reimbursed a flat fee of $104.92 regardless of which code applies.

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.

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.

Medicare carrier policies generally limit Medicare coverage to only one speech processor with the initial cochlear implant system (click here for an example). 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 as explained under "Fraud and Abuse".

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).

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

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 that are 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 CFR §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.

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 remuneration (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 1128B(b) of the Social Security Act (and the self-referral prohibitions at Section 1877(b)).