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
- 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
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 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).
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
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
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
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
- 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
- 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
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
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.
- 1 See HCFA Internet website at
- 2 Rehabilitation services are
excluded from the outpatient hospital PPS pursuant to the Balanced Budget Act
(BBA) of 1997.
- 3 See 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
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