2001 Conference Proceedings

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Patricia Ourand
Associated Speech & Language Services
Towson, MD

What is Medicare?

Medicare was created by Congress in 1965 and has become the nation's largest health services funding program. Medicare, sometimes called Title XVIII (for the chapter of the Social Security Act in which the Medicare program is codified), operates as a federal health insurance benefits program for three classes of people:

Medicare is divided into two parts, known as Part A and Part B. Medicare Part B, also known as supplemental medical insurance, covers various outpatient services, including physician services, durable medical equipment, speech-language pathologists' services, prosthetic and orthotic devices, and home health services. Medicare Part B will provide funding for an AAC assessment, for the purchase of AAC devices, for training, and for device repair. Medicare has determined that AAC devices are durable medical equipment.

Medicare and Medicaid are commonly confused. In the most general sense, Medicare and Medicaid are most similar in that they are among the most complicated benefits programs ever created. These programs have many substantive similarities and overlaps, as well as important substantive and procedural differences. First, Congress created both programs in 1965, and both provide funding for a wide array of health benefits to eligible individuals. Both Medicaid and Medicare make use of managed care organizations; both programs cover many items and services; and individuals can be eligible for both programs at the same time. Among the items and services that are covered by both programs is purchase of AAC devices and AAC device repair. 

Medicaid and Medicare differ in regard to eligibility requirements, administration, and claims procedures. Medicaid is an income-based program, which provides provides benefits to individuals who are poor, or who are poor and disabled. It is administered by the states, and subject to federal guidelines and oversight. 

Medicare, does not have income-based eligibility requirements: instead, eligibility is based on a person's age, disability status, or specific condition. Medicare funding comes directly from the federal government, and it is administered directly by the federal government with no state level administrative responsibilities or guidance. 

Medicare is structured as a cost reimbursement program, which requires the beneficiary to acquire the item or service first, and then seek Medicare reimbursement for its costs. Medicare then determines whether the item or service was necessary to be provided. If so, Medicare provides reimbursement, most often, according to a fee schedule. The fee schedule states what Medicare has determined is the "reasonable charge" for the item or service, and is set according to a very complicated formula. Medicare will pay: a) 80 % of the "reasonable charge;" or, b) 80 % of the actual charge for the item or service, if the actual charge is less than the fee schedule. Medicare has established a fee schedule for AAC devices. Four "code" or groups of AAC devices with similar characteristics have been identified, with each code having its own reimbursement rate. 

For most items and services that Medicare covers, suppliers engage in a practice called "accepting assignment." When a supplier accepts assignment, the beneficiary's co-payment is limited to the 20 % difference between what Medicare will provide, and either the fee schedule amount, or the actual charge, whichever is lower. When suppliers "accept assignment," the beneficiary co-payment must be made to the supplier; when it is received, the device will ship. The supplier then waits for the Medicare payment to be made directly to the supplier (either 80 % of the fee schedule amount, or 80 % of the actual charge for the device, whichever is lower.)

When a supplier accepts assignment, there is no additional charge to the beneficiary to pay any additional difference between the fee schedule amount, and the ordinary selling price of the device. Thus, by accepting assignment for a device with a price higher than the fee schedule amount, a supplier will be agreeing that the fee schedule amount will be the total payment for the device. A supplier may elect not to accept assignment, particularly when the selling price of the device is a great deal higher than the fee schedule amount. If this occurs, beneficiaries will be required to pay the supplier the full price for the device, and the Medicare reimbursement will be paid directly to the beneficiary. However, the amount Medicare will pay is not affected by whether or not the supplier accepts assignment: it will remain the same.

What AAC Devices Does Medicare Cover?

Medicare has established four codes for AAC devices, with each code representing a group of devices with similar characteristics. The four codes are described as follows:

  1. K0541 Speech generating device, digitized speech, using pre-recorded messages, less than or equal to 8 minutes recording time
  2. K0542 - Speech generating device, digitized speech, using pre-recorded messages, greater than 8 minutes recording time
  3. K0543 - Speech generating device, synthesized speech, requiring message formulation by spelling and access by physical contact with the device
  4. K0544 - Speech generating device, synthesized speech, permitting multiple methods of message formulation and multiple methods of device access

Medicare guidance also has provided some additional description of what these device codes mean:

On November 30, the HCFA national office issued a new National Coverage Decision (NCD) for AAC devices, # 60-23. This NCD states that "devices that are not dedicated speech devices, but are devices that are capable of running software for purposes other than speech generation, e.g., devices that can also run a word processing package, an accounting program, or perform other non-medical functions … Laptop computers, desktop computers, or PDAs, which may be programmed to perform the same function as a speech generating device, are non-covered since they are not primarily medical in nature and do not meet the definition of DME." For this reason, they cannot be considered speech-generating devices for Medicare coverage purposes. A device that is useful to someone without severe speech impairment is not considered a speech-generating device for Medicare coverage purposes.

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