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November 6, 2006


November 6, 2006


CMS Releases Final Medicare Physician Payment Rule

The pulmonary community received qualified good news in the Medicare Physician Payment rule published by Centers for Medicare and Medicaid Services (CMS) last week.  Pulmonary physicians can expect to see a 1 percent increase in Medicare payments in 2007.

While the 1 percent increase is small, the pulmonary community is only one of four specialties expected to see increases in Medicare reimbursement in 2007,

Allergy/Immunology -3%

Anesthesiology -12%
Cardiac surgery:  -2%

Cardiology -7%

Critical Care -1%

Emergency Medicine + 2%

Endocrinology +1%

Family Medicine 0%

Infectious Disease +4%

Internal Medicine -1%

Pulmonary Disease +1%
Thoracic surgery:  -2%

Nurse Practitioner -5%

Physicians Assistant -3%


The biggest losses where seen by clinical psychologist (-14%), clinical social workers (-14%) and radiology (-14%).

Pulmonary and the rest of the evaluation and management community benefited from the revaluation of physician work values from the 5-year RUC review.  Additionally, the pulmonary community saw increases in the new practice expense reimbursement methodology. 

However, most of these gains were wiped out by cuts in the sustainable growth rates (SGR), and budget neutrality adjustment to physician work values.

Should Congress act to restore the cut in the SGR, then the pulmonary community can expect to see an additional 5 percent increase in Medicare revenue.


Tobacco Initiatives on the Ballot in Seven States

This week voters in Arizona, California, Florida, Missouri, Ohio, Nevada and South Dakota will cast ballots on key tobacco control initiatives.  Most of the ballot initiatives include a mix of banning smoking in public places, banning smoking in work places, increasing the state excise tax and dedicating increased tobacco excise taxes to health-focused programs. 

Voters in Arizona, Nevada and Ohio are being asked to choose between tobacco control ballot proposals supported by the public health and physician community and “alternative“ proposals supported by the tobacco industry.  The proposals backed by the tobacco industry support ineffective policies and in many cases, would roll back existing effective community tobacco control policy and require an amendment to the state constitution to enact more strict tobacco control policy.  Below is a brief summary of the tobacco ballot initiatives:


Proposition 201 – would make all public places, restaurants and work places smoke free.  Proposition 201 is supported by the Arizona Thoracic Society and a broad coalition of physician and public health groups.

Proposition 203 - would increase Arizona’s cigarette tax by 80 cents per pack (and also increase the tax on other tobacco products) and utilize the revenue to fund early childhood development programs.  Proposition 203 is supported by the Arizona Thoracic Society and many other physician and public health groups.

Proposition 206 – is an ineffective tobacco control alternative supported by Big Tobacco.  Proposition 206 would actually roll back existing local control policy and prevent any local government from enacting more stringent tobacco control policy.


Proposition 86 - would increase California’s cigarette tax by $2.60 per pack and use the revenue to fund tobacco prevention and cessation programs and other critical health programs such as health insurance for children, disease prevention, medical research and emergency room care.  Proposition 86 is supported by the California Thoracic Society and a coalition of the physician and public health organizations


Amendment 4 - would require the Florida Legislature to annually fund a comprehensive, statewide tobacco education and prevention program, using tobacco settlement money and following the best practices of the US Centers for Disease Control and Prevention (CDC). Annual funding would be 15 percent of 2005 tobacco settlement payments to Florida, adjusted annually for inflation.  Amendment 4 is supported by the Florida Thoracic Society.


Amendment 3 would increase Missouri’s cigarette tax by 80 cents, from 17 cents to 97 cents per pack, and increase the tax on other tobacco products by 20 percent. The new revenues, projected by the state to be at least $351 million dollars per year, would fund tobacco prevention and cessation programs and other critical health initiatives.  Amendment 3 is supported by a coalition of physician and public health organizations.


Question 5 - the Nevada Clean Indoor Air Act, will protect Nevada workers and families from secondhand smoke by prohibiting smoking in restaurants, grocery stores, shopping malls, other retail establishments and bars that serve food. It also gives local governments the authority to pass tougher smoke-free laws.  Question 5 is supported by a coalition of physician and public health organizations.

Question 4 – is the ineffective proposal supported by Big Tobacco that provides incomplete and ineffective control of smoke in restaurants, schools and workplaces. 


Issue 5 - would change state law to make all Ohio workplaces, including restaurants and bars, smoke-free and protect the right of all workers and the public to breathe clean air.  Issue 5 is supported by a coalition of physician and public health organization.

Issue 4 – is an ineffective smoke free proposal supported by Big Tobacco.  The provision would actually roll back existing local smoke free policy and prevent local government from enacting more stringent smoke free policy.


Initiated Measure 2 would increase South Dakota’s cigarette tax by $1 per pack and the tax on other tobacco products from 10 percent to 35 percent of the wholesale price. This increase would raise approximately $40 million dollars a year to fund tobacco prevention and cessation programs, property tax relief, education enhancement and health care.  Initiated Measure 2 is supported by a broad coalition of physician and public health organizations.


US Supreme Court Hears Clean Air Act Case

The US Supreme Court heard oral arguments in the Environmental Defense v. Duke Power Company regarding enforcement of the Clean Air Act.  A central issue in this case is what constitutes an “increase” in pollutions emissions.  Under the Clean Air Act, as companies upgrade their facilities they are required to install pollution control technology.  In this case, Duke Power upgraded a number of coal fired power plants.  The upgrades did not change the hourly rate of pollution emissions from the power plants but did allow the plants to run more hours a day, thus increasing overall pollution emitted from the plants. 

Duke Power holds that “increase” should be measured in terms of hourly rate of emissions.  EPA holds that any increase in total emission, regardless of the hourly emission, constitutes an increase.   EPA took Duke Power to court.

The 4th Circuit Court of Appeals sided with Duke Power on how “increases” should be measured.  However, the Clean Air Act specifies that all legal challenges to the Clean Air Act should be heard first by the US Court of Appeals for the District of Columbia Circuit.   The D.C. Court has ruled previously that increases in pollution should be measured by total emissions, not emission rates per hour.

The ATS has filed an amicus brief in support of EPA’s action against the Duke Power company.  A decision from the US Supreme Court is expected in this summer.


US Supreme Court Hears Tobacco Punitive Damages Case

Also before the US Supreme Court last week was a case regarding punitive damages levied against the tobacco industry.  The court heard oral arguments in the Philip Morris USA Inc. v. Williams.  The case surrounds whether the $79.5 million in punitive damages to the Williams estate is an excessive award and therefore denies Philip Morris its due process rights.  

Mr. Jessie Williams was smoker who died of lung cancer.  The Williams estate sued Philip Morris for compensatory damages and punitive damages.  An Oregon court awarded the Williams estate $821,000 in compensatory damages and $79.5 million in punitive damages.  Philip Morris is asking the Supreme Court to overturn the $79.5 million in punitive damages awarded; stating the amount of the award is excessive and violates due process.       

In general, the US courts have held that whether a punitive damage award is so excessive as to be unconstitutional depends, in part, upon the degree of reprehensibility of the defendant's misconduct.  In previous cases, the Supreme Court affirmed that "reprehensibility" is the most important factor, but also stated that "in practice, few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process."

The ATS and other health groups submitted an amicus brief case in support of the punitive award, holding that the award is justified because Philip Morris engaged in uniquely egregious wrongful behavior and caused an extraordinary amount of harm.  The Supreme Court is expected to issue its ruling this summer.


CMS Issues Final Oxygen Payment Rule

Last week, the Centers for Medicare and Medicaid Services (CMS – which administers the Medicare program) issued final rules for reimbursement for home oxygen equipment.  The rule provides regulatory guidance on the implementation of the recently passed Deficit Reduction Act.

Under current policy, CMS pays for oxygen on a rental basis, paying about $200/month for oxygen plus an additional $32/month for patients using portable systems.  These payments are made as long as the Medicare beneficiary needs oxygen.

The Deficit Reduction Act (DRA) changed Medicare reimbursements for oxygen from an open-ended rental item to a capped rental item.  After 36 months, rental payment for the oxygen equipment stops.  The DRA further mandated that after 36 months, the ownership of the oxygen equipment would transfer to the Medicare beneficiary.  The DRA did allow for payments beyond the 36 month to refill oxygen and for maintenance and repair.

CMS’s proposed rule implements the provisions of the DRA.  As required by the law, the proposed rule implements the 36 month capped rental and title transfer provision as defined in the DRA.  The rule further clarifies that all equipment transfers to the beneficiary, including tubing, masks, cylinders and replacement cylinders.  The impact of this provision on oxygen cylinders may be problematic for oxygen providers.

The final rule changes the reimbursement system from a modality neutral to a modality specific oxygen payment system.  These changes were not part of the DRA.  Below is a chart that lists the new categories of equipment and the monthly rental reimbursement – for the first 36 months and any continuing reimbursement for refills beyond the 36th month.

Categories of Oxygen Equipment


Categories of Oxygen Equipment

Rental Period Payments Contents After Ownership
Concentrator only $198.40 $0
Concentrator + gas portable $230.19 $77.45
Concentrator + oxygen generating portable $250.03 $77.45
Liquid Stationary and portable $230.19 $154.90

The earlier proposed rule had proposed lower reimbursement for stationary oxygen concentrator systems while proposing higher reimbursement for oxygen generating portable systems.  

The above equipment categories and payment rates would be effective January 1, 2007.

The final rule also covers key issues including the useful life of oxygen equipment, provider assignment, requirements for providers to continue service to beneficiaries, warranty requirements, reimbursement for service and repair, and equipment replacement provisions.

Points of Contact

Gary Ewart Senior Director, Government Relations
Nuala Moore Senior Legislative Representative
Joe Kirby DC Office Administrator