Invacare Corporation's Response to the Administration's FY 07 Budget Proposal to Sharply Reduce the Home Oxygen Therapy Benefit

Wednesday, February 15, 2006 4:05 pm EST



Public Company Information:

"The Administration's budget proposal to cut Medicare payments for home oxygen therapy would dramatically erode the quality of care for beneficiaries who rely upon home oxygen therapy. Home oxygen therapy sustains life for the approximately one million seniors who rely upon the therapy"
ELYRIA, Ohio--(BUSINESS WIRE)--Feb. 15, 2006--On February 6, 2006, President Bush announced his Administration's FY 07 budget proposal, including a Medicare proposal that would reduce Medicare spending over the next five years by $36 billion. President Bush's proposed Medicare package includes $7 billion in proposed cuts for durable medical equipment (DME). The proposal would limit Medicare rental payments for home oxygen therapy to 13 months. Almost 20 percent of the Medicare cuts would come from a benefit that accounts for approximately two percent of Medicare program expenditures.

"The Administration's budget proposal to cut Medicare payments for home oxygen therapy would dramatically erode the quality of care for beneficiaries who rely upon home oxygen therapy. Home oxygen therapy sustains life for the approximately one million seniors who rely upon the therapy," said A. Malachi Mixon, III, chairman and chief executive officer at Invacare.

Beneficiaries Will Suffer

The Administration's FY 07 budget proposal for Medicare payment for home oxygen therapy builds off a controversial provision Congress recently included in the Deficit Reduction Act of 2005 (DRA). The DRA provision limits rental payments for home oxygen therapy to 36 months, and forces the beneficiary to own the oxygen equipment from that point forward. How beneficiaries receive ongoing care, maintenance, service and repair services beyond 36 months is unclear. Congress included this DRA provision at the last minute, after the House and Senate had passed versions of the bill without this provision, and without any study, hearings, or consultation with affected parties. The Administration's FY 07 budget proposal would limit monthly payments for home oxygen therapy to 13 months, further jeopardizing beneficiary access to quality care and services.

This proposal will sharply limit the Medicare home oxygen therapy benefit after 13 months. Virtually every beneficiary requiring home oxygen to sustain life will suffer dramatic benefit reduction because Medicare beneficiaries are on home oxygen therapy for an average of 26 months. Once ownership of the equipment transfers to the beneficiary, the home oxygen provider will no longer have a relationship with the beneficiary. The beneficiary will then be responsible for obtaining necessary services to ensure the equipment continues to operate/function properly, that the oxygen purity levels are appropriate, that regular maintenance is performed, and that the beneficiary has the necessary accessories/supplies such as cannulas and tubing.

In addition, today beneficiaries typically have ongoing access to respiratory therapist to monitor their condition. It is unclear how seniors will obtain necessary RT services once equipment ownership passes to the consumer. Most important, in the event of an electrical outage, it is unclear how beneficiaries will obtain back up compressed oxygen tanks to use when there is no electricity to power the oxygen concentrator. Many beneficiaries will end up in hospital emergency rooms, or being admitted to a hospital where the daily cost exceeds $3600. In contrast, an entire year of home oxygen therapy can be provided for about $2784.

The President's Proposal is Based on Erroneous Assumptions

Medicare and its beneficiaries are not paying for oxygen equipment; they are paying for home oxygen therapy, 24 hours per day, 7 days per week, 365 days per year. Oxygen is a Federal legend drug and the devices dispense a prescription drug - oxygen. The oxygen technologies used to produce and/or deliver the drug are only technical components associated with the overall provision home oxygen therapy. Focusing attention on the relationship between the overall cost of providing this therapy and the cost of a single component of its provision is a complete misunderstanding of how beneficiaries on home oxygen therapy receive care. The unplanned effect will transfer the burden of maintenance and repair of sophisticated oxygen technologies to the patients (beneficiaries) or caregivers and, therefore, the total management of their home oxygen therapy regimen. This will clearly produce the undesired effect of unmonitored and regulated dispensing and distribution of a prescription drug. This presents a serious risk to patient safety and care and will undoubtedly result in higher costs to the patient and the system.

Home Oxygen Therapy is Cost Effective and Clinically Efficacious

The average annualized cost for home oxygen under the current payment model is $2,784. In 2002, there were 673,000 people hospitalized for COPD - their average length of stay was 5.2 days. The average Medicare cost for one day in the hospital is $3,606, the average admission for COPD costs over $18,000.

"Home oxygen therapy is the most cost effective and clinical efficacious treatment available to those with COPD and low blood oxygen and can be provided to a patient for one year at less than the average cost for one day in the hospital. Oxygen is the only treatment or drug scientifically proven to extend the life of patients with chronic lung disease. Oxygen therapy also reduces the frequency of hospitalization," said Mixon.

Congress Has Already Dramatically Cut the Home Oxygen Therapy Benefit:

The DRA capped rental payments for home oxygen therapy at 36 months, and mandates that beneficiaries own the equipment at that time. Home oxygen payments have been drastically reduced over the last decade. The BBA of 97 produced a 30% cut in the home oxygen payment in conjunction with CPI freezes that are still in place today. The FEHBP cuts resulting from the MMA added another 12% cut in the home oxygen therapy payment.

Congress Has Already Rejected a Similar Proposal

"During deliberations on the Deficit Reduction Act of 2005, Congress already rejected an 18-month cap of rental payments for home oxygen therapy. Similarly, Congress should reject this draconian proposal," continued Mixon. "The Administration's proposal to sharply limit the home oxygen therapy must be rejected by the Congress."

Not a MedPAC Recommendation

Unlike many other Medicare proposals in the Administration's budget proposals, the Medicare Payment Advisory Commission did not recommend any cuts or changes to the way Medicare pays for home oxygen therapy.

Invacare Corporation (NYSE:IVC), headquartered in Elyria, Ohio, is the global leader in the manufacture and distribution of innovative home and long-term care medical products that promote recovery and active lifestyles. The company has 6,100 associates and markets its products in 80 countries around the world. For more information about the company and its products, visit Invacare's website at


Invacare Corporation
Lara L. Mahoney, 440-329-6393

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