SSR 69-9: Sections 1842(b)(3)(B)(ii) and 1862(a).—Reasonable Charge Basis—Acceptance of Assignment by Supplier of Durable Medical Equipment
Where a supplementary medical insurance enrollee has incurred expenses for a medically necessary appliance, ordering not the standard model but a more expensive one, and the supplier accepts assignment for payment pursuant to section 1842(b)(3)(B)(ii) of the Act, held acceptance of such assignment binds the supplier to the amount determined by the carrier to be the "reasonable charge" for equipment adequate to meet the enrollee's needs and he may not bill the enrollee for the difference between the amount and the customary charge for the deluxe model sold.
Payment may be made on a reasonable charge basis under the provisions of Part B of title XVIII of the Social Security Act to, or on behalf of, a supplementary medical insurance enrollee under this part, for medically necessary durable medical equipment, including iron lungs, oxygen tents, hospital beds and wheelchairs used in the patient's home, (including an institution used as his home, other than a hospital or nursing home) whether furnished on a rental basis or purchased. Payment may not, however, be made under the program, for any expenses incurred for items or services which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, nor for items or services which constitute personal comfort items or services. (Section 1862(a)(1) and (6))
Determinations as to the rates and amounts payable to suppliers of durable medical equipment are made by carriers under contract to the Secretary of the Department of Health, Education, and Welfare pursuant to the provisions of section 1842 of the Act. Subsection (b) thereof provides in pertinent part:
(3) Each such contract shall provide that the carrier—
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(B) will take such action as may be necessary to assure that, where payment under this part for a service is on a charge basis, such charge will be reasonable and not higher than the charge applicable, for a comparable service and under comparable circumstances, to the policyholders and subscribers of the carrier, and such payment will * * * be made—
(i) on the basis of an itemized bill; or
(ii) on the basis of an assignment under the terms of which the reasonable charge is the full charge for the service; * * *.
In effect, the SMI benefits (equal to 80 percent of the reasonable charge after the annual $50 deductible has been met) are paid either to the enrollee who claims payment on the basis of an itemized bill, or to the supplier who has accepted an assignment under the terms of which he agrees that the assignment from the enrollee can legally claim and collect from the enrollee no more than the difference between the SMI benefit paid and the reasonable charge amount.
Situations have occurred where an enrollee, needing an item of durable medical equipment, has been furnished the necessary item by a supplier who accepts assignment. The model furnished is more elaborate than a standard model which is adequate for his needs (e.g., a wheelchair with special features which add to the comfort or appearance of the chair but are not necessary for efficient operation and serviceability). The carrier determines that the "reasonable charge" for that equipment is the price of the "standard" rather than the deluxe model, and the supplier then seeks to bill the patient for the difference between the "reasonable charge" determined by the carrier and the customary charge for the deluxe model furnished.
This has raised the question whether section 1842(b)(3)(B)(ii) of the Act quoted above binds a supplier of durable medical equipment who has accepted an assignment to accept the "reasonable charge" determined by the carrier as the full charge for the item sold, whether standard or deluxe.
Section 1842(b)(3) also provides that in determining what is the "reasonable charge" for medically required services or items, there shall be taken into consideration the customary charge for such services or items as well as the charge prevailing in the locality for similar services or items. The "reasonable charge," in this case of durable medical equipment (whether standard or deluxe), is the amount which can be allowed, under these criteria, for a piece of equipment that will adequately meet the patient's need. It is not necessarily the fair market value of the equipment furnished. As previously stated, acceptance of an assignment binds the supplier to accept the "reasonable charge" for covered services or items as the full charge. To permit the supplier of a deluxe piece of equipment to bill the enrollee for the customary charge differential between the standard appliance and the more expensive appliance furnished would result in a dilution of the protection of enrollees which was intended by the assignment method.
Accordingly, where a SMI enrollee incurs expenses for a medically necessary appliance, and the supplier to accept the "reasonable charge," as determined by the carrier, as his full charge for the item sold, whether standard or deluxe, under the provisions of section 1842(b)(3)(B)(ii).
It is true that the suppliers of durable medical equipment may not wish to accept assignment on deluxe items as a result of this rule. However, SMI enrollees will still be able to obtain more expensive items or equipment and program payment will be made if they are willing and able to pay the difference between the amount allowed and the supplier's charge. As amended by the Social Security Amendments of 1967, section 1842 of the Act permits payment of SMI benefits to enrollees on the basis of an itemized bill, whether or not such bill has been paid. In such cases, payment to the enrollee on the basis of an itemized bill would be in the same amount as the benefit which would be paid to the supplier who accepts assignment—80 percent of the "reasonable charge" for items or equipment necessary for treatment of the patient's condition (subject, of course, to any applicable deductible).