Congress Close to a Deal on Funding of the Federal Government; Modest Potential Impact on O&P and Suspension of Medical Device Excise Tax for Non-O&P in Play


On Wednesday, December 16th, President Obama signed a short term spending measure that will allow the Federal government to continue to operate until December 22, allowing Congress to finalize its long anticipated Omnibus appropriations and tax break extender legislation that will fund the Federal government for the remainder of the 2016 fiscal year.  Two important provisions of this legislation that are of significance to O&P are the limitation of Medicaid reimbursement rates for Durable Medical Equipment to current Medicare rates and a 2 year moratorium of the 2.3% medical device excise tax.

The provisions that would limit Medicaid reimbursement for DME to current Medicare rates may result in significant reductions in Medicaid payments for DME due to significant reductions in Medicare payments as a result of competitive bidding.   This provision would not have an immediate impact on O&P services since they are not currently included in current competitive bidding programs,  If CMS eventually acts to exercise its sole competitive bidding authority as to O&P , i.e. if CMS were to incorporate off the shelf (OTS) orthoses into future competitive bidding programs, it would like result also  in a significant impact reducing also Medicaid payments for this limited category of OTS (only) orthotic devicesin the future.

The second provision would create a 2 year moratorium of the 2.3% medical device excise tax, a tax that AOPA has opposed since its inception.  While this would be good news for the DMEPOS industry in general,  it is important for AOPA members to recognize three facts relative to the pending deliberations on the omnibus bill, and the provision calling for a two-year moratorium of the 2.3% medical device excise tax:

  1. AOPA’s efforts with the Department of Treasury and the IRS secured a decision in 2012 that recognized, from the very inception of the medical device excise tax, that O&P devices are, and remain exempt from the tax at both the manufacturer and patient care facility levels.
  2. Nonetheless, AOPA has consistently advocated the complete elimination/repeal of the medical device excise tax as it is an unnecessary burden on all medical device companies, and thereby, upon all of American health care.
  3. Whether or not the pending omnibus spending bill is actually enacted in its current form and results in a two-year moratorium of the medical device excise tax or not, the long-standing, permanent exemption secured for O&P in 2012 remains fully in force and applicable without change.  The O&P exemption is completely distinct and independent of the current discussions on suspending the 2.3% tax that has been applicable to virtually all others selling medical devices.

AOPA will continue to monitor the status of the pending omnibus bill as it moves closer to passage, presumably next week.

Questions regarding this issue may be directed to Joe McTernan at jmcternan@aopanet.org or Devon Bernard at dbernard@aopanet.org.