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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case. 
You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101. 
 
The rules say that in this policy, the term PAP (positive airway pressure) device will refer to both a single-level 
continuous positive airway pressure device (E0601) and a bi-level respiratory assist device without back-up 
rate (E0470) when it is used in the treatment of obstructive sleep apnea. 
 
   I. An E0601 device is covered for the treatment of obstructive sleep apnea (OSA) if criteria A ? C are met: 
 
        A. The beneficiary has an in-person clinical evaluation by the treating practitioner prior to the sleep test to 
assess the beneficiary for obstructive sleep apnea. 
 
        B. The beneficiary has a sleep test (as defined below) that meets either of the following criteria (1 or 2): 
 
            1. The apnea-hypopnea index (AHI) or Respiratory Disturbance Index (RDI) is greater than or equal to 
15 events per hour with a minimum of 30 events; or, 
 
            2. The AHI or RDI is greater than or equal to 5 and less than or equal to 14 events per hour with a 
minimum of 10 events and documentation of: 
 
                a. Excessive daytime sleepiness, impaired cognition, mood disorders, or insomnia; or, 
 
                b. Hypertension, ischemic heart disease, or history of stroke. 
 
        C. The beneficiary and/or their caregiver has received instruction from the supplier of the device in the 
proper use and care of the equipment. 
 
    If a claim for an E0601 is submitted and all of the criteria above have not been met, it will be denied as not 
reasonable and necessary. 
 
Coverage and Payment rules for sleep tests may be found in the LCDs for the applicable Medicare Part A or 
Part B contractor. There may be differences between those LCDs and the DME MAC LCD. For the purposes 
of coverage of PAP therapy, the DME MAC coverage, coding and payment rules take precedence. 
 
Coverage of a PAP device for the treatment of OSA is limited to claims where the diagnosis of OSA is based 
upon a sleep test (Type I, II, III, IV, Other) that meets the Medicare coverage criteria in effect for the date of 
service of the claim for the PAP device. The sleep test must be either a polysomnogram performed in a facility-
based laboratory (Type I study) or an inpatient hospital-based or home based sleep test (HST) (Types II, III, IV, 
Other). The test must be ordered by the beneficiary?s treating practitioner and conducted by an entity that 
qualifies as a Medicare provider of sleep tests and is in compliance with all applicable state regulatory 
requirements. 
 
A Type I sleep test is the continuous and simultaneous monitoring and recording of various physiological and 
pathophysiological parameters of sleep with practitioner review, interpretation, and report. It is facility-based 
and must include sleep staging, which is defined to include a 1-4 lead electroencephalogram (EEG), electro-
oculogram (EOG), submental electromyogram (EMG) and electrocardiogram (ECG). It must also include at 
least the following additional parameters of sleep: airflow, respiratory effort, and oxygen saturation by 
oximetry. It may be performed as either a whole night study for diagnosis only or as a split night study to 
diagnose and initially evaluate treatment. 
 
An HST is performed unattended in the beneficiary?s home using a portable monitoring device. A portable 
monitoring device for conducting an HST must meet one of the following criteria: 
 
    A. Type II device ? Monitors and records a minimum of seven (7) channels: EEG, EOG, EMG, ECG/heart 
rate, airflow, respiratory movement/effort and oxygen saturation; or, 
 
   B. Type III device ? Monitors and records a minimum of four (4) channels: respiratory movement/effort, 
airflow, ECG/heart rate and oxygen saturation; or, 
 
   C. Type IV device ? Monitors and records a minimum of three (3) channels, one of which is airflow; or, 
 
    D. Other - Devices that monitor and record a minimum of three (3) channels that include actigraphy, 
oximetry and peripheral arterial tone and for which there is substantive clinical evidence in the published peer-
reviewed medical literature that demonstrates that the results accurately and reliably correspond to an AHI or 
RDI as defined above. This determination will be made on a device by device basis (See Appendix B for list of 
approved devices in this category). 
 
For all PAP devices, beneficiaries who undergo an HST must, prior to having the test, receive instruction on 
how to properly apply a portable sleep monitoring device. This instruction must be provided by the entity 
conducting the HST and may not be performed by a DME supplier. Beneficiary instruction may be 
accomplished by either: 
 
    1. Face-to-face demonstration of the portable sleep monitoring device?s application and use; or, 
 
    2. Video or telephonic instruction, with 24 hour availability of qualified personnel to answer questions or 
troubleshoot issues with the device. 
 
For all PAP devices the sleep test (Type I - IV, Other) must be interpreted by a practitioner who holds either: 
 
    1. Current certification in Sleep Medicine by the American Board of Sleep Medicine (ABSM); or, 
 
    2. Current subspecialty certification in Sleep Medicine by a member board of the American Board of 
Medical Specialties (ABMS) or American Osteopathic Association (AOA); or, 
 
    3. Completed residency or fellowship training by an ABMS or AOA member board and has completed all 
the requirements for subspecialty certification in sleep medicine except the examination itself and only until the 
time of reporting of the first examination for which the practitioner is eligible; or, 
 
    4. Active staff membership of a sleep center or laboratory accredited by the American Academy of Sleep 
Medicine (AASM), Accreditation Commission for Health Care (ACHC), or The Joint Commission (TJC, 
formerly the Joint Commission on Accreditation of Healthcare Organizations ? JCAHO). 
 
You can find this information in Medicare's Local Coverage Determination (LCD): Positive Airway Pressure 
(PAP) Devices for the Treatment of Obstructive Sleep Apnea (L33718). 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.