MEDICARE

CMS Should Evaluate 

Providing Coverage 

for Disposable 

Medical Devices That 

Could Substitute for 

Durable Medical 

Equipment

Report to Congressional Committees

July 2017

GAO-17-600

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-600, a report to 

congressional committees

July 2017

MEDICARE

CMS Should Evaluate Providing Coverage for 

Disposable Medical Devices That Could 

Substitute for Durable Medical Equipment

What GAO Found

While disposable medical devices are generally not covered by Medicare, GAO 

identified eight that could potentially substitute for durable medical equipment 

(DME) items that are covered. These disposable DME substitutes fall into

existing Medicare DME categories—infusion pumps, including insulin pumps; 

blood glucose monitors; sleep apnea devices; and nebulizers. Stakeholders 

GAO interviewed identified multiple benefits of using disposable substitutes, 

such as better health outcomes and potential cost-savings. However, they also 

cited factors that limit their use, including that these substitutes may not lead to 

cost-savings in all cases. 

Stakeholders identified several market incentives, such as a growing demand, as 

reasons to develop disposable DME substitutes, but mostly cited lack of 

coverage by Medicare as a disincentive to development. Disposable DME 

substitutes are generally precluded from Medicare coverage under the DME 

benefit because they do not meet the Centers for Medicare & Medicaid Services’ 

(CMS) regulatory definition of “durable”—able to withstand repeated use, with an 

expected lifetime of at least 3 years. Stakeholders noted this also decreases 

their chances of obtaining coverage from other insurers, which may follow 

Medicare payment policy. Some stakeholders noted that CMS’s DME definition 

is a disincentive to technological innovation, and the agency has already faced 

challenges making coverage decisions with some devices. According to federal 

internal control standards, management should anticipate and plan for significant 

changes using a forward-looking process, but CMS officials said the agency has 

not considered the possibility of reexamining its definition. As a result, the 

agency may not be taking advantage of the potential benefits of these devices.

If Medicare coverage were expanded to include disposable DME substitutes, 

CMS would need to consider issues related to benefit category designation. 

GAO identified three possible options for covering disposable DME substitutes: 

an expansion of the current DME benefit, an expansion of the current home 

health benefit, or establishment of a new benefit category. The table lists the 

options GAO identified, which are not exhaustive. CMS would also need to 

consider its authority to provide for expanded coverage and evaluate potential 

reimbursement options.

Possible Options for Medicare Coverage of Disposable DME Substitutes

Medicare benefit Authority Reimbursement options

Durable medical 

equipment (DME)

benefit

Regulatory change could redefine 

“durable” to accommodate 

substitutes with shorter life 

expectancy, but congressional 

action likely necessary for single 

and short-term use devices

Use current fee schedule or a

reduced percentage of the fee 

schedule amount or establish 

payment through the competitive 

bidding program

Home health benefit Congressional action required Establish a separate payment or

adjust the home health bundle to 

include disposables

Newly established 

benefit for disposable 

devices

Congressional action required Would depend on congressional

action taken in establishing the new 

benefit

Source: GAO analysis of applicable laws and regulations. | GAO-17-600

View GAO-17-600. For more information, 

contact Kathleen M. King at (202) 512-7114 or 

kingk@gao.gov.

Why GAO Did This Study

In 2015, Medicare spent $6.7 billion for 

DME. CMS’s definition of DME 

generally precludes potential 

disposable DME substitutes from 

coverage. Congress included a 

provision in law for GAO to review the 

potential role of disposable medical 

devices as substitutes for DME. 

This report examines (1) potential 

disposable DME substitutes and their 

possible benefits and limitations; (2)

the incentives and disincentives 

stakeholders identified for developing 

these substitutes, including the 

possible influence of health insurance 

coverage; and (3) issues related to 

benefit category designation—

including legal authority and potential 

payment methodologies—if Medicare 

coverage were expanded to include 

disposable DME substitutes. GAO

reviewed agency documents and

literature on disposable DME 

substitutes and Medicare payment 

policy; interviewed CMS officials; and 

interviewed various stakeholders, 

including representatives of device 

manufacturers, beneficiary advocates, 

health care providers, and insurers, for 

their perspectives. 

What GAO Recommends

GAO recommends that CMS, within

the Department of Health and Human 

Services (HHS), evaluate the possible 

costs and savings of using disposable 

devices as substitutes for DME, and, if 

appropriate, seek legislative authority 

to cover them. HHS stated that such 

an evaluation was premature. 

However, GAO continues to believe an 

evaluation is needed to help HHS

anticipate and plan for significant 

changes using a forward-looking 

process.
Page i GAO-17-600 Disposable DME Substitutes

Letter 1

Background 4

Some Potential Disposable Substitutes for DME Exist, and These 

Substitutes May Have Benefits in Some Cases 7

Stakeholders Identified Market Incentives for Developing Potential 

Disposable DME Substitutes, but Cited Medicare Payment 

Policy as a Disincentive 17

CMS Would Need to Consider Issues Related to Benefit 

Categorization, Including Legal Authority and Potential Payment 

Methodologies, If Medicare Coverage Were Expanded to 

Disposable DME Substitutes 21

Conclusions 27

Recommendation for Executive Action 27

Agency Comments and Our Evaluation 27

Appendix I List of Stakeholders Interviewed 31

Appendix II Comments from the Department of Health and Human Services 32

Appendix III GAO Contact and Staff Acknowledgments 34

Tables

Table 1: Manufacturer Examples of Potential Cost-savings 

Associated with Disposable Substitutes for Durable 

Medical Equipment (DME) 16

Table 2: Possible Options for Covering Disposable Durable 

Medical Equipment (DME) Substitutes 21

Figures

Figure 1: Durable Infusion Pump and Potential Disposable 

Substitutes 8

Figure 2: Durable Insulin Pump and Potential Disposable 

Substitutes 10

Figure 3: Durable Blood Glucose Monitor and Potential 

Disposable Substitute 11

Contents
Page ii GAO-17-600 Disposable DME Substitutes

Figure 4: Durable Sleep Apnea Device and Potential Disposable 

Substitutes 13

Figure 5: Durable Nebulizer and Potential Disposable Substitute 14

Abbreviations

CMS Centers for Medicare & Medicaid Services

CPAP continuous positive airway pressure

DME durable medical equipment

HHS Department of Health and Human Services

MAC Medicare administrative contractor

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Page 1 GAO-17-600 Disposable DME Substitutes

441 G St. N.W.

Washington, DC 20548

July 17, 2017

Congressional Committees

Medicare, the federal health insurance program administered by the 

Centers for Medicare & Medicaid Services (CMS), within the Department 

of Health and Human Services (HHS), spent $6.7 billion in 2015 for 

durable medical equipment (DME).1 DME includes items such as hospital 

beds, wheelchairs, and blood glucose monitors. Medicare covers DME 

that serves a medical purpose, can be used in the home, and has an 

expected lifetime of at least 3 years, among other things. According to 

industry stakeholders, some new medical technology that is disposable 

may have the potential to substitute for DME and achieve better results 

and give better value to Medicare. Because these disposable DME 

substitutes do not meet the definition of DME, they cannot be covered by 

Medicare under the DME benefit.2

The Consolidated Appropriations Act, 2016, included a provision for GAO 

to report to Congress on the role of disposable devices as substitutes for 

DME.3 This report examines

1. potential disposable DME substitutes and the possible benefits and 

limitations of their use;

2. incentives and disincentives stakeholders have identified regarding 

the development of disposable DME substitutes, including the 

possible influence of health insurance coverage; and

 1

The amount that Medicare paid for DME in 2015 includes prosthetics, orthotics, and 

related supplies for beneficiaries. The amount paid is for Medicare Part B fee-for-service 

payments and does not include Medicare Advantage. In addition, it does not include the 

20 percent coinsurance that beneficiaries are responsible for paying to suppliers or any 

additional payments that beneficiaries may have made to suppliers that do not accept 

assignment. Suppliers who accept assignment must accept the Medicare-approved

payment amount and may not charge beneficiaries more than any unmet deductible and 

20 percent coinsurance. 

2

In this report, we define disposable devices as those that meet the following criteria: (1) 

they have a DME counterpart for which they could potentially substitute and (2) they are 

intended to treat the same conditions as the DME version. We refer to these devices as 

disposable DME substitutes.

3

Pub. L. No. 114-113 § 504(c), 129 Stat. 2242, 3022 (2015). 

Letter
Page 2 GAO-17-600 Disposable DME Substitutes

3. issues related to benefit category designation—including legal 

authority and potential payment methodologies—if Medicare coverage 

were expanded to include disposable DME substitutes.

To examine our objectives, we interviewed representatives from various 

stakeholder groups, including the medical device industry, health care 

providers, Medicare beneficiary advocates, a state Medicaid directors 

group, and health insurers.4 We also interviewed manufacturers and 

developers of the disposable DME substitutes we identified during the 

course of our work, and we reviewed related documentation, such as 

journal articles about the devices and user manuals for these substitutes.5

(See app. I for a complete list of stakeholders we interviewed.) To 

supplement our interviews, we conducted a literature search to identify 

disposable DME substitutes.6 Additionally, we reviewed CMS 

documentation and interviewed CMS officials and representatives of the 

two DME Medicare administrative contractors (MAC) regarding 

disposable DME substitutes and Medicare coverage of DME.7 We 

compared CMS’s approach to coverage determinations regarding 

disposable DME substitutes to federal internal control standards for risk 

 4

We interviewed 21 stakeholders in total. Specifically, we interviewed 2 medical device 

manufacturer groups, 2 Medicare beneficiary advocate groups, 4 health care provider 

groups, 1 state Medicaid directors group, 1 health insurer and 2 health insurer groups, and 

9 manufacturers and developers of specific disposable DME substitutes. (We collectively 

refer to the manufacturers and developers as “manufacturers” in this report.) In addition, 

we requested to interview 9 other stakeholders—2 Medicare beneficiary advocate groups, 

3 health care provider groups, 2 health insurance groups, and 2 manufacturers of a 

disposable DME substitute. These stakeholders did not respond to our request or declined 

our invitation. We identified groups to interview through various sources, including our 

previous work and recommendations provided by interviewees. We also conducted 

internet searches for manufacturers of those disposable DME substitutes we identified, 

among other things. The views we obtained during our interviews are not generalizable to 

all industry stakeholders.

5

We interviewed manufacturers of 7 of the 8 disposable DME substitutes we identified. 

We contacted multiple manufacturers of the eighth device type but were unable to obtain 

an interview with any of them. We identified journal articles about the disposable DME 

substitutes via internet searches.

6

Our literature search included peer-reviewed publications, government publications, trade 

and industry articles, and association and nonprofit publications from January 2006 to 

October 2016. We reviewed 149 abstracts but did not identify any additional disposable 

DME substitutes. 

7

CMS has contracted with two companies, Noridian Healthcare Solutions, LLC, and CGS 

Administrators, LLC, as DME MACs to cover the four geographic areas. The DME MACs 

administer claims for payment that DME suppliers submit to Medicare on behalf of 

beneficiaries. 
Page 3 GAO-17-600 Disposable DME Substitutes

assessment.8 In addition, to describe issues related to benefit category 

designation if Medicare coverage were expanded to include disposable 

DME substitutes, we reviewed reports on DME and Medicare payment 

policy that we identified through a targeted literature search and reviewed 

relevant statutes and regulations.9 Additionally, we reviewed our past 

work on Medicare payment policy.

We conducted this performance audit from August 2016 to July 2017 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 8

See GAO, Standards for Internal Control in the Federal Government, GAO-14-704G 

(Washington, D.C.: September 2014). Internal control is a process effected by an entity’s 

oversight body, management, and other personnel that provides reasonable assurance 

that the objectives of an entity will be achieved. 

9

For our targeted literature search, we reviewed publications obtained via internet 

databases such as ProQuest and from organizations that research and produce reports 

on Medicare payment policy, such as the Medicare Payment Advisory Commission. 
Page 4 GAO-17-600 Disposable DME Substitutes

Medicare covers items such as hospital beds, wheelchairs, and blood 

glucose monitors under its DME benefit because they are specifically 

included in the Medicare statute’s definition of DME.10 Other items are 

covered under the Medicare DME benefit based on CMS’s interpretation 

of the statute, which does not elaborate on the meaning of “durable.” By 

regulation, CMS has defined DME as equipment that (1) can withstand 

repeated use; (2) has an expected lifetime of at least 3 years; (3) is used 

primarily to serve a medical purpose; (4) is not generally useful in the 

absence of an illness or injury; and (5) is appropriate for use in the 

home.11 Most Medicare beneficiaries enroll in Medicare Part B, which 

provides coverage for DME if the devices are medically necessary and 

prescribed by a physician.12 Medicare beneficiaries typically obtain DME 

from suppliers, who then submit claims for payment to Medicare on behalf 

of beneficiaries. CMS contracts with DME MACs to process these claims 

and ensure proper administration of the DME benefit.

Medicare uses three different processes to set the amount it pays for 

DME.13 First, the payment amounts for some types of DME are set in a 

fee schedule that is based on the average charges Medicare allowed 

during a 12-month period ending June 30, 1987, subject to national floors 

and ceilings. These historical fee schedule amounts have been updated 

in some years by a measure of price inflation and a measure of economy-

 10See 42 U.S.C. § 1395x(n).

11See 42 C.F.R. § 414.202 (2016). The 3-year minimum lifetime requirement is effective 

for items classified as DME after January 1, 2012. 

12Related supplies and accessories that are necessary for the effective use of the DME 

item, such as drugs or tubing, are also covered by Medicare. For diabetic patients, insulin 

used in an insulin pump that is covered under Part B is covered under the DME benefit. 

Insulin not used in an insulin pump is covered under Medicare Part D, Medicare’s 

prescription drug program. In addition, Medicare Part D plans may cover medical supplies 

associated with the injection of insulin, including syringes, needles, alcohol swabs, and 

gauze. 

13Medicare pays 80 percent of the lower of the supplier’s charge for the item or the fee 

schedule amount, less any unmet deductible. The beneficiary is responsible for the 

remaining 20 percent, plus any unmet deductible. 

Background

Medicare Payment for 

DME
Page 5 GAO-17-600 Disposable DME Substitutes

wide productivity.14 Second, the payments for some DME are set through 

a competitive bidding program. In that program, qualified DME suppliers 

with the lowest bids are competitively selected to furnish certain DME 

product categories to Medicare beneficiaries in designated competitive 

bidding areas.15 Third, when CMS classifies a new device on the market 

as DME, CMS may set the price using the price of a comparable item. If 

there is no comparable item, then CMS may set the price using the gapfill methodology.16 This method takes supplier price lists for the new item 

and applies a deflation factor to calculate the base-year price—the price 

for the 12-month period ending June 30, 1987, on which the original fee 

schedule was based. To then calculate the payment amount, CMS takes 

the median deflated price and increases it to the current date using the 

update factors that were applied to the original fee schedule.17 Similar to 

the fee schedule, the final price is subject to floors and ceilings.

Typically, when a Medicare beneficiary receives DME in conjunction with 

home health care, the devices are covered, and payments are made, 

under the DME benefit.18 However, prior to January 2017, the home 

health benefit covered disposable negative pressure wound therapy that 

may substitute for DME as part of the bundled rate CMS pays home 

health agencies—a single rate for providing treatment and certain related 

 14For some years, the payment amount was not updated. For example, no update was 

provided from 1998 through 2000 or in 2002, although updates were provided in 2001, as 

required by law. See 42 U.S.C. § 1395m(a)(14).

15A product category is a grouping of related items used to treat a similar medical 

condition. A competitive bidding area is either a metropolitan statistical area or a part

thereof. Metropolitan statistical areas are designated by the Office of Management and 

Budget and include major cities and the suburban areas surrounding them. Prices for 

DME product categories under the competitive bidding program are reduced based on 

information from the program for locations outside of the competitive bidding areas. For 

more information on the competitive bidding program, see GAO, Medicare: CMS’s Round 

2 Durable Medical Equipment and National Mail-order Diabetes Testing Supplies 

Competitive Bidding Programs, GAO-16-570 (Washington, D.C.: Sept. 15, 2016). 

16The gap-fill method is established in Medicare’s claims processing manual. CMS 

officials told us it is subject to change should CMS determine another method to be more 

appropriate. 

17The inflation factors used in the gap-filling process account for the years in which no 

update was provided. 

18In contrast, in other settings such as a hospital, if a beneficiary received DME, it would 

be covered under the inpatient payment system rather than the DME benefit. 

Disposable Negative 

Pressure Wound Therapy 

and Home Health 

Payments
Page 6 GAO-17-600 Disposable DME Substitutes

items or services during a 60-day care episode.19 Beginning in January 

2017, the Consolidated Appropriations Act, 2016, unbundled certain 

disposable negative pressure wound therapy devices that may substitute 

for DME under the Medicare home health benefit.20 The act provides for a 

separate payment for disposable negative pressure wound therapy—

meaning it is not part of the bundled payment amount—and sets the 

reimbursement rate for disposable negative pressure wound therapy 

equal to the rate used in an outpatient setting, where the device is

covered.21 Furthermore, the act provides separate payment for the 

disposable negative pressure wound therapy only to beneficiaries who 

are receiving home health services.

 19The bundled payment rates are based on patients’ conditions and service use, adjusted 

for the geographic area in which the care was provided. If fewer than five visits are 

delivered during a 60-day episode, the home health agency is paid per visit by visit type, 

rather than by the episode payment method.

Negative pressure wound therapy applies suction to a wound to remove drainage and 

debris.

20Pub. L. No. 114-113 § 504(a), (b), 129 Stat.3021 (codified at 42 U.S.C. §§ 1395l(a)(1), 

1395m(s) and 1395x(m)(5). 

21Under Medicare’s outpatient benefit, the disposable negative wound pressure therapy 

device and services related to providing it are categorized with other wound care items 

and services into a single payment classification. All services within this classification have 

the same payment rate. The home health separate payment amount similarly includes 

both the disposable negative pressure wound therapy device and the services related to 

providing it.
Page 7 GAO-17-600 Disposable DME Substitutes

We identified a limited number of disposable medical devices that could 

potentially substitute for DME, based on our literature review and 

interviews with industry stakeholders. These devices do not necessarily 

represent a complete list of available disposable devices. Specifically, we 

identified eight devices that could potentially substitute for DME. These 

devices fall into existing DME categories used by Medicare—infusion 

pumps, including insulin pumps; blood glucose monitors; sleep apnea 

devices; and nebulizers.22 These disposable DME substitutes vary in life 

expectancy. For example, some of the substitutes are intended to last a 

day, while others a year or two. A few of the disposable DME substitutes 

we identified have been on the market for more than a decade; a couple 

have become available more recently, in the past 3 to 5 years. We also 

identified a disposable DME substitute that is currently in development.

• Infusion pumps. These devices deliver fluids, including medication, 

into a patient’s body in a controlled manner. In general, a trained 

technician programs this device, using built-in software, to deliver 

fluids at specific rates through disposable tubing connected from the 

device to the patient via a needle. We identified two examples of 

disposable devices that could potentially substitute for DME—the 

ambulatory infusion pump and the elastomeric pump. The disposable 

ambulatory infusion pump has the same characteristics as the DME 

version, such as being able to deliver fluid at a controlled rate and 

 22These eight devices are in addition to the disposable negative pressure wound therapy 

device already covered under Medicare. Medicare currently covers more than 17 

categories of DME, including the ones above, with multiple devices within each of these 

categories. Some of these categories include manual wheelchairs and power mobility 

devices, oxygen equipment and accessories, and hospital beds. An insulin pump is a type 

of infusion pump, but for this report, we created a separate category due to the insulin 

pump’s use as treatment for a chronic illness. 

Some Potential 

Disposable 

Substitutes for DME 

Exist, and These 

Substitutes May Have 

Benefits in Some 

Cases

Some Potential Examples 

of Disposable Substitutes 

for DME Exist, according 

to Industry Stakeholders
Page 8 GAO-17-600 Disposable DME Substitutes

using a disposable infusion set that is discarded after a single use. 

However, unlike the durable infusion pump, the ambulatory infusion 

pump has a life expectancy of 1 year. The disposable elastomeric 

pump is a single-use device that utilizes a stretchable balloon 

reservoir that relies on the pressure from the elastic walls of the 

balloon to deliver a single dose of medication before being discarded. 

(See fig. 1.)

Figure 1: Durable Infusion Pump and Potential Disposable Substitutes
Page 9 GAO-17-600 Disposable DME Substitutes

• Insulin pumps. These devices are infusion pumps specifically used 

to deliver insulin to patients with diabetes. The DME version of an 

insulin pump consists of an insulin reservoir and a pumping 

mechanism that controls the release of insulin to the patient via a 

disposable infusion set. We identified two potential disposable 

substitutes—a completely disposable insulin pump and an insulin 

pump with both disposable and durable components. The completely 

disposable insulin pump consists of an adhesive patch containing an 

insulin reservoir and needle. This patch is attached to the patient’s 

skin, and a needle is inserted into the skin when a button is pressed, 

allowing insulin to be delivered throughout the day. This type of insulin 

pump is intended to last for 24 hours and then be discarded. The 

other device we identified has both disposable and durable 

components. This device’s disposable component contains the insulin 

reservoir, pumping mechanism, and a transmitter sensor in an 

adhesive patch that is intended to last for 3 days. Its durable 

component, which is expected to last for 4 years, includes a remote 

controller that transmits instructions programmed by the patient to the 

sensor in the patch, which in turn controls the release of insulin via the 

pumping mechanism. (See fig. 2.)
Page 10 GAO-17-600 Disposable DME Substitutes

Figure 2: Durable Insulin Pump and Potential Disposable Substitutes

• Blood glucose monitor. These devices measure the blood glucose 

levels in patients. For patients with diabetes, this device provides 

them with information indicating when an insulin injection is needed. 
Page 11 GAO-17-600 Disposable DME Substitutes

For the DME version of this device, a patient pricks his or her finger, 

touches the test strip to the blood, and waits for the durable monitor to 

display a reading on the patient’s blood glucose level. We identified 

one type of DME substitute. This disposable substitute includes a vial 

of 50 test strips with a small monitor on the lid. The entire unit is 

discarded when all of the test strips have been used. (See fig. 3.)

Figure 3: Durable Blood Glucose Monitor and Potential Disposable Substitute

• Sleep apnea devices. Called continuous positive airway pressure 

(CPAP) machines, these devices use mild air pressure to keep a 

patient’s breathing airways open. The DME version of this machine 

includes a mask or other device that fits over the patient’s nose, and 

sometimes over the mouth. Straps hold the mask in position and a 

tube is connected to the machine’s motor, which blows air into the 

tube. We identified one potential disposable DME substitute on the 

market and another in development. The first is a disposable valve 
Page 12 GAO-17-600 Disposable DME Substitutes

that fits into a patient’s nose with no mask or associated machine.23 It 

is intended to last for one night and then be discarded. The second 

device is a disposable micro-CPAP still under development.24 It 

involves a device that fits into a patient’s nostrils and is intended to 

last 8 hours and then be discarded. According to the manufacturer, 

the time limit of 8 hours is linked to the battery life of the device. (See 

fig. 4.)

 23This disposable substitute operates differently than the durable CPAP device. The 

CPAP device provides a positive pressure during inhalation and exhalation. In contrast, 

this disposable substitute creates pressure during exhalation only. 

24According to the developer, components of the device are being tested; clinical trials 

have not begun. 
Page 13 GAO-17-600 Disposable DME Substitutes

Figure 4: Durable Sleep Apnea Device and Potential Disposable Substitutes

• Nebulizers. These devices allow a patient to receive a drug via 

inhalation. Nebulizers change liquid medicine into fine droplets (in 

aerosol or mist form) that are inhaled through a mouthpiece or mask 

and used to treat conditions, such as asthma. Disposable nebulizers 

are generally smaller than the DME versions and may last for a year. 

(See fig. 5.)
Page 14 GAO-17-600 Disposable DME Substitutes

Figure 5: Durable Nebulizer and Potential Disposable Substitute

Note: We were unable to interview a manufacturer of a disposable nebulizer.

Over half of the 21 stakeholders we spoke with—including 

representatives from device manufacturers discussing their specific 

devices, Medicare beneficiary advocate groups, providers, and insurers—

commented on the multiple benefits of substituting DME with disposable 

devices. The benefits can be categorized into three areas: (1) patient 

preference and/or improved quality of life, (2) better health outcomes, and 

(3) potential cost-savings. Specifically, 12 of the 21 stakeholders 

mentioned patient preference and/or improved quality of life as a benefit 

of using disposable substitutes. They said that disposable devices are, for 

example, often lighter and quieter than durable devices. Thus, in some 

cases, the substitutes may allow patients more freedom of movement and 

be more discreet.25 For example, the disposable insulin pumps do not 

 25For example, see N. Ramchandani and R. Heptulla, “New Technologies for Diabetes: A 

Review of the Present and the Future,” International Journal of Pediatric Endocrinology, 

vol. 28 (2012).

Stakeholders Identified 

Multiple Benefits of Using 

Disposable DME 

Substitutes, but Also Cited 

Limitations to Their Use
Page 15 GAO-17-600 Disposable DME Substitutes

require users to take additional supplies if they leave the house. Further, 

several stakeholders said that disposable devices are easier to use, such 

as the elastomeric pump, which one stakeholder explained had fewer 

opportunities for error.

Additionally, 9 of the 21 stakeholders we spoke with said these devices 

can result in better health outcomes due, in part, to better compliance.26

For example, one stakeholder for a company that manufactures a 

disposable DME substitute to treat sleep apnea said the company 

specifically targeted its device to non-compliant users of the durable 

CPAP machine. This stakeholder said that while the durable CPAP 

machine is still considered the “gold standard” for treating obstructive 

sleep apnea, a significant proportion of patients do not comply with 

treatment over time. In addition, a representative for a company that 

manufactures a disposable insulin pump said that some patients are able 

to reduce the amount of insulin they need after using this device because 

of increased compliance. This representative explained that because the 

insulin is being delivered at a more continuous, consistent rate due to 

better compliance, users are making more efficient use of their insulin 

injections.

Twelve of the 21 stakeholders we spoke with noted different ways that 

disposable devices may result in potential cost-savings for the Medicare 

program and beneficiaries than their DME counterparts in some cases. 

For example, for patients that have acute conditions, such as those 

needing a course of antibiotics, it could be more financially prudent for 

Medicare and the beneficiary to use multiple elastomeric pumps for 

several days to administer the medication rather than pay for a durable 

pump, which is usually paid for on a monthly basis under Medicare. Also, 

four stakeholders said that disposable DME substitutes may generate 

potential savings because they do not have the cleaning and 

maintenance costs associated with DME, which can be reused. Further, 

one study we reviewed noted that nurses using elastomeric pumps 

 26These cited benefits were supported by some of the literature we identified in our 

review. For example, see M. Riaz et al., “Nasal Expiratory Positive Airway Pressure 

Devices (Provent) for OSA: A Systematic Review and Meta-Analysis,” Sleep Disorders, 

vol. 2015 (2015); A. Winter et al., “V-Go Insulin Delivery System Versus Multiple Daily 

Insulin Injections for Patients with Uncontrolled Type 2 Diabetes Mellitus,” Journal of 

Diabetes Science and Technology, vol. 9, no. 5 (2015); and Y. Reznik and O. Cohen, 

“Insulin Pump for Type 2 Diabetes – Use and Misuse of Continuous Subcutaneous Insulin 

Infusion in Type 2 Diabetes,” Diabetes Care, vol. 36, sup. 2 (2013).
Page 16 GAO-17-600 Disposable DME Substitutes

reported a reduced workload for maintenance and education.27 Table 1 

shows examples of the potential cost-savings associated with using 

disposable DME substitutes compared to their DME counterparts, as 

noted by manufacturers of disposable DME substitutes.

Table 1: Manufacturer Examples of Potential Cost-savings Associated with Disposable Substitutes for Durable Medical 

Equipment (DME)

Type of device Medicare payment for DME, 

supplies

Cost of disposable DME 

substitutea Potential savings with disposable DME substitute

Durable electronic infusion pump 

and disposable elastomeric pumpb $383.13 (average cost for DME and supplies at month one) 

$83.00 (cost for 2 

elastomeric pumps at 

month one)

$300.13 (potential savings 

using an elastomeric pump at 

month one) 

Durable CPAP machine and 

disposable CPAP substitute (in 

development)c

$242.58 (average cost for CPAP 

machine and supplies at month 

one) 

$90.00 (estimated cost for 

disposable CPAP 

substitute in development 

at month one)d

$152.58e (potential savings 

with disposable CPAP 

substitute in development at 

month one) 

Source: GAO analysis of data from the Centers for Medicare & Medicaid Services and manufacturers. │ GAO-17-600

a

Costs of disposable DME substitutes were provided by the manufacturers or developers (referred to 

collectively as “manufacturers”) of these devices.

b

This comparison is of the costs for an electronic infusion pump and supplies (including for 

maintenance) and an elastomeric pump and supplies for two treatments of 5Fu chemotherapy 

treatment for colorectal cancer, with treatments being administered every 2 weeks. The costs do not 

include the cost of the medication; according to CMS, the cost of two treatments of 5Fu 

chemotherapy is $1,840. The costs to Medicare and beneficiaries reflect the average non-rural fee 

schedule payment based on calendar year 2017 payment amounts.

c

This comparison is of the costs in month one for a beneficiary using a nasal cannula continuous 

positive airway pressure (CPAP) system (including the nasal device, headgear, chinstrap, pressure 

tubing, a humidifier, and a non-disposable filter) to a disposable CPAP substitute still in development. 

The costs to Medicare and beneficiaries reflect the average non-rural fee schedule payment based on 

calendar year 2017 payment amounts.

d

This estimate from the developer is subject to change if and when the device is approved for 

marketing.

e

The potential savings with a disposable CPAP substitute compared to the durable CPAP machine 

vary over time. For example, in month two, the potential savings with the disposable CPAP substitute 

in this scenario is $84.08. The difference is attributed to the different life expectancies of the supplies 

used in conjunction with the durable CPAP machine. For example, the estimated life expectancy of 

one non-disposable filter is about 6 months, while the estimated life expectancy of one item of 

pressure tubing is about 3 months.

Despite the potential benefits of disposable substitutes, stakeholders also 

noted limitations to using these devices regarding health outcomes and 

potential cost-savings. For example, stakeholders and officials from both 

DME MACs said there are few studies comparing the effectiveness of 

 27See J. Heath and S. Jones, “Utilization of an Elastomeric Continuous Infusion Device to 

Maintain Catheter Patency,” Journal of Intravenous Nursing, vol. 24, no. 2 (March/April 

2001). 
Page 17 GAO-17-600 Disposable DME Substitutes

disposable substitutes with their DME counterpart. Additionally, 

stakeholders noted that DME might be more appropriate than disposable 

DME substitutes in some cases, such as when dosing of medication 

needs to be precise. For example, two stakeholders said that the 

elastomeric infusion pump might not be appropriate when the rate of 

medication delivery needs to be specific, such as with some 

chemotherapy treatments or for patients with chronic conditions that 

require long-term treatment. Regarding potential cost-savings, four 

stakeholders noted that potential cost-savings might not be obtained for 

all disposable DME substitutes. For example, for patients with chronic 

conditions that require use of DME for extended periods, it might be more 

cost-effective to use a durable device rather than disposable substitutes 

that would need to be replaced regularly.

Stakeholders we spoke with—including representatives from device 

manufacturers, Medicare beneficiary advocate groups, providers, and 

insurers—cited several market incentives for developing potential 

disposable DME substitutes. For example, 12 of the 21 stakeholders 

noted that there is an international market for disposable devices, an 

increasing demand for some types of devices resulting from a growing 

patient population, a general movement resulting from advancing 

technology, and that some disposable devices can be sold as a “cash 

product”: that is, the product could be sold at relatively low cost without 

insurance coverage.

However, over half of the stakeholders we interviewed said lack of 

insurance coverage for disposable DME substitutes—particularly 

Medicare—was a disincentive to developing such products. Specifically, 

13 of the 21 stakeholders cited lack of insurance coverage as a 

disincentive to developing disposable DME substitutes, including 

representatives from all of the manufacturer organizations and two-thirds 

of the manufacturers we interviewed. Further, 9 of these 13 

stakeholders—including 4 out of 9 manufacturers—specifically cited lack 

of Medicare benefit coverage as a barrier, with 2 of these 4 

manufacturers noting that disposable substitutes do not meet CMS’s 3-

year minimum lifetime requirement to be categorized as DME. Eight of 

the 13 stakeholders also said that lack of Medicare coverage decreased 

their chances for obtaining benefit coverage from Medicaid and insurers, 

which often follow Medicare payment policy.

Stakeholders 

Identified Market 

Incentives for 

Developing Potential 

Disposable DME 

Substitutes, but Cited 

Medicare Payment 

Policy as a 

Disincentive
Page 18 GAO-17-600 Disposable DME Substitutes

Based on our analysis of interviews with these stakeholders, we found 

limited coverage for the potential disposable substitutes we identified.28

Specifically, according to the manufacturers we spoke with,

• the disposable elastomeric infusion pump is covered by Medicaid in 

some states and is covered by some health insurance plans;29

• the completely disposable insulin pump is covered by Medicare under 

Part D by some plans, some Medicaid, and other insurance programs, 

including TRICARE;30

• the insulin pump with disposable and durable components has 

Medicaid coverage in some states and extensive insurance 

coverage;31and

• the disposable sleep apnea device has some coverage via insurance 

and other programs, including the Department of Veterans Affairs.

In addition, manufacturers noted that neither the disposable ambulatory 

infusion pump nor the completely disposable blood glucose monitor is 

covered by Medicare, Medicaid, or other insurance programs.

Stakeholders also raised concerns about how CMS determines whether a 

device with disposable components meets the definition of DME. As 

technology has advanced, manufacturers have developed potential 

substitutes for DME with both durable and disposable components. 

However, according to CMS officials, in order for a device to be covered 

by Medicare, the agency must determine that the medically necessary 

function of the device is performed by a durable component, not a 

 28We identified two other potential disposable substitutes not included—a micro-CPAP 

device and nebulizers. We were unable to obtain coverage information for these devices: 

according to the developer, the micro-CPAP device is still under development, and we 

were unable to include a manufacturer of a disposable nebulizer in our analysis. 

29For this disposable device and for the others that we identified, if at least one state was 

identified that provided Medicaid coverage or one health insurer provided coverage, the 

device was included. 

30According to the manufacturer, the completely disposable insulin pump is coverable 

under Medicare Part D as a supply for the injection of insulin rather than under Part B as 

DME. Medicare Part D covers insulin and certain supplies used for the injection of insulin, 

such as syringes, gauze, and alcohol swabs. The manufacturer also noted that health 

insurance coverage of the completely disposable insulin pump is generally under the 

medical benefit rather than the pharmacy benefit.

31According to CMS officials, the agency is currently evaluating whether this device is 

eligible for coverage under Medicare Part D. 
Page 19 GAO-17-600 Disposable DME Substitutes

disposable one. Two of the stakeholders we spoke with expressed 

concerns about CMS’s approach to making durability determinations—

and thus benefit coverage determinations—based on whether the durable 

or disposable component performs the medically necessary function. 

They said CMS should make such decisions based on the whole device 

and not its individual parts. If the durable component is essential to the 

device, then that should be sufficient.

CMS has made benefit coverage determinations for at least two devices 

with disposable and durable components. The first device is a specific 

continuous glucose monitor, which CMS classified as DME. This device 

includes an adhesive patch containing a disposable sensor and a 

wireless transmitter that sends information to a durable electronic receiver 

that displays a patient’s blood glucose level accurately enough for a 

patient to make treatment decisions.32 CMS determined that for this 

device, the medically necessary function performed is the displaying of 

the blood glucose level, and therefore this particular continuous glucose 

monitor could be classified as DME. The second device involves one of 

the disposable insulin pumps we identified. This particular device includes 

an adhesive patch containing an insulin reservoir, pumping mechanism, 

and a transmitter sensor that delivers insulin after receiving instructions 

transmitted from a programmable durable electronic device. According to 

the manufacturer of this device, although the durable component meets 

CMS’s 3-year minimum lifetime requirement, CMS determined that for 

this device, the medically necessary function is the pumping mechanism 

that delivers insulin. Therefore, because the pumping mechanism is 

disposable, CMS determined that this insulin pump is not considered 

DME.33

Furthermore, 6 of the 21 stakeholders we spoke with noted that 

technology is advancing in the area of medical device development. Five 

of these stakeholders specifically cited CMS’s definition of DME as a 

disincentive to technological innovation, such as the development of 

disposable substitutes. As advancing technology results in changes to the 

functionality of devices, including the development of disposable 

substitutes, CMS will likely have to consider how its benefit coverage 

 32Continuous glucose monitors measure and report a patient’s glucose levels at regular 

intervals (for example, every 5 minutes). In contrast, a blood glucose monitor provides 

information only when the patient actively tests his or her blood. 

33The manufacturer of this device told us that they were still in discussion with CMS 

regarding the device’s classification. 
Page 20 GAO-17-600 Disposable DME Substitutes

policies will apply to them. CMS has already faced issues accommodating 

new technology related to smartphone applications; for example, the 

continuous glucose monitor we described above, which CMS classified as 

DME, sends information to a durable electronic receiver that displays a 

patient’s blood glucose level. Alternatively, this information can be 

displayed using a smartphone application; however, officials from one 

DME MAC that we spoke with said the receiver would not be covered by 

Medicare if information was obtained from the smartphone. CMS officials 

explained that the smartphone application is not considered DME 

because the smartphone itself is not primarily and customarily used to 

serve a medical purpose and is useful to an individual in the absence of 

illness or injury and therefore is not considered a medical device, 

although it may be used to track medical information.

As technology advances, manufacturers may continue to incorporate 

these advances into devices that have the potential to substitute for DME, 

and more disposable devices may be developed in the future. Federal 

internal control standards state that management should identify, analyze, 

and respond to change, including anticipating and planning for significant 

changes using a forward-looking process.34 CMS has already begun 

facing issues related to advancing technology, such as making policy 

determinations for devices with both durable and disposable components 

based on the functionality of different parts of the device. However, 

Medicare currently does not cover most potential disposable DME 

substitutes because they do not meet Medicare’s definition of “durable,” 

which CMS has interpreted to mean withstanding repeated use and 

having an expected minimum lifetime of 3 years, among other things.35

Further, CMS officials told us that the agency continues to regard this 

interpretation of the Medicare statute as appropriate and has not 

considered the possibility of reexamining it in order to accommodate 

disposable substitutes. Without such consideration for Medicare 

coverage, CMS and other insurers that follow Medicare payment policy 

may not be taking advantage of the possible benefits of these devices.

 34GAO-14-704G, Internal Control 9.03.

35See 21 C.F.R. § 414.202 (2016). 
Page 21 GAO-17-600 Disposable DME Substitutes

If Medicare coverage were expanded to include disposable DME 

substitutes, CMS would need to consider issues related to benefit 

category designation. We identified three possible options that CMS could 

consider as benefit categories for expanding coverage: (1) using the DME 

benefit, (2) using the home health benefit, or (3) establishing a new 

benefit. (See table 2.) Under each scenario, CMS would need to consider 

its authority to provide for such expanded coverage. In addition, CMS 

would need to evaluate potential payment methodologies for 

reimbursement, taking into consideration its responsibility to be a prudent 

purchaser of medical care. Although we identify several possibilities in 

this report, this is not intended to be an exhaustive list of potential benefit 

categories and payment methodologies to be considered if Medicare

coverage were expanded to disposable DME substitutes. 

Table 2: Possible Options for Covering Disposable Durable Medical Equipment (DME) Substitutes

Medicare benefit category Authority Reimbursement options

DME benefit Regulatory change could redefine “durable” 

to accommodate substitutes with shorter 

life expectancy, but congressional action 

likely necessary for single and short-term 

use devices

Use current fee schedule or a reduced percentage 

of the fee schedule amount

or

Establish payment through the competitive bidding 

program

Home health benefit Congressional action required Establish a separate payment for home health 

beneficiaries using disposable DME substitutes

or

Adjust the home health bundle to include 

disposables

Newly established benefit for 

disposable devices

Congressional action required Would depend on congressional action taken in 

establishing the new benefit

Source: GAO analysis of applicable laws and regulations. | GAO-17-600

Note: The possible options presented in this table are not intended to be an exhaustive list.

Because the disposable DME substitutes we identified generally treat the 

same conditions as some DME items, consideration could be given to 

expanding eligibility for the DME benefit to cover similar disposable 

CMS Would Need to 

Consider Issues 

Related to Benefit 

Categorization, 

Including Legal 

Authority and 

Potential Payment 

Methodologies, If 

Medicare Coverage 

Were Expanded to 

Disposable DME 

Substitutes

DME Benefit Category
Page 22 GAO-17-600 Disposable DME Substitutes

items.36 Although the CMS regulation interpreting the statutory definition 

of DME includes a requirement that such equipment can withstand 

repeated use and have a life expectancy of at least 3 years, CMS officials 

acknowledged their authority to promulgate rules amending the regulation 

to potentially shorten the minimum lifetime expectancy.37 However, it is 

uncertain whether CMS could reasonably interpret “durable” in such a 

way that allows for coverage of all of the disposable DME substitutes we 

identified—many of which are intended for single or short-term use.38

Thus, providing Medicare coverage to all of these disposable DME 

substitutes would likely require congressional action.

Some stakeholders also noted that using the DME benefit would require 

several coverage decisions to be made, either through CMS’s national 

coverage determination process or through the local process conducted 

by the DME MACs.39 For example, one decision point three stakeholders 

noted is whether Medicare would cover a disposable DME substitute as a 

potential replacement for its durable counterpart in all cases or only under 

certain circumstances. Another consideration mentioned by another three 

stakeholders is whether there would be limits to the benefit, such as 

whether Medicare would cover a disposable DME substitute only for a 

certain number of months. Limiting coverage in such a way could 

 36Similarly, in 2012, the Medicare Payment Advisory Commission noted that disposable 

infusion pumps were not covered by Medicare but that Congress could potentially extend 

the DME benefit to include them. See Medicare Payment Advisory Commission, Report to 

the Congress: Medicare and the Health Care Delivery System, June 2012 (Washington, 

D.C.: June 15, 2012). 

3742 C.F.R. § 414.202 (2016). In the preamble to the 2011 final rule establishing the 

standard for lifetime expectancy, CMS referenced multiple sources for setting the standard 

at 3 years, including the Department of Commerce’s durability standard for consumer 

durable goods. See 76 Fed. Reg. 70228, 70287 (preamble IV, D) (Nov. 10, 2011). 

38The term “durable medical equipment” is established in statute, but the statutory 

definition does not elaborate on the specific meaning of “durable.” See 42 U.S.C. § 

1395x(n). CMS officials referred to a statutory payment rule authorizing the replacement of 

certain items of durable medical equipment that have been continuously used for a period 

or “reasonable useful lifetime” of at least 5 years as a basis for assuming that the DME 

benefit is for equipment intended to be used over multiple years. See 42 U.S.C. § 

1395(m)(a)(7)(C). 

39National and local coverage determinations are policies that identify the items and 

services and the circumstances under which they are covered by Medicare. CMS 

develops national coverage determinations, which apply to all beneficiaries across the 

country. DME MACs develop local coverage determinations related to DME, and these 

apply to the states in their jurisdictions, which can lead to geographic variation in Medicare 

coverage.
Page 23 GAO-17-600 Disposable DME Substitutes

encourage the use of disposable DME substitutes for acute conditions 

over chronic conditions. Three stakeholders suggested that some 

disposable DME substitutes, such as in the case of elastomeric infusion 

pumps, are more likely to result in cost-savings as compared to their 

durable counterparts when used to treat acute conditions. However, 

limiting coverage of disposable DME substitutes to a certain length of 

time could impede beneficiary access to their preferred medical 

equipment.

We identified two approaches CMS could consider within the DME benefit 

for setting reimbursement rates for disposable DME substitutes. 

Specifically, payments for disposable DME substitutes could be based on 

the payment rates of their DME counterparts, or they could be treated 

separately, making use of the typical procedures for establishing payment 

rates for new DME. For the first approach, CMS could set the 

reimbursement rate for a disposable DME substitute at the same price as 

the DME counterpart, or—recognizing that disposable devices may be 

less costly than DME—at a reduced percentage of the rate for the DME 

counterpart.40 However, we have previously reported that the historical 

charges on which the fee schedule rates are based are outdated and do 

not reflect current costs.41 As a result, the reimbursement rates increase 

costs to both the federal government and Medicare beneficiaries. In 

addition, four stakeholders raised concerns about this type of “one-sizefits-all” approach to disposable DME substitutes. For example, one 

stakeholder noted that disposable DME substitutes could vary widely in 

cost, quality, and the length of time a beneficiary requires the device. The 

cost of certain disposable DME substitutes may not be similar to the cost 

of their DME counterparts. Therefore, basing the rates for all disposable 

devices on the DME rates might result in significant over- or 

underpayments.

 40For example, S. 1253, introduced in the Senate in May 2015, would have expanded 

Medicare coverage to certain disposable medical technology that would otherwise be 

covered as DME at a payment rate of 95 percent of the DME item for which it would 

substitute. This bill was amended in committee to specifically pertain to negative pressure 

wound therapy devices, and language from this bill eventually became law as part of the 

Consolidated Appropriations Act, 2016, which provided a separate payment for disposable 

negative pressure wound therapy at a rate equal to the amount paid under the outpatient 

payment system. See S.1253 as reported by Senate Finance on Jul. 30, 2015, at 9.

41See GAO, Medicare: Competitive Bidding for Medical Equipment and Supplies Could 

Reduce Program Payments, but Adequate Oversight Is Critical, GAO-08-767T 

(Washington, D.C.: May 6, 2008).
Page 24 GAO-17-600 Disposable DME Substitutes

Using the second approach, separate payment rates could be established 

for disposable DME substitutes using one of the two existing DME 

payment methodologies: the fee schedule based on historical charges or 

the competitive bidding program.

• Setting payment rates via the historical fee schedule would likely 

entail using the gap-fill method because the disposable DME 

substitutes we identified did not exist at the time the historical charges 

for most DME were set. In this case, the gap-fill method would rely on 

taking current supplier prices and resetting them to the 12-month 

period ending June 30, 1987, used in the original fee schedule by a 

deflation factor based on the consumer price index for all urban 

consumers, followed by re-inflating the price using an inflation factor 

limited to the years in which a DME inflation update was provided.42

One stakeholder expressed concern regarding the gap-fill method, 

though, stating that the process results in pricing that does not 

accurately represent market prices. In addition, as with the fee 

schedule amounts for DME, the payments for disposable DME 

substitutes could become outdated over time and increase costs to 

both the federal government and Medicare beneficiaries.

• A competitive bidding program that would reflect market prices could 

be established for disposable DME substitutes, as CMS has done for 

certain DME items. We previously found that, among other things, the 

competitive bidding method has generally led to reduced payments for 

those DME included in the program.43 We have also previously 

reported that CMS’s monitoring of the competitive bidding program 

indicated that beneficiary DME access and satisfaction had not been 

affected, but noted some stakeholders’ concerns, such as difficulty 

locating a contract supplier.

44

Disposable DME substitutes could potentially be covered under 

Medicare’s home health benefit. There is precedent for such coverage: 

 42CMS officials noted that while the gap-fill method is an administrative process, it is 

based on statutory requirements for setting the DME fee schedule amounts. See 42 

U.S.C. § 1395m(a). 

43See GAO, Medicare: Bidding Results from CMS’s Durable Medical Equipment 

Competitive Bidding Program, GAO-15-63 (Washington, D.C.: Nov. 7, 2014).

44See GAO, Medicare: CMS’s Round 2 Durable Medical Equipment and National Mailorder Diabetes Testing Supplies Competitive Bidding Programs, GAO-16-570

(Washington, D.C.: Sept. 15, 2016).

Home Health Benefit 

Category
Page 25 GAO-17-600 Disposable DME Substitutes

disposable negative pressure wound therapy devices are covered under 

the home health benefit. Previously, they were covered as part of the 

bundled rate, but the Consolidated Appropriations Act, 2016, required

certain disposable negative pressure wound therapy devices to be paid 

separately under Medicare home health services.45 Coverage under the 

home health benefit could potentially be expanded to include other types 

of disposable DME substitutes that we identified. However, coverage 

under this benefit would only be applicable in cases where a beneficiary 

is receiving Medicare home health services, which excludes beneficiaries 

who are not homebound and do not have a need for skilled care. 

Furthermore, because disposable DME substitutes are not among the 

existing covered services for home health, covering these disposable 

devices under this benefit would likely require legislation.46 We identified 

two options for setting payment rates within the home health benefit: as a 

separate payment or as part of bundled payments.

• Under the home health benefit, a separate payment amount could be 

set for disposable DME substitutes. For the disposable negative 

pressure wound therapy device, Congress established a separate 

payment amount equal to the amount paid under the outpatient 

payment system. However, according to manufacturers we spoke 

with, the disposable DME substitutes we identified are not currently 

covered under the outpatient benefit, and therefore no such rates 

exist for Congress to do the same for these devices. Additionally, we 

have previously found that generous separate payments can 

incentivize a specific medical practice even if it is not always entirely 

warranted. For example, we found that the separate payments for 

injectable drugs used in treating end-stage renal disease exceeded 

 45Pub. L. No. 114-113 § 504(a), (b), 129 Stat. 3021 (codified at 42 U.S.C. §§ 1395I(a)(1), 

1395m(s), and 1395x(m)(5)). 

46The home health services benefit includes skilled nursing care, physical therapy, 

occupational therapy, speech-language pathology services, home health aide services, 

medical social services, and medical supplies (such as catheters). See 42 U.S.C. § 

1861(m).
Page 26 GAO-17-600 Disposable DME Substitutes

the costs of acquiring them and provided an incentive to use more of 

the drugs than necessary.47

• Alternatively, disposable DME substitutes could be included in the 

home health bundle. CMS sets the bundled payment’s national 

average base amount as the amount that would be paid for a typical 

home health patient residing in an average market. Including 

disposable DME substitutes in the bundle might subsequently mean 

recalculating the base rate. However, as one stakeholder noted, 

including disposable DME substitutes in the bundle would mean they 

are treated differently than their DME counterparts, which are paid for 

as separate payments under the DME benefit for beneficiaries 

receiving home health services. Literature and two of our stakeholder 

interviews noted that bundled payment can incentivize using the 

device that the provider has determined to be more cost-effective, but 

if DME and disposable DME substitutes were paid differently, 

providers might not have an incentive to choose the more costeffective device.48

A new benefit category could be established to specifically cover the 

disposable DME substitutes we identified, or—more broadly—to cover a 

category of disposable devices that could potentially substitute for DME, 

including those not yet on the market. Only Congress has the authority to 

create new Medicare benefit categories. If Congress created such a 

benefit, it could establish a new payment methodology, use one of the 

payment methodologies discussed in this report, or use an existing 

payment methodology we have not discussed here. For example, one 

stakeholder suggested emulating a payment mechanism established 

under the Protecting Access to Medicare Act of 2014 for clinical 

laboratory tests: beginning in 2018, the Medicare rate would reflect 

 47See GAO, End-Stage Renal Disease: Bundling Medicare’s Payment for Drugs with 

Payment for All ESRD Services Would Promote Efficiency and Clinical Flexibility, 

GAO-07-77 (Washington, D.C.: Nov. 13, 2006). These drugs were subsequently included 

in the end-stage renal disease bundle, and their use declined—utilization in the first year 

the drugs were included in the bundle was about 23 percent lower, on average, than it had 

been 4 years previously. See GAO, End-Stage Renal Disease: Reduction in Drug 

Utilization Suggests Bundled Payment Is Too High, GAO-13-190R (Washington, D.C.: 

Dec. 7, 2012).

48See R. Mechanic and S. Altman, “Payment Reform Options: Episode Payment Is a 

Good Place to Start,” Health Affairs, vol. 28, no. 2 (2009); and Urban Institute and Catalyst 

for Payment Reform, Payment Methods: How They Work (Washington, D.C.: Urban 

Institute, 2016). 

New Benefit Category
Page 27 GAO-17-600 Disposable DME Substitutes

private payer rates for these tests.49 Regardless of the methodology 

established, the rate would ideally be set to account for the costs of 

relatively efficient providers of the devices, and provide sufficient access 

to the devices for beneficiaries.

Some disposable medical devices may have the potential to substitute for 

DME and may offer advantages in some cases, such as cost-savings and 

better health outcomes. While a few of these disposable DME substitutes 

have been on the market for several years, a couple we identified are 

more recent. As technology advances, more manufacturers could develop 

new disposable devices, and stakeholders we interviewed identified 

incentives to do so, such as a growing patient population. However, 

Medicare currently does not cover most disposable DME substitutes 

because they do not meet Medicare’s definition of durability. CMS officials 

stated that they continue to regard this definition as appropriate and have 

not considered the possibility of extending DME coverage to these 

substitutes. As we noted, there may be ways to cover disposable DME 

substitutes other than with the DME benefit and its associated payment 

methodologies, such as the home health benefit. According to federal 

internal control standards, management should anticipate and plan for 

significant changes using a forward-looking process. Without considering 

whether disposable DME substitutes should be covered by Medicare, 

CMS and other insurers that follow Medicare payment policy may not 

recognize advances in technology that may provide potential cost-savings 

and better health outcomes.

We recommend that the Administrator of CMS evaluate the possible 

costs and savings of using disposable devices that could potentially 

substitute for DME, including options for benefit categories and payment 

methodologies that could be used to cover these substitutes, and, if 

appropriate, seek legislative authority to cover these devices.

We provided a draft of this report to HHS for comment. HHS’s written 

comments are reproduced in appendix II. HHS also provided technical 

comments, which we incorporated as appropriate.

 49See Pub. L. No. 113-93, § 216, 128 Stat. 1040, 1053 (codified at 42 U.S.C. § 1395m-1).

Conclusions

Recommendation for 

Executive Action

Agency Comments 

and Our Evaluation
Page 28 GAO-17-600 Disposable DME Substitutes

In its written comments, although HHS did not state whether it agreed or 

disagreed with the recommendation, the agency stated that it is 

premature to conduct the study we recommended of the possible costs 

and savings of using disposable devices that could potentially substitute 

for DME. HHS emphasized that only Congress has the authority to create 

new benefit categories and payment systems for potential disposable 

DME substitutes and that additional information is needed on whether 

disposable devices are appropriate clinical substitutes before conducting 

an analysis of possible costs and savings. We agree, and our report 

states, that CMS may lack the authority to interpret “durable” in a way that 

allows for coverage of all the disposable DME substitutes we identified 

and that congressional action may be required for Medicare to cover 

some of these devices. However, without conducting a study to identify 

the potential costs and benefits of covering such devices, CMS will lack 

the necessary clinical and cost information to determine if it would be 

beneficial to reassess current statutory and regulatory coverage rules. In

other instances, CMS has used the national and local coverage 

determination processes to establish clinically based policies related to 

DME. Moreover, CMS—which oversees the implementation of complex 

Medicare payment rules—is uniquely positioned to consider the extent to 

which coverage of any clinically appropriate substitutes would benefit the 

federal government and beneficiaries. 

For these reasons, we disagree with HHS that an evaluation of potential 

disposable DME substitutes is premature. As we state in the report, 

management should anticipate and plan for significant changes using a 

forward-looking process, according to federal internal control standards. 

The study we recommended is such a forward-looking process. Unless it 

is undertaken, neither HHS nor Congress will have the information it 

needs to reassess whether the current statutory and regulatory 

framework makes good clinical and fiscal sense.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Health and Human Services, and other 

interested parties. In addition, the report is available at no charge on the 

GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 
Page 29 GAO-17-600 Disposable DME Substitutes

of this report. GAO staff who made key contributions to this report are 

listed in appendix III.

Kathleen M. King

Director, Health Care
Page 30 GAO-17-600 Disposable DME Substitutes

List of Committees

The Honorable Orrin G. Hatch

Chairman

The Honorable Ron Wyden

Ranking Member

Committee on Finance

United States Senate

The Honorable Greg Walden

Chairman

The Honorable Frank Pallone, Jr.

Ranking Member

Committee on Energy and Commerce

House of Representatives

The Honorable Kevin Brady

Chairman

The Honorable Richard Neal

Ranking Member

Committee on Ways and Means

House of Representatives
Appendix I: List of Stakeholders Interviewed

Page 31 GAO-17-600 Disposable DME Substitutes

1. Advanced Medical Technology Association

2. Medical Device Manufacturers Association

1. American Diabetes Association

2. Center for Medicare Advocacy

1. Alliance for Home Health Quality and Innovation

2. American Association for Homecare

3. National Association for the Support of Long Term Care

4. National Home Infusion Association

1. National Association of Medicaid Directors

1. Alliance of Community Health Plans

2. America’s Health Insurance Plans

3. Kaiser Permanente

1. Airing

2. B. Braun Medical Inc.

3. Halyard Health, Inc.

4. Insulet Corporation

5. Provent Sleep Therapy, LLC

6. Smith & Nephew

7. Trividia Health, Inc.

8. Valeritas, Inc.

9. Zyno Medical

Appendix I: List of Stakeholders Interviewed

Medical Device 

Manufacturer Groups

Medicare Beneficiary 

Advocate Groups

Health Care Provider 

Groups

State Medicaid Directors 

Group

Insurers and Insurer 

Groups

Manufacturers and 

Developers of Specific 

Disposable Medical 

Devices
Appendix II: Comments from the Department 

of Health and Human Services

Page 32 GAO-17-600 Disposable DME Substitutes

Appendix II: Comments from the Department 

of Health and Human Services
Appendix II: Comments from the Department 

of Health and Human Services

Page 33 GAO-17-600 Disposable DME Substitutes
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 34 GAO-17-600 Disposable DME Substitutes

Kathleen M. King, (202) 512-7114 or kingk@gao.gov

In addition to the contact named above, Martin T. Gahart, Assistant 

Director; Hannah Marston Minter, Analyst-in-Charge; George Bogart; 

Ricky Harrison; Gay Hee Lee; Elizabeth T. Morrison; and Alison Smith 

made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(101063)
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