Medicare has covered SGDs since as early as 1981.  This makes Medicare one of the first systems of health benefits ever to accept SGDs for coverage and funding. Currently, Medicare is the single largest funding source for SGDs. 

 The information presented here addresses the following topics:

A.    Medicare Eligibility Basics

B.    Medicare SGD Eligibility Basics

C.    Current Medicare SGD Coverage Guidance

D.    Current Medicare SGD Codes

E.    Current Medicare SGD Fee Schedule

F.     Medicare Payment Basics

G.    SLP Tools to Complete Required Assessment

H.    History of Medicare SGD Coverage

I.      Additional Medicare SGD Funding Topics [Rental; repair; eye-gaze SGD coverage; SLP assessment coverage; DME competitive bidding]

A.  Medicare Eligibility Basics

Medicare was created in 1965 to provide health care financial assistance to older Americans, defined as people age 65 and older.  Shortly thereafter, Medicare was expanded to provide the same health care financial assistance to other groups.  Medicare’s SGD coverage is relevant to people age 65 and older and two of these other groups: 

• Medicare is available to people who are younger than 65, who worked, and who became disabled through other than on-the-job injury; and

• Medicare is available to the children with severe disabilities of people who worked, and who reach age 65, or die, or become disabled themselves. 

Additional eligibility rules apply to both groups of people younger than age 65.  For former workers who become disabled prior to age 65, Medicare is available (a) if they have been determined “disabled” under the Social Security Act, and (b) after they are in receipt of Social Security Disability Insurance benefits for a period of 24 months. 

For the children with disabilities of workers who retire at age 65; or who become disabled themselves, or die, the children must have impairments sufficiently severe to meet the “disability” standard of the Social Security Act.  “Disabled adult children,” the common name for this class of Medicare recipients, also are subject to the 24 month waiting period. 

Special Eligibility Rules Apply to People with ALS 

People younger than age 65, who worked, and who are diagnosed with Amyotrophic Lateral Sclerosis, also known as ALS or Lou Gehrig’s Disease are subject to 2 special Medicare eligibility rules.  First, these younger workers with ALS will be deemed “disabled” under the Social Security Act upon receipt of the ALS diagnosis.  They will immediately become eligible for Social Security Disability Insurance Benefits if they met the work-requirements for that program and stop working.  In addition, people diagnosed with ALS will become eligible for Medicare immediately upon establishing eligibility for Social Security disability insurance benefits: the 24 month wait period has been waived. 

Stated more simply, a person who meets the work-experience rules for eligibility for Social Security Disability Insurance benefits will become eligible for Medicare immediately following

a)   ALS diagnosis; and

b)  cessation of work. 

Immediate access to Medicare can be of great importance to people with ALS.  Medicare eligibility will enable the person to obtain an SGD as soon as one is needed. 

Additional Benefit for People with ALS 

In addition to a shorter path to Medicare eligibility, people with ALS are eligible for a non-public benefit that will enhance Medicare’s SGD coverage.  The Muscular Dystrophy Association (MDA) has established a program of financial assistance that will provide any person with ALS up to $ 2,000 for purchase of an SGD.  These funds can be used to meet the Medicare co-payment obligations, to pay for accessories that may not be covered by Medicare, or other related SGD needs.  Some MDA offices will allow the funds to be used for training or other services.  (A separate fund of $ 2000 also is available from MDA to support mobility device purchases.)

B.  Medicare SGD Eligibility Basics

Medicare covers SGDs as items of Durable Medical Equipment (DME), which is a benefit of the Medicare Part B program.  To be eligible for an SGD, a Medicare recipient must satisfy these 4 requirements:

• be enrolled in Medicare Part B (pay the enrollment premium);

• live in his or her family home; an assisted living facility; or a group home, but not in a hospital, hospice or nursing facility;

• be determined, following an SLP evaluation, to need an SGD to meet communication needs arising in daily activities; and

• have a doctor’s prescription for the SGD and all related items.

C.  Current Medicare SGD Coverage Guidance

Medicare covers SGDs as items of durable medical equipment.  Medicare defines DME as follows: 

Durable medical equipment means equipment furnished by a supplier or a home health agency that:

1) Can withstand repeated use;

2) Is primarily and customarily used to serve a medical purpose;

3) Generally is not useful to an individual in the absence of an illness or injury; and

4) Is appropriate for use in the home.

42 C.F.R. § 414.202

Medicare’s current SGD coverage is based on 3 guidelines, which became effective between January 1, and May 4, 2001, and which have since remained unchanged.

• National Coverage Determination (NCD) for SGDs, which describes the types of devices that Medicare will cover as speech generating devices. 

• Computer- And PDA-Based Devices Coverage Letter.  In May 2001, Medicare clarified the NCD to acknowledge Medicare coverage of certain computer and PDA based SGDs.  Letter dated May 4, 2001 to Lewis Golinker, Esq., from Thomas E. Hoyer, Director, Chronic Care Policy Group, Center for Health Plans and Providers, Health Care Financing Administration. 

• Regional Medical Review Policy (RMRP) for SGDs (March 2001), now also known as a Local Coverage Determination (LCD) for SGDs.  The RMRP for SGDs was jointly issued by the 4 DME Regional Carriers (DMERCs), and thus is applicable nationwide.  The RMRP outlines the SLP clinical assessment and report required to support a Medicare funding request for an SGD.

Additional information about the development of each document can be found in the Medicare SGD coverage history section, which follows.  

D.  Current Medicare SGD “Codes”

Medicare divides all SGD models into 6 “codes,” or ”HCPCS (pronounced “Hick-Pix”) Codes.”  They are numbered E 2500, E-2502, E-2504, E-2506, E-2508, and E-2510.  The prefix “E” denotes that SGDs are classified by Medicare as items of “durable medical equipment,” or DME. 

Each code is defined by specific device characteristics.  All SGD models with characteristics that match the code definition will fall within the same code.  Medicare then uses the codes to determine its payment amount for these devices. 

In addition, Medicare has created 3 codes for SGD software, E-2511; SGD mounts, E-2512; and SGD accessories, E-2599. 

E.  Current Medicare SGD Fee Schedule 

Medicare payment for SGDs is based on a “fee schedule.”  The fee schedule for SGDs is the amount Medicare has determined is a “reasonable charge” for all device models in each code.  The reasonable charge is then used to determine the amount of Medicare payment for an SGD.  This is explained in Section F.

Medicare SGD Fee Schedule, Effective January 2010 (no increase to prior fee schedule amounts).

Note that a fee schedule exists only for SGDs.  No fee schedule has been created for software, mounts or accessories.  

F.  Medicare Payment Basics 

Medicare payment for (funding for) SGDs is based on the principle of “cost reimbursement.”  Cost reimbursement requires the Medicare recipient to incur a charge before a Medicare payment claim can be filed.  This charge will arise after a recipient purchases and receives a medical device, procedure or service.  Typically, proof that a charge has been incurred is proof the SGD has been delivered to the recipient.  Cost reimbursement is distinct from the principle of “prior authorization,” in which the funding program (e.g., Medicaid) is asked to approve the device, procedure or service before it is obtained or performed. 

After a Medicare recipient has incurred a charge for a covered item or service, Medicare payment will be calculated as follows. 

Medicare will pay:

         80 percent of the lesser of:

• the actual charge for the item; or

• the fee schedule amount for the code in which that item fits.

For items such as SGD software, mounts and accessories, Medicare’s reimbursement is based on a procedure known as “individual consideration,” because these items are not subject to a fee schedule.  The calculations that lead to a payment amount for items subject to individual consideration are beyond the scope of this web-page.  Generally, Medicare will provide reimbursement at 83-85 percent of the selling price of individual consideration items.

Calculating Medicare Payments

As stated above, the amount of the Medicare payment will be based on the amount of the “charge” incurred by the recipient, and whether the charge is lower or equal to the applicable fee schedule, or greater than the fee schedule for that item. 

There are 2 common ways the “charge” to a Medicare recipient is calculated.  One is a charge based on payment in full for the device, procedure or service.  The client pays that amount to the supplier or provider, and submits a Medicare claim for the maximum payment allowable under the rules stated above.  For example, a recipient who buys an SGD that sells for less than the fee schedule amount will receive payment from Medicare equal to 80 % of the recipient’s outlay, leaving a 20 percent co-payment amount. 

The second way a charge is calculated is based on a practice or procedure known as “accepting assignment.”  “Accepting assignment” allows the recipient to pay only the 20 percent co-payment for the device, yet still receive it, and also seek full reimbursement from Medicare.   

Accepting Assignment 

Accepting assignment is a practice or procedure born of necessity.   It is a practical solution to an otherwise irresolvable problem.  The problem: Medicare’s pre-requisite that the recipient incur a charge prior to filing a Medicare claim can be an impassible barrier to access to Medicare covered services.  The more expensive the device, procedure or service, the harder it will be for the recipient to afford to purchase it at full price, no matter what the promise of future reimbursement may hold.  For SGDs, where many items have selling prices of thousands of dollars, the financial burdens of incurring a charge may be too great for an individual or a family to afford. “Accepting assignment” is the name given to the practice or procedure that will allow recipients to gain access to Medicare covered items and services that might otherwise be financially out of reach. 

Accepting assignment arises from a 3 way agreement among the Medicare recipient, the supplier, and Medicare itself.  Its elements include the following:

• Medicare recipients assign (transfer) their right to Medicare reimbursement to the supplier;

• In exchange, the supplier agrees to supply the item or provide the service upon payment of a sum equal to 20 percent of the cost of the item or service; 

• The supplier also agrees that if the Medicare payment is less than the full cost of the item, the supplier will accept the Medicare payment as payment in full, and will not seek payment of the difference (balance) from the recipient;

• Finally, even though the recipient has paid only 20 percent of the cost of the item, Medicare agrees that it will pay its reimbursement based on the full “reasonable charge” of the device and that it will pay its reimbursement directly to the supplier, rather than to the recipient

Accepting assignment is of extraordinary value to Medicare recipients.  It is the only practical way they can access costly covered devices, procedures or services.  Medicare recipients will be able to access very expensive items of DME, at one fifth (20 %) their cost.  For example, an SGD that sells for $ 6,768.25, the amount of the E 2510 fee schedule, can be obtained for only $ 1,353.65 (20 % of that amount).  For equipment that sells for amounts greater than the Medicare fee schedule, recipients also receive two discounts.  First, the recipient’s payment will be 20 % of the applicable fee schedule, which will be smaller than 20% of the selling price of the device.  Second, the total payment to the supplier will be the Medicare fee schedule amount, and the recipient will not have to pay the difference between that amount and the original selling price.

Suppliers also benefit from accepting assignment. The obvious benefit is that this practice permits sales that otherwise would be precluded due to the purchase price of the SGDs.  Second, suppliers benefit enormously by Medicare’s agreement to re-direct its payments to the suppliers.  This eliminates the need for suppliers to seek reimbursement of the Medicare payment amount from their customers, a substantial burden. 

Two examples follow.

Medicare Payment for SGD with a Catalog Price (MSRP) Below the Fee Schedule  

Dynavox is paid in full for device.  No balance exists after Medicare payment is made.

Medicare Payment for SGD with a Catalog Price (MSRP) Above the Fee Schedule

Dynavox accepts assignment, and will receive a total payment equal to the fee schedule for this device. Dynavox does not bill the recipient for the balance ($ 746.75) between the device MSRP and the total payment.

One limitation regarding accepting assignment is that it is voluntary.  Suppliers elect to accept assignment on a per item and per claim basis.  If the supplier refuses to accept assignment for an item, the recipient must pay in full to start the Medicare claims process. 

At present, almost all SGD models are made available to Medicare recipients on an assigned basis.  For those devices with selling prices below or equal to the applicable fee schedule, the suppliers receive payment in full.  For these devices, no basis exists to refuse assignment.  For devices with selling prices above the applicable fee schedule, the willingness to accept assignment will weaken as the gap between the fee schedule amount and selling price widens  (As the MSRP of the device increases beyond the fee schedule, the willingness to accept assignment decreases.)

The Recipient’s Co-Payment 

Medicare’s payment rules incorporate a Medicare recipient co-payment.  Medicare recipients must pay one of the following amounts for an SGD:

• 20% of the actual charge for the device, if the actual charge is below or equal to the applicable fee schedule amount;

• 20 % of the fee schedule for the device, if the actual charge is above the fee schedule;

• The full catalog or retail price (MSRP) for the device, if the supplier refuses to accept assignment (which will then be reduced by the Medicare payment);

• Nothing, if the supplier agrees to accept assignment, and special circumstances exist for waiver of the Recipient’s co-payment.

Medicare prohibits suppliers from waiving co-payments as a matter of policy.  However, Medicare recognizes that there may be special circumstances where a supplier may wish to waive a co-payment amount.  There are no formal rules or guidelines for this exception; each supplier is able to create its own procedures.  For example, if a recipient can show, financially, that the co-payment requirement is a “deal-breaker,” i.e., unless it is waived or reduced, the SGD cannot be obtained, the supplier may be willing to waive the co-payment requirement in this circumstance.

Even if the co-payment is a requirement, Medicare recipients can use a variety of funding sources to meet this obligation.  These include:

• Medi-Gap insurance policies;

• Insurance coverage from spouses or other family members;

• Medicaid, if the recipient has dual Medicare-Medicaid eligibility;

• MDA or other charity sources

G.  SLP Tools to Complete Required Assessment & Report to Support Medicare SGD Recommendation

The RMRP for SGDs states the SLP assessment and report that Medicare requires to support an SGD recommendation.  Two tools have been developed to help SLPs through the assessment and report writing process.  One is the SGD Assessment Protocol, or simply, the Protocol.  It was developed by the Medicare Implementation Team (“MIT). The MIT is a work group of SLPs and other professionals who provided input to Medicare as the SGD coverage guidance was being written.  The Protocol addresses each section of the SLP assessment and explains the information to be obtained, suggests tests or other ways to gather the information, and includes sample reports.  The Protocol also offers SLPs an opportunity to receive individualized assistance from MIT members.

Because the RMRP outlines a complete SLP assessment and report in clear terms, it has become a general resource used by SLPs when clients have funding from other systems of benefits. 

The second tool is called the AAC Report Coach.  It was developed by Pamela Mathy, Ph.D., Clinical Director, Arizona State University, and a member of the MIT.  The AAC Report Coach is a template that will help SLPs to quickly organize their assessment data into a report sufficiently detailed to meet Medicare’s and other funding programs’ expectations.  The AAC Report Coach is designed to allow an SLP to prepare a complete report within 30 minutes. 

H.  History of Medicare SGD Coverage

I.  Additional Medicare SGD Funding Topics 

A set of Frequently Asked Questions has been developed to provide additional information about current Medicare SGD coverage.

Medicare SGD Rental

Medicare does not require trial use of SGDs as part of the assessment and recommendation process.  However, it does permit SGD rental, and will provide payment.  The current rental fee schedule for SGDs is stated in the following Table

Medicare’s rental policy is not limited to a specific time period.  Medicare’s rental payments will follow the same rules as for device payment.  It will pay 80 % of the fee schedule amount for SGD rentals.

Medicare SGD Repair 

Medicare will repair SGDs, mounts and accessories after all applicable device warranties expire. 

Medicare SGD Replacement 

Medicare uses the term “replacement” as a term of art.  It is important that SLPs understand how Medicare uses the term.  To Medicare, “replacement” means “the provision of an identical or nearly identical item.”   This is narrower or more specialized than a conversational use of the term, which would include any substitute of a new item for an existing one, whether the new one is of the same or different model type.

For this reason, a client whose medical condition changes and therefore requires a different SGD, is not seeking a “replacement.”  And, for this reason, whatever Medicare guidance applies to replacement devices, does not apply to a person in this circumstance.  Medicare guidance states this clearly:  “Situations involving the provision of a different item because of a change in medical condition are not addressed by this section.” 

Medicare will consider the “replacement” of an existing item of DME when it has been lost or experienced irreparable damage.  “Irreparable damage” also is a specialized term.  To Medicare, “irreparable damage refers to a specific accident or to a natural disaster (e.g., fire, flood, etc.).”  To seek replacement (of the same model) an SLP confirmation that the item remains appropriate and physician’s prescription will be needed.

Note, there is no time limit associated with replacement necessitated by irreparable damage.

Medicare also describes a different circumstance that necessitates replacement: irreparable wear.  This is defined as “deterioration sustained by day-to-day usage over time and a specific event cannot be identified.”  For devices sought to be replaced for this cause, Medicare will take into account an expected useful life of the product.  Medicare states “if the item has been in continuous use by the patient… for the equipment’s useful lifetime, the beneficiary may elect to obtain a new piece of equipment. 

Medicare guidance also states that the reasonable useful lifetime of DME is to be set by program instructions.  To date, none has been written for SGDs.  For this reason, the DMERCs are instructed to make this determination themselves, “but in no case can it be less than 5 years.”

This guidance is important regarding the so-called “5 year rule.”  Medicare appears to have a “5-year rule” for replacement of equipment that simply wears out and becomes irreparable due to daily wear and tear.  By contrast, when a specific event can be identified as the cause of the irreparable damage to the device, e.g., it is dropped, the 5 year rule does not apply.  A device whose status as irreparable can be traced to a specific event, can be replaced whenever it is determined to be irreparable. 

Note, however: replacement, to Medicare means replacement of the same model.  To the extent a model has gone out of production, replacement will be with the device that succeeds the earlier model, e.g., an MT 4 for a Dynamyte 3100. 

Note as well that a client will not be seeking “replacement” and the preceding does not apply when the recipient’s medical condition changes and s/he is unable to continue to use an existing SGD.  Most often, SGD users in this situation will not need a new SGD, but instead, an accessory such as a switch or scan module.  These can be requested whenever their need arises.

Medicare Coverage of Eye-Gaze SGDs

Medicare covers SGDs that provide access through Eye-Gaze technology . The devices are coded as E 2510 devices plus E 2599 accessories.  Where mounts are part of the system, they are billed as mounts, E 2512. 

At least a dozen approvals have been issued.  Some of these decisions have been made available to the ATLC, and represent decisions made by DMERC Regions A, B, and C, and by a Medicare administrative law judge. 

Medicare Decisions Approving Eye Gaze Systems (******* Add pdf links below ********)

In re: Darrell M., (DMERC Region C)(March 22, 2002);

In re: Steven N., (DMERC Region B)(January 2, 2004);

In re: Mark DeZ, (DMERC Region B)(September 8, 2004);

In re: Wendy B., (DMERC Region C)(March 29, 2005);

In re: Michael McP., (DMERC Region C)(March 29, 2005);

In re: Peter L., Dkt No. 999-35-2002 (Social Security Admin. Office of Hearings & Appeals)(September 21, 2005);

In re: Theodore, (DMERC Region A)(October 17, 2005);

The devices approved in these decisions are all systems manufactured by LC Technologies.  It also should be noted that Eye Response, the manufacturer of the the ERICA system, also reports favorable Medicare decisions, but no documents regarding these approved funding requests have been received. 

Medicare Coverage of SLP Assessment

In addition to covering SGDs, Medicare provides reimbursement to SLPs for SGD assessment and treatment.  Three CPT codes have been assigned to these tasks

Medicare DME Competitive Bidding

According to Medicare, Section 302 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), Pub. L. No. 108-173, authorizes the Secretary of Health & Human Services to impose “competitive bidding” on the Medicare durable medical equipment benefit.  Despite lofty language, at root, the sole purpose for competitive bidding is to save Medicare money.  It’s benefits to recipients, if any, are a far lower priority than the anticipated fiscal benefits to the program.

Not a lot has been explained regarding how competitive bidding will work, which only increases the anxiety of those concerned about Medicare SGD coverage.  The operating assumption for competitive bidding is known.  Competitive bidding assumes that DME items that fall within each code basically are the same, and therefore, Medicare will benefit if all of these items are forced to compete against each other on the basis of cost. 

The problem for SGDs and many other DME items is that the basic assumption of device equivalence is false.  SGDs within a given code may differ in 4 significant ways:   

• the devices may have distinct features;

• even when the features are the same, the functioning of these features may vary substantially;

• the software operating systems of the devices may be substantially different and are device specific; and

• character of the customer service offered by the SGD suppliers is both an essential component of the device selection process, and an asset that varies substantially.  

All of these factors are central to the SGD device selection in the SLP assessment process. By contrast, cost or pricing is far less significant.  It also is noteworthy that the physical differences among SGD software, mounts and accessories precluded Medicare from establishing a fee schedule for these 3 codes. 

In the Fall 2005, Medicare held a public meeting about DME competitive bidding and thereafter invited written comments.  The ATLC submitted comments on behalf of organizations interested in Medicare SGD coverage, and expressly asked Medicare to exempt the 9 SGD and related items codes from the competitive bidding process.  See Letter dated October 12, 2005 to Sean Dalenberg, Centers for Medicare & Medicaid Services, from Lewis Golinker, Esq., Director, Assistive Technology Law Center.

A final decision regarding this request has not yet been received from Medicare.

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