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O&P Field Dodges a Budget Bullet; For Now

On Monday, February 6, 2006, President Bush released his fiscal year (FY) 2007 Budget Proposal. The Administration.s $2.77 trillion budget includes $870.7 billion for annually appropriated discretionary programs and the remainder in entitlement spending including Social Security, Medicare and Medicaid.

The Budget Proposal recommends large cuts to or the elimination of 141 programs, a savings of almost $15 billion. Under the plan, the federal budget deficit would decrease in FY 2007 to $257 billion, down from $367 billion in FY 2006. This year.s budget proposals, which apply to fiscal year 2007 beginning on October 1, 2006, represent another very austere year for the federal budget. For instance, labor, health and human services, and education programs would be cut by a combined $4 billion from FY 2006 levels.

Medicare Part A: The Medicare proposals would save $2.5 billion in FY 2007 and $35.9 billion over five years. The Bush Administration proposes to achieve $2.1 billion in savings in FY 2007 and $22.2 billion over the next five years by reducing Part A Medicare payments, primarily by freezing or decreasing annual updates for hospitals, inpatient rehabilitation facilities, skilled nursing facilities and home health agencies. The Administration would reduce the payment for hip and knee replacements in posts acute care settings, saving $2.4 billion over five years.

Medicare Part B: The President.s Part B budget proposals would save $460 million in 2007 and $15.6 billion over five years. The President.s budget would extend competitive bidding to clinical laboratory services and estimates this initiative would save $1.4 billion over five years. The budget cites competitive bidding programs being developed for durable medical equipment (DME) and outpatient drugs as successful templates. However, in all of the budget documents that are publicly available to date, there is no mention of expanding to additional orthotics or prosthetics.

The budget proposes to issue Medicare payments for short-term power wheelchairs based on duration of usage, rather than the current payment system, saving an estimated $50 million in FY 2007 and $460 million over five years. Under the Medicare Modernization Act of 2003 (.MMA.), the DME fee schedule was frozen through 2008.

But the MMA froze the O&P fee schedule through calendar year 2006, not 2008. After extensive review of the budget documents and after speaking with agency officials, there is no provision to once again freeze the O&P fee schedule in 2007 and beyond. This means that the Administration proposes to allow the CPI-U annual update to apply at least for the 2007. Considering the austere budget climate, this is clearly a temporary victory. But remember, if Congress proceeds with a Medicare bill this year, all options for savings will again be on the table, potentially including orthotics and prosthetics.

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