CMS Pub. 100-04, ch. 36, § 40.11

Upgrades under the Competitive Bidding Program

(Rev. 1532, Issued: 06-11-08, Effective: 07-01-08, Implementation: 07-07-08)

In general, an item included in a competitive bidding program must be furnished by a contract

supplier for Medicare to make payment. This requirement applies to situations where the item is

furnished directly or indirectly as an upgrade. An upgrade is an item with features that go

beyond what is medically necessary. An upgrade may include an excess component. An excess

component may be an item feature or service, which is in addition to, or is more extensive than,

the item that is reasonable and necessary under Medicare coverage requirements. An item is

indirectly furnished if Medicare makes payment for it because it is medically necessary and is

furnished as part of an upgraded item.

The billing instructions for upgraded equipment found in section 120 of chapter 20 of the

Medicare Claims Processing Manual (Pub. 100-04) continue to apply under the DMEPOS

Competitive Bidding Program.

The following scenarios and chart describe situations where a beneficiary, residing in a

competitive bidding area, elects to upgrade to an item with features or upgrades that are not

medically necessary.

• Upgrades from a bid item to a non-bid item

In this situation, Medicare payment will only be made to a contract supplier on an

assignment-related basis. Medicare payment will be equal to 80 percent of the single

payment amount for the medically necessary bid item.

• Upgrades from a non-bid item to a bid item

When upgrading from a non-bid to a bid item, Medicare payment is made to a contract

supplier on either an assigned or unassigned basis. Medicare payment will be equal to 80

percent of the lower of the actual charge or the fee schedule amount for the medically

necessary non-bid item.

• Upgrades from a bid item in one product category (category “S”) to a bid item in

another product category (category “U”)

In this case, Medicare payment is only made to a contract supplier for the product

category “U” on an assignment-related basis. Medicare payment would be equal to 80

percent of the single payment amount for the medically necessary bid item in product

category “S”.

Upgrade Scenarios for Beneficiaries Residing in a Competitive Bidding Area (CBA)

From the

Medically

Necessary

Item

To the

Upgraded

Item

Must be

Furnished by

Assignment

Mandatory

(Y/N)

Medicare Payment Based

Upon

Bid Item Non-Bid

Item

Contract

Supplier

Y Single Payment Amount

for the Medically

Necessary Item

Non-Bid

Item

Bid Item Contract

Supplier

N Lower of the Actual

Charge or Fee Schedule

Amount for the Medically

Necessary Item

Bid Item in

Product

Category

“S”

Bid Item in

Product

Category

“U”

Contract

Supplier for

Category

“U”

Y Single Payment Amount

for Category “S” for the

Medically Necessary Item

The following scenarios and chart describe situations where a beneficiary, who does not reside in

a competitive bidding area, but travels to a competitive bidding area, elects to upgrade to an item

with features that are not medically necessary.

• Upgrades from a bid item to a non-bid item

In this situation, Medicare payment is only made to a contract supplier on an assignment-related basis. Medicare payment will be equal to 80 percent of the lower of the actual

charge or the fee schedule amount for the medically necessary bid item.

• Upgrades from a non-bid item to a bid item

When upgrading from a non-bid to a bid item, Medicare payment is made to a contract

supplier on either an assigned or unassigned basis. Medicare payment will be equal to 80

percent of the lower of the actual charge or the fee schedule amount for the medically

necessary non-bid item.

• Upgrades from a bid item in one product category (category “S”) to a bid item in

another product category (category “U”)

In this case, Medicare payment is only made to a contract supplier for the product

category “U” on an assignment-related basis. Medicare payment would be equal to 80

percent of lower of the actual charge or the fee schedule amount for the medically

necessary bid item in product category “S”.

Upgrade Scenarios for Beneficiaries Who Do Not Reside In a CBA, But Travel to a CBA

From the

Medically

Necessary

Item

To the

Upgraded

Item

Must be

Furnished by

Assignment

Mandatory

(Y/N)

Medicare Payment Based Upon

Bid Item Non-Bid

Item

Contract

Supplier

Y Lower of the Actual Charge or Fee

Schedule Amount for the Medically

Necessary Item

Non-Bid

Item

Bid Item Contract

Supplier

N Lower of the Actual Charge or Fee

Schedule Amount for the Medically

Necessary Item

Bid Item in

Product

Category

“S”

Bid Item in

Product

Category

“U”

Contract

Supplier for

Category

“U”

Y Lower of the Actual Charge or Fee

Schedule Amount for the Medically

Necessary Item

Beneficiary Liability under the Competitive Bidding Program

Under the competitive bidding program, a beneficiary has no financial liability to a non contract

supplier that furnishes an item included in the competitive bidding program for a competitive

bidding area, unless, prior to receiving the item, the beneficiary selects Option 1 on the ABN and

signs the notice. Similarly, beneficiaries who receive an upgraded item from a non-contract

supplier in a competitive bidding area are not financially liable for the item unless, prior to

giving the beneficiary the upgraded item, the supplier obtains a valid ABN on which the enrollee

has selected Option 1 and signed the notice.

In the case of upgrades, for a beneficiary to be liable for the extra cost of an item that exceeds

their medical needs, the beneficiary must, select Option 1 and sign a valid ABN prior to

receiving the item. See Chapter 20, section 120 of the Medicare Claims Processing Manual for

additional information on ABN upgrades.