Revision 22-4; Effective Dec. 1, 2022

A Medicaid recipient may pay for health care costs Medicaid does not cover. Some of these expenses, referred to as incurred medical expenses (IMEs), may be deducted from a recipient’s personal income when calculating co-payment amounts. IMEs for necessary medical care are allowable deductions if the medical services were received not more than three months prior to the month of application, regardless of the recipient’s medical effective date (MED). Expenses for services received before the three-month prior period may not be deducted.

When calculating a recipient's co-payment amount, certain IMEs not covered or reimbursed by a third party are deducted. HHSC limits these expenses to Medicare and other general health insurance premiums, deductibles, and coinsurance, and to medical care and services that are recognized by state law but not covered under the Medicaid state plan. Only the amount of the IME that remains after payments from all third-party sources (such as Medicaid, Medicare and private health insurance) becomes the recipient’s responsibility and may be considered as an allowable deduction.

An open-ended IME is an ongoing expense that occurs every month. For example, Medicare Part B premiums and general health insurance premiums are open-ended IMEs.

An IME for a set amount that a recipient will pay off within a specific period is not open-ended. For example, dentures or wheelchairs are not open-ended IMEs.

IMEs may be reported at application, renewal or as a change. 

Process IME requests received after a person is certified for Medicaid as a change.

• process the IME request within 10 work days of receipt; 
• enter the IME information into the Texas Integrated Eligibility Redesign System (TIERS); and
• notify the recipient, the nursing facility, and the IME provider of the co-payment adjustment.

For medical expenses incurred prior to the recipient’s MED, allow the IME deduction in the first month that the recipient has a co-payment responsibility. If the amount of the medical expenses, in addition to other allowable deductions, exceed the recipient’s total countable income for the month, the excess portion of the deduction for the medical expenses may be carried forward to ongoing month(s).

Related Policy

Redetermination Cycles, B-8200
IME Notices, H-2900

H-2110 When to Consider an IME Deduction

Revision 16-2; Effective June 1, 2016

An incurred medical expense (IME) deduction applies only to Medicaid recipients with a co-payment amount other than zero.

The recipient must provide verification of all medical expenses to be considered.

In spousal impoverishment budgets with a co-payment amount other than zero, an IME deduction is allowed when an IME is paid for by the recipient or the recipient’s community-based spouse.

H-2120 Medically Necessary

Revision 16-2; Effective June 1, 2016

Before allowing an incurred medical expense (IME) deduction, the expense must be certified as medically necessary.

Medically necessary is defined as the need for medical services in an amount and frequency sufficient, according to accepted standards of medical practice, to preserve health and life and to prevent future impairment.

Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME,  is used for certification of medical necessity. The form must be completed, signed, and dated by the recipient's physician or a nurse practitioner, clinical nurse specialist, or physician's assistant who is working in collaboration with the recipient's physician.

Form H1263-B, Certification of No Medical Contraindication – Dental, is used for dental IME recipients. By signing Form H1263-B, the attending physician (medical practitioner) certifies that the dental treatment is not medically contraindicated for the recipient. The physician is not able to certify medical necessity for dental services.

H-2130 Form H1263-A and Form H1263-B

Revision 22-4; Effective Dec. 1, 2022

Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME, is used to request an IME deduction for medically necessary durable medical equipment.

Form H1263-B, Certification of No Medical Contraindication – Dental, is used to request an IME deduction for necessary non-emergency dental services.

Form H1263-A and Form H1263-B must be signed with handwritten dates and signatures by the recipient or the recipient’s authorized representative (AR) and the recipient’s attending practitioner. A stamped signature is not acceptable.

If Form H1263-A or Form H1263-B is received with a stamped signature:

• pend the case;
• send Form H1052-IME, Notice of Delay in Decision for Incurred Medical Expense – Action Needed, to notify the provider and the recipient of the delay in processing due to the need for a handwritten signature; and
• request a new Form H1263-A or Form H1263-B with handwritten signatures.

The signature dates of the recipient or the recipient's AR and the recipient’s attending physician on Form H1263-A or Form H1263-B must not be more than 90 days apart.

If the signature dates are more than 90 days apart:

• pend the case;
• send Form H1052-IME to notify the recipient or the recipient’s AR and the IME provider of the delay in processing; and
• request a new Form H1263-A or Form H1263-B.

Request a new Form H1263-A or Form H1263-B and send Form H1052-IME if Form H1263-A or Form H1263-B is received without any of the following:

• signature of the recipient or the recipient’s AR;
• a description of authority to act for the recipient listed in Section II of Page 2; or
• signature of the recipient’s attending practitioner.

A request for an IME deduction for services received prior to the MED must be initiated by the recipient or the recipient’s legal guardian, Power of Attorney (POA), or designated AR. The request may not be initiated by a medical services provider or supplier unless the provider or supplier is also the recipient's AR.

For IME requests received after a person is certified for Medicaid, there are no restrictions on who can complete Form H1263-A or Form H1263-B. However, the recipient or the recipient’s AR must sign Form H1263-A or Form H1263-B, Section II of page 2 to indicate a request for a deduction from the recipient's personal income to pay for an IME.

If the recipient is unable to sign and does not have a designated AR, legal guardian or POA, the following can sign the form on the recipient’s behalf:

• nursing facility administrator;
• social worker; or
• director of nursing.

If the recipient has a designated AR but someone other than the AR signs Form H1263-A or Form H1263-B, verify the AR is aware of the IME request. If unable to contact by phone, pend the case and send Form H1052-IME to request the AR sign Form H1263-A or Form H1263-B. If Form H1263-A or Form H1263-B is not returned with the signature of the designated AR, deny the IME request.

This will ensure all parties are knowledgeable of the IME request. If the AR has changed, thoroughly document the explanation in the case record.

Submitting to HHSC

Send completed Form H1263-A and Form H1263-B to HHSC via mail or fax.

Fax to: 877-447-2839
Or
Mail to:
Texas Health and Human Services Commission
P.O. Box 149027
Austin, TX 78714-9027

H-2140 Deductions for Insurance Premiums

Revision 16-2; Effective June 1, 2016

Premiums for general health insurance policies, including premiums for limited scope polices for vision and dental, may be allowable incurred medical expenses (IMEs). Allow an IME deduction when a recipient provides verification that a policy is assignable, the coverage effective date, and the premium amount.

Assignable means the benefits may be paid to the health care provider.

If a health insurance policy is not assignable, payments are made directly to a recipient. The policy is considered an income maintenance policy and is not an allowable IME.

Use Form H1253, Verification of Health Insurance Policy, if a recipient requests help to obtain verification for a policy.

Verification of the first premium payment is not required prior to allowing an IME deduction.

Assignable general health insurance policies must be reported on the Third Party Resource screen in the system of record.

For IME requests for dental insurance premiums, use Form H1053-IME, Provider Notice of Incurred Medical Expense Decision, to notify a dental insurance provider that an IME deduction request is approved or denied. Form H1053-IME does not contain space for co-payment information. To safeguard confidentiality, do not add co-payment information to the form or provide the information to any provider (either verbally or in writing) without written authorization from the recipient.

H-2150 Non-Allowable Deductions – General IME

Revision 22-4; Effective Dec. 1, 2022

The following are not allowable IME deductions:

• items covered by the nursing facility (NF) vendor payment including, but not limited to, diapers, sitters, certain durable medical equipment, dietary supplements or physical, speech or occupational therapy;
• covered services that are beyond the amount, duration, and scope of the Medicaid state plan including, but not limited to, additional prescription drugs;
• expenses incurred by Medicaid-eligible recipients for services covered by the Medicaid state plan but delivered by non-Medicaid providers;
• expenses for medical services received more than three months prior to the month of application;
• premiums for cancer or other disease-specific insurance policies, or general health, dental, or vision insurance policies with benefits that cannot be assigned;
• premiums for insurance policies that pay a flat rate benefit to the insured or income maintenance policies;
• health care services provided outside of the U.S.;
• expenses incurred during a transfer of assets penalty including, but not limited to, nursing facility bills;
• expenses incurred by Medicaid-eligible recipients for eyeglasses, contact lenses, hearing aids, services provided by a chiropractor or a podiatrist (these are covered through the Medicaid program);
• expenses incurred by Medicaid-eligible recipients 21 years or older requiring mental health and counseling services provided by a licensed psychologist, licensed professional counselor, licensed clinical social worker or a licensed marriage and family therapist effective for dates of service on or after Dec. 1, 2005; and
• expenses covered by STAR+PLUS managed care organizations (MCOs) either:
  • as an NF add-on service, including medically necessary durable medical equipment, such as customized power wheelchairs (CPWCs), augmentative communication devices (ACDs), emergency dental services, and physician ordered rehabilitation services (also called goal directed therapies); or
  • as value-added services (VAS). VAS are extra benefits offered by an MCO beyond Medicaid-covered services. VAS may include routine dental, vision, podiatry, and health and wellness services. Note: A recipient may choose to use the MCO VAS or the IME process.

Related Policy 

Limitations for Pre-Eligibility Incurred Medical Expenses (IMEs), H-2160

H-2160 Pre-Eligibility IMEs

Revision 22-4; Effective Dec. 1, 2022

Expenses for necessary medical care received within three months prior to the month of application, are allowable IME deductions regardless of the recipient’s MED. Expenses for services received before the three-month prior period may not be deducted. The recipient must provide verification of all medical care expenses.

To be considered as a deduction, the expense must:

• be the responsibility of the recipient;
• be reported at application or within three months of certification;
• not be subject to payment by a third party; and
• remain unpaid at certification.

The allowable deduction must not exceed the Medicaid reimbursement rate in effect when the medical expense was incurred. Do not use the private pay rate. 

Use Form H0005, Policy Clarification Request, and follow policy clarification request procedures to request the Medicaid reimbursement rate for all pre-eligibility IMEs.

Related Policy 

Deduction of Incurred Medical Expenses, H-2100
Form H1263-A and Form H1263-B, H-2130
Non-Allowable Deductions – General IME, H-2150

Revision 16-2; Effective June 1, 2016

Incurred medical expense (IME) deductions are allowed for reimbursements by the recipient to a third party who has paid an allowable IME on behalf of the recipient after it is determined the following conditions exist:

• recipient and third party had an agreement prior to the IME that the third party would be reimbursed; or
• recipient's medical condition precluded such an agreement.

Revision 18-4; Effective December 1, 2018

If the recipient is no longer eligible for a Medicaid type program with a co-payment, do not make any retroactive adjustments to allow the full IME amount. The IME deduction stops and payment of any remaining balance is an agreement between the recipient and the IME provider.

In addition, do not retroactively adjust the co-payment amount for an IME deduction if the recipient:

• discharges from the facility;
• no longer receives waiver services; or
• is not responsible for payment of the IME because someone has been paying the bill on the recipient’s behalf.

Recipient Moves from Facility to Community Waiver

When a facility Medicaid recipient moves to the community with waiver Medicaid benefits, continue the approved IME deduction when there is a co-payment amount other than zero.

The IME deduction ceases if there is no co-payment amount for the community waiver program.

Recipient Moves from Community Waiver to Facility

When a Medicaid waiver recipient with an approved IME deduction enters or returns to a Medicaid facility, verify if the recipient has any balance due on the IME allowance. If there is a balance due, approve a co-payment deduction for the remaining balance of the IME. If a Medicaid recipient re-enters a nursing facility and has an outstanding balance due on an IME incurred during a previous facility stay, allow an IME deduction for the remaining balance.

 

H-2310 IME Budget Adjustments Due to Death

Revision 18-4; Effective December 1, 2018

Do not process IME requests received more than 10 calendar days after a recipient’s date of death. The recipient's authorized representative, family or trustee is responsible for paying the IME provider after the recipient’s death.

Process  IME requests received within 10 calendar days of a recipient’s date of death.

If the IME is approved:

• adjust the recipient’s co-payment retroactively to the first month services were provided; and
• notify the recipient’s authorized representative, the nursing facility and the IME provider.

If the IME is not approved:

• document the reason for the denial in TIERS Case Comments and notify the authorized representative and the IME provider of the denial;
• send Form TF0001, Notice of Case Action, to notify the recipient’s authorized representative; and
• send Form H1053-IME, Provider Notice of Incurred Medical Expense, to notify the IME provider.

Revision 12-1; Effective March 1, 2012

Average and project medical expenses, but reconcile the projection with actual expenses every six months, per 42 Code of Federal Regulations §435.725(e).

For routine dental incurred medical expense (IME) deductions, retroactively allow the deduction beginning the first month the work began. Do not allow any routine dental IME deductions until after the dental work has been completed.

Example 1: Form H1263-B, Certification of No Medical Contraindication – Dental, for dentures is received on May 24, 2010. Dental work began in March 2010. Lower the co-payment in the month of March 2010 and ongoing.

For non-routine dental IME deductions, allow the deduction beginning the first month following approval. Do not allow any deductions for non-routine before approval is received.

Example 2: Form H1263-B for implants is received on June 19, 2010. Approval is received on Form H1263-B on July 15, 2010. Dental work begins Aug. 2, 2010. Lower the co-payment in the month of August 2010 and ongoing.

Documentation of the IME deductions should be entered in the automated system, even if the co-payment amount is $0. See Appendix XVI, Documentation and Verification Guide.

Revision 16-2; Effective June 1, 2016

Medicare Part D related expenses may include:

• Part D premiums;
• prescription drug co-payments/costs;
• prescription drug deductibles; and
• non-formulary Part D drugs.

Allow Medicare Part D related expenses as an incurred medical expense (IME) deduction for a recipient who:

• has Medicare;
• has a co-payment; and
• is receiving home and community-based waiver services, or is residing in a long-term care (LTC) facility.

If a recipient provides verification of payment of an out-of-pocket Medicare Part D related expense, allow the expense as an IME.

Form H1263-A, Certification of Medical Necessity, is not necessary to request an IME deduction for Medicare Part D related expenses, but may be used for documentation of a request. If a recipient is unable to make a request and has no authorized representative, facility staff or home and community-based waiver case managers may provide verification and request an IME deduction.

Revision 16-2 ; Effective June 1, 2016

Revision 17-4; Effective December 1, 2017

Dental services that are not medically contraindicated for the individual may be allowable incurred medical expense (IME) deductions. Requests for dental IMEs must include the following:

• a completed, signed Form H1263-B, Certification of No Medical Contraindication – Dental; and
• an invoice or billing statement indicating the dental services provided, the date of the dental services, and the appropriate Current Dental Terminology (CDT) code(s).

A treatment plan is not required, but may be received along with an invoice or billing statement.

A treatment plan is a schedule of procedures and appointments needed to restore, step-by-step, an individual’s oral health.  The treatment plan must be presented to the individual for approval and should include:

• a description of the individual’s condition;
• the duration of the treatment plan as prescribed by the dentist; and
• a list of the dental procedures recommended by the dentist, including:
  • a description of each service or procedure;
  • the appropriate Current Dental Terminology (CDT) code; and
  • the expected cost for each service.   

Invoice or Billing Statement - A summary of the dental services provided and the amount the individual is expected to pay the dentist. The invoice should include the:

• date(s) of the dental service(s);
• description of each dental procedure provided;
• appropriate CDT code(s) for each dental procedure; and
• cost for each dental procedure provided. 

Note: If the individual has dental insurance, the invoice must reflect any services covered by the dental insurance plan and clearly indicate the remaining balance after any adjustments.

Form H1263-B, submitted with a dental invoice, is only valid for the delivered services listed on the invoice.

Form H1263-B, submitted with a proposed treatment plan, is valid for up to 12 months for dental services:

• identified on the dental treatment plan; and
• delivered within 12 months of the date of the initial dental treatment.

All IME requests for dental services associated with a dental treatment plan must include an invoice indicating the dental services provided, the date the services were provided, and the appropriate CDT code(s).

Note: Additional dental services not listed on the original treatment plan and/or dental services provided past the 12 months require a new Form H1263-B.

Form H1263-B, signed by the attending physician, is verification that the requested dental services are not medically contraindicated. If Form H1263-B is received from a requester with a notation that the attending physician does not agree that the procedure is not medically contraindicated for the recipient, deny the IME request. Notify the provider and the recipient or recipient's authorized representative of the denial using the appropriate notice.

If Form H1263-B is received from a requester without a physician signature, do not process the IME. Notify the provider and the recipient or recipient's authorized representative of a delay in processing the deduction for the requested IME using Form H1052-IME, Notice of Delay in Decision for Incurred Medical Expense.

H-2710 Using the TX Dental IME Fee Schedule

Revision 23-4; Effective Dec. 1, 2023

Determine the proper incurred medical expense (IME) deduction by comparing the fees submitted by a dental provider to the fees listed in the TX Dental IME Fee Schedule. Use the date(s) of service shown on the dental invoice to select the appropriate fee schedule. The fee schedule is available for staff use on the LOOP.

The TX Dental IME Fee Schedule is based on the American Dental Association (ADA) Survey of Fees at the 90th percentile for the West South Central Region, General Dentistry, and contains the ADA’s Current Dental Terminology (CDT) codes. The schedule is updated yearly and separates the CDT codes into routine and non-routine dental services.

Due to legal liabilities associated with the copyright for the ADA Survey of Fees, the TX Dental IME Fee Schedule is a view-only internal document. It is only accessible by HHS enterprise employees. Do not print, make copies, or distribute any of the TX Dental IME Fee Schedule.

The amount allowed for a code cannot exceed the amount listed on the TX Dental IME Fee Schedule. If the dental provider submits a charge with an amount greater than the maximum allowable amount listed for a code, allow the amount listed on the TX Dental IME Fee Schedule for that code as an IME deduction. If a dental provider submits a charge less than the amount allowed on the TX Dental IME Fee Schedule, allow the lesser amount as an IME deduction.

Examples:

• The dental provider submits a charge for code D0272 with the amount of $60. The code D0272, under Radiographs, reflects a maximum of $55. Consider $55 as an IME deduction.
• The dental provider submits a charge for code D0150 with the amount of $60. The code D0150, under Clinical Oral Evaluation, reflects a maximum of $107. Consider $60 as an IME deduction.

Any CDT code(s) listed on the TX Dental IME Fee Schedule may be allowable as an IME.

Contact the dental provider to resolve the discrepancy if the treatment plan received contains:

• a discrepancy in the CDT code and description;
• a CDT code not listed on the TX Dental IME Fee Schedule; or
• no CDT code listed.

H-2720 Non-Allowable Deductions – Dental

Revision 21-3; Effective September 1, 2021

Dental services are not allowable IMEs for Medicaid recipients in intermediate care facilities for individuals with intellectual disabilities (ICFs/IID). A recipient in an ICF/IID receives dental care through the Medicaid program.

The following items are unallowable as an IME:

• adjustments to the fees for X-rays or other procedures performed by mobile dentists;
• sedation charges, CDT code D9248;
• more than two times per year per patient for dental exams;
• more than four times per year per patient for dental cleanings;
• more than one time per year per patient for X-rays;
• aesthetic treatments, CDT codes D9972, D9973, D9974 and D9975;
• trip charges (house call fees), CDT codes D0171, D9410, D9430 and D9440, and finance charges (these are not reasonable medical expenses and cannot be considered when determining IMEs); and
• further add-ons or increased fees for the initial denture and fittings.

Each of the following CDT codes should not be allowed more than two times per year per patient:

• initial or routine exams (D0120, D0150, D0180);
• problem focused exams (D0140, D0160, D0170);
• scaling, root planning or debridement (D4341, D4342, D4346, D4355); and
• Periodontal Maintenance (only for patients who have received active periodontal therapy in the previous 24 months) (D4910).

Each of the following CDT codes should not be allowed more than four times per year per patient:

• dental cleanings (D1110);
• topical fluoride treatments (D1204, D1206); and
• Oral Hygiene Instructions (D1330).

H-2730 Reserved for Future Use

Revision 13-2, Effective June 1, 2013

H-2740 Reserved for Future Use

Revision 13-2, Effective June 1, 2013

H-2751 Hospice Recipients

Revision 23-4; Effective Dec. 1, 2023 

For hospice recipients with a dental incurred medical expense (IME), Current Dental Technology (CDT) codes notated with an asterisk (*) on the routine schedule can be allowed by staff without further review.

For CDT codes not marked with an asterisk, follow regional procedures to submit the request to the contracted dentist for clearance. The contracted dentist reviews each request for hospice recipients whether the CDT codes are routine or non-routine.

Before sending the request to the contracted dentist, get the following:

• documentation from the hospice provider or attending practitioner about the prognosis; and
• the reason for the dental request and how the dental services will benefit the recipient.

Encrypt all external email communication with the contracted dentist per the Health Insurance Portability and Accountability Act (HIPAA ). Use encrypted email which is available through the Options menu in Outlook when sending IME requests to the contracted dentist. Encrypt all email communication, including replies and forwards in the same conversation.

Note: Do not send any IME requests by regular email to the contracted dentist.

Staff without access to encryption email software must send the request by fax to the contracted dentist. Ensure the fax cover sheet has the fax number and region number of the requestor. The contracted dentist will respond by fax to the requestor.

H-2760 Replacement of Lost Dentures

Revision 10-3; Effective September 1, 2010

The replacement of dentures is an allowable incurred medical expense (IME) as long as the recipient/authorized representative provides written verification from the facility that the facility will not cover the replacement of lost dentures. The verification request for a facility’s written statement is to be sent to the recipient/authorized representative and not the dental provider. The recipient or the authorized representative is to provide the facility’s written statement to the MEPD specialist. The request for replacement of lost dentures is to be initiated by the recipient/authorized representative, not the dental provider.

H-2770 Emergency Dental Services

Revision 16-2; Effective June 1, 2016

STAR+PLUS managed care organizations are responsible for payment of emergency dental services for nursing facility recipients. Emergency dental services are not allowable incurred medical expenses.

H-2780 Reserved for Future Use

Revision 20-2; Effective June 1, 2020

H-2790 When the Co-Payment Adjustment is Not Used to Pay Dental Provider

Revision 24-1; Effective March 1, 2024

Payment for dental IME services is a matter between the person or the person’s payee and the dental provider. The income from the co-payment adjustment must be used to pay the dental provider in a timely manner.

When IMEs are projected in the co-payment budget, monitor the case at regular intervals. If the income from the co-payment adjustment is not used to pay the dental bill, remove the ongoing co-payment adjustment and reconcile the budget. Reconciliation is required if the payments were not made, or the amount paid was different from the amount projected.

Related Policy

IME Notices, H-2900
Incurred Medical Expenses (IMEs), H-3120
Incurred Medical Expenses (IMEs), H-3420
Incurred Medical Expenses (IMEs), H-3520
Incurred Medical Expenses (IMEs), H-3620

Revision 16-2; Effective June 1, 2016

Certain medically necessary DME may be allowable incurred medical expense (IME) deductions. Examples include:

• customized, manual wheelchairs; and
• basic, power wheelchairs.

Certain medically necessary DME expenses are not allowable IME deductions, if they are:

• covered by a third party;
• covered under the Texas Medicaid State Plan;
• included in the nursing facility (NF) vendor payment; or
• included as NF add-on services.

Examples of medically necessary DME included in NF vendor payments are:

• standard wheelchairs;
• walkers;
• crutches;
• canes;
• air mattresses;
• hospital beds;
• trapeze bars;
• ventilators;
• oxygen equipment, such as tanks, concentrators, tubing, masks, valves and regulators; and
• DME that could be used by other residents, such as oversized wheelchairs or beds.

Note: If a recipient wishes to keep DME that is covered by the vendor payment for personal use only, the recipient is responsible for the purchase and it is not an allowable IME. See The Nursing Facility Requirements for Licensure and Medicaid Certification Handbook for additional information.

Direct recipients to their NF representative to request DME items included in the NF vendor payment.

Any repairs to DME for which an IME deduction was allowed are the responsibility of the NF. Refer to the Texas Department of Aging and Disability Services rules at Texas Administrative Code Section 19.2601(b)(8)(C), Vendor Payment (Items and Services Included).

Use Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME, for a DME IME request.

H-2810 Using the DME Fee Schedule

Revision 16-2; Effective June 1, 2016

Determine the appropriate incurred medical expense (IME) deduction by comparing fees submitted by a durable medical equipment (DME) provider to the fees listed in the DME fee schedule.

The Medicare fee schedule for DME contains Healthcare Common Procedural Coding System (HCPCS) codes used by DME providers to file claims. The Texas-specific amounts allowed for IME claims for each code are available on the HHSC Office of Social Services Intranet. The DME Fee Schedule is updated, as needed.

There are no copyright issues with the DME Fee Schedule posted on the Office of Social Services Intranet. This fee schedule is available to the public on the Centers for Medicare and Medicaid Services website.

The amount allowed for a particular HCPCS code cannot exceed the amount listed on the DME fee schedule. If the DME provider submits a charge with an amount greater than the maximum allowable amount listed for a particular code, allow the amount listed on the DME Fee Schedule for that particular code as an IME deduction. If a DME provider submits a charge less than the amount allowed on the DME Fee Schedule, allow the lesser amount as an IME deduction.

Examples:

• The DME provider submits a charge for code E2214 with the amount of $35.00. The code E2214, Pneumatic caster tire, reflects a maximum of $32.52. Consider $32.52 as an IME deduction.
• The DME provider submits a charge for code E2603 with the amount of $120.00. The code E2603, Skin protect cushion < 22 inches, reflects a maximum of $126.07. Consider $120.00 as an IME deduction.

Not all codes listed on the DME fee schedule are allowable as IME deductions. IME requests for codes highlighted in gray or codes not listed on the fee schedule should be submitted for review to state office. See H-2830, DME Exception Processing/Codes Not on the Fee Schedule.

Contact the DME provider to resolve the discrepancy if the treatment plan received contains:

• a discrepancy in the HCPCS code and description;
• an HCPCS code not listed on the DME Fee Schedule; or
• no HCPCS code listed.

H-2820 DME Procedures

Revision 18-1; Effective March 1, 2018

Use the following procedures to process incurred medical expense (IME) requests for durable medical equipment (DME).

1. If the MEPD specialist receives an IME request, send Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME, to the requestor within two working days of receipt of the request.
2. Inform the requestor to have Form H1263-A completed and the service or equipment provider submit written, detailed specifications for the requested service or equipment to the recipient's attending practitioner after assessing the recipient's needs. The specifications must include the following:
   • a detailed explanation of medical equipment/services recommended;
   • an itemized listing of all equipment and accessories and costs;
   • the appropriate DME Healthcare Common Procedural Coding System (HCPCS) code for each service or equipment; and
   • a clear explanation of why the nursing facility equipment will not meet the recipient's needs.
3. The recipient's attending practitioner, physician assistant or advance practice nurse employed by the attending practitioner, must sign and date the form that lists the medical procedure and the itemized list of equipment and accessories that includes the explanation of why the nursing facility equipment is not adequate for the recipient.
4. The requestor submits to the MEPD specialist:
   • completed Form H1263-A;
   • a provider service statement reflecting service or equipment provided along with the appropriate HCPCS code(s); and
   • a statement from the provider showing the equipment is delivered and the date of delivery. 
     
     The MEPD specialist must document on the form the date the form was received by the agency. 
     
     If the request does not contain a detailed explanation or identification of the equipment needed, return the request to the provider. Explain to the provider that more information is needed regarding the need to identify the equipment or an explanation for the need of the equipment.
5. Once the completed Form H1263-A, written/detailed specifications and itemized list are received, the MEPD specialist determines the correct amount of the recipient's co-payment adjustment by comparing the fees submitted by the provider to the appropriate HCPCS codes and charges on the Medicare DME Fee Schedule. This is in accordance with B-8200, Redetermination Cycles, for treatment of a change. Within this same time frame, the MEPD specialist ensures entry into the appropriate automated system and notifies the recipient of the co-payment adjustment, using Form H4808, Notice of Change in Applied Income/Notice of Denial of Medical Assistance, or Form H1259, Correction of Applied Income, in accordance with established agency notification requirements.
6. Complete the same type of form that was sent to notify the recipient of the IME adjustment and mail it to the provider with only the following information:
   • the particular claim that is approved;
   • total amount approved;
   • recipient's co-payment is adjusted (not the actual co-pay amount); and
   • the beginning month of the co-payment or adjustment.

To safeguard confidentiality, do not send a notice to a provider that includes specific information about the recipient's finances, sources of income or the amount of co-payment. Do not use auto-populated forms or a copy of the same notice that was sent to the recipient. If a provider inquires about a recipient's finances, refer the provider to the recipient or the recipient's authorized representative. Do not refer the provider to nursing facility staff.

Reminder: To safeguard confidentiality, do not provide the co-payment amount to any provider (either verbally or in writing) without written authorization from the recipient.

H-2830 DME Exception Processing/Codes Not on the Fee Schedule

Revision 17-3; Effective September 1, 2017

The Medicare fee schedule does not contain all of the Healthcare Common Procedural Coding System (HCPCS) codes used by durable medical equipment (DME) providers. Medicare considers these codes as miscellaneous codes or codes not otherwise specified or classified. Based on the DME exception processing information from the Centers for Medicare & Medicaid Services, certain miscellaneous codes may be allowable incurred medical expense (IME) deductions even though the HCPCS codes are not identified on the Medicare fee schedule.

Based on the DME exception process, determine the amount of the IME deduction for allowable miscellaneous codes and allowable codes not listed on the fee schedule using the following steps.

• Request the wholesale pricing in writing from the DME provider for each HCPCS miscellaneous code on the invoice.
• Multiply the wholesale price by 40 percent to obtain the markup amount.
• Add the wholesale price and the markup amount for the total fee.
• Allow up to the total amount as an IME deduction.

Example: K0108 wholesale price is $350. $350 x 40 percent = $140. $140 is the markup amount. $350 + $140 = $490 total amount. $490 is the allowable IME.

If a DME provider does not provide the wholesale pricing for a particular HCPCS miscellaneous code, do not allow that code as an IME deduction. Do not deny the entire IME request. Use Form H1052-IME, Notice of Delay in Decision for Incurred Medical Expenses, to notify the provider of a delay in processing the IME and include the additional information needed to process the request. If the wholesale price is not provided, process the IME request for the remaining codes. If the wholesale price is provided after the remaining IME has been approved, process the change and allow the code as an IME deduction.

H-2840 DME Modifier Code for Rental Items

Revision 10-3; Effective September 1, 2010

Because of Medicare regulations regarding durable medical equipment (DME), an individual owns the DME after a set number of payments. This is common for wheelchairs.

On the Medicare Fee Schedule, some DMEs are considered capped rental items. In these situations, the first Modifier column (column labeled Mod) will reflect only RR for rented. The DME supplier must transfer ownership of the capped rental equipment to the individual after the 13th continuous month of rental. An individual in an institution makes a one-time purchase instead of renting the DME. Calculate the incurred medical expense (IME) deduction by multiplying the monthly rental amount on the Medicare Fee Schedule by 13. This is the total allowable amount of IME deduction for this item.

Example: An individual purchased a heavy-duty wheelchair with modifications specific for his use. The code submitted with Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME, is K0006. The monthly rental amount for this code is 125.41. The total IME deduction for this DME is $1,630.33 ($125.41 x 13).

To safeguard beneficiary access to quality equipment throughout the duration of the rental period, Medicare requires that the DME supplier may not provide different equipment from that which was initially furnished to the individual at any time during the 13-month rental for capped rental DME unless one of the following exceptions applies:

• the equipment is lost, stolen or irreparably damaged;
• the equipment is being repaired while loaner equipment is in use;
• there is a change in the beneficiary's medical condition such that the equipment initially furnished is no longer appropriate or medically necessary; or
• the DME carrier determines that a change in equipment is warranted.

Based on this, an individual is limited to only one IME deduction for each identified DME during the capped rental period. If an exception is met and a need is identified for a change, request the DME provider to submit a copy of the exception request/approval.

H-2850 Wheelchairs

Revision 18-3; Effective September 1, 2018

Customized Power Wheelchairs

A customized power wheelchair (CPWC) is a covered service in a nursing facility (NF).  Direct individuals to request CPWCs through a recipient's managed care organization.

Customized Manual Wheelchairs (CMWCs)

CMWCs may be considered for an incurred medical expense (IME) deduction for an NF recipient with:

• A completed, signed, and dated Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment or Other IME
• Written and detailed specifications and an itemized list of the requested durable medical equipment (DME) and all accessories
• Clear, written explanation, signed by the physician, of why the NF equipment will not meet the recipient's needs

Before allowing an IME deduction, if the recipient has a positive preadmission screening and resident review (PASRR) evaluation, verify what type of positive PASRR the person has.

A NF recipient with a positive PASRR evaluation for an intellectual disability (ID) or a developmental disability (DD) is eligible to receive DME through NF specialized services. Do not consider an IME deduction for a CMCW.  Direct these individuals to the NF to request a CMWC as a NF specialized service.

A NF recipient with a positive PASRR evaluation for Mental Illness (MI) is not eligible to receive DME through NF specialized services. Requests for CMWCs can be considered for an IME deduction.

Basic Power Wheelchairs

Basic power wheelchairs that are not customized can be considered for an IME deduction if the following verification is received:

• a completed, signed, and dated Form H1263-A; and
• a clear, written explanation, signed by the physician, of why the NF equipment will not meet the recipient's needs.

Basic power wheelchairs include the wheelchair, necessary batteries and may include the following basic components. Do not allow separate charges for the items listed below:

• lap belt or safety belt;
• battery charger;
• batteries (initial);
• complete set of tires and casters, any type;
• leg rests;
• foot rests or foot platform;
• arm rests;
• any weight-specific components (braces, bars, upholstery, brackets, motors, gears, etc.), as required by a person’s weight capacity; and
• controller and input device.

H-2860 Reserved for Future Use

Revision 20-2; Effective June 1, 2020

H-2870 When the Co-Payment Adjustment is Not Used to Pay DME Provider

Revision 24-1; Effective March 1, 2024

Payment for durable medical equipment is a matter between the person or the person’s payee and the durable medical equipment (DME) provider. The income from the co-payment adjustment must be used to pay the DME provider in a timely manner. 

When DMEs are projected in the co-payment budget, monitor the case at regular intervals. If the income from the co-payment adjustment is not used to pay the DME provider, remove the ongoing co-payment adjustment and reconcile the budget. Reconciliation is required if the payments were not made, or if the amount paid was different from the amount projected

Related Policy 

IME Notices, H-2900
Incurred Medical Expenses (IMEs), H-3120
Incurred Medical Expenses (IMEs), H-3420
Incurred Medical Expenses (IMEs), H-3520
Incurred Medical Expenses (IMEs), H-3620

Revision 20-4; Effective December 1, 2020

Form TF0001, Notice of Case Action, is used to notify a recipient, authorized representative (AR), or both that a request for an IME deduction is approved or denied.

Form TF0001P, Provider Notice of Case Action, is used to notify the nursing facility that a co-payment adjustment has been approved.

For approved IME requests, TIERS automatically generates Forms TF0001 and TF0001P with the following information:

• a note that the co-payment adjustment is for an IME allowance and that the funds must be used to pay the IME provider;
• the reason for the IME adjustment (receipt of dental services or durable medical equipment);
• the date the IME item or service was received; and
• the total amount of the IME allowance.

For denied IME requests, TIERS automatically generates Forms TF0001 and TF0001P, but the forms do not reflect changes in the co-payment or provide a reason for denial when the IME request is denied.

IME Provider Notice

For both dental or durable IME requests, use Form H1053-IME, Provider Notice of Incurred Medical Expense Decision, to notify an IME provider that a request for an IME deduction is approved or denied.

• If the IME request is approved, the form will list the services and total amount of the IME allowed.
• If the IME request is denied, the form will list the services not allowed, and staff manually add additional comments to why the IME request was denied.
• Do not add co-payment information to this form.

Reminder: To safeguard confidentiality, do not provide the co-payment amount to any provider (either verbally or in writing) without written authorization from the recipient or the recipient’s AR.

Request for Verification of Delivery

When an IME request does not include proof of delivery or verification of the date services were provided, use the following forms to request verification of receipt of services from the recipient or the recipient’s authorized representative (AR). Do not send the request to the provider. The provider may assist the recipient in providing the requested information, but the recipient or the recipient’s AR must complete the form.

• For durable IME requests, use Form H1051-IME, Receipt of Durable Medical Equipment.
• For dental IME requests, use Form H1054-IME, Proof of Dental Services.

Notice of Delay

For both dental or durable IME requests, use Form H1052-IME, Notice of Delay in Decision for Incurred Medical Expenses, to:

• Notify the recipient of a delay in processing an IME request when the following information is needed on Form H1263-A, Certification of Medical Necessity – Durable Medical Equipment, or on Form H1263-B, Certification of No Medical Contraindication - Dental:
  • the written signature of the recipient or authorized representative; or
  • a description of the authority to sign for the recipient.
• Notify the IME provider of a delay in processing an IME request when the following information is needed:
  • current dental terminology (CDT) or health care common procedural coding system (HCPCS) codes;
  • the written signature of the attending practitioner on Form H1263-A or Form H1263-B; or
  • other information.

Related Policy

Deduction of Incurred Medical Expenses (IMEs), H-2100
IME Budget Adjustments Due to Death, H-2310
Notices, R-1300