PDAC - Correct Coding - Warranty, Reasonable Useful Lifetime (RUL), and the Minimum Lifetime Requirement (MLR) for Durable Medical Equipment

Coding applications submitted to the Pricing, Data Analysis, and Coding (PDAC) contractor require information regarding durability. Warranty, RUL, and MLR information are often cited interchangeably in response. However, they are not the same. This article will review the applicable Medicare definitions and payment rules related to these topics.

For an item to be eligible for coverage under the Medicare Durable Medical Equipment (DME) Benefit, specific criteria must be met. 42 CFR 414.202 provides the definition of durability:

Durable medical equipment means equipment, furnished by a supplier or a home health agency that meets the following conditions:
1.Can withstand repeated use.
2.Effective with respect to items classified as DME after January 1, 2012, has an expected life of at least 3 years.
3.Is primarily and customarily used to serve a medical purpose.
4.Generally, is not useful to an individual in the absence of an illness or injury.
5.Is appropriate for use in the home.

[Emphasis added]

CMS Benefit Policy Manual (Internet Only Manual 100-02) Chapter 15, §110.1 provides additional guidance for understanding durability under the DME Benefit. It states:

A. Durability

An item is considered durable if it can withstand repeated use, i.e., the type of item that could normally be rented. Medical supplies of an expendable nature, such as incontinent pads, lamb’s wool pads, catheters, ace bandages, elastic stockings, surgical facemasks, irrigating kits, sheets, and bags are not considered “durable” within the meaning of the definition. There are other items that, although durable in nature, may fall into other coverage categories such as supplies, braces, prosthetic devices, artificial arms, legs, and eyes.

[Emphasis added]

The term “Minimum Lifetime Requirement” or “MLR” is used to refer to the specified three-year duration for repeated use (durability). Repeated rental requires full functionality over the entire MLR. Items with an MLR of less than three-years are not eligible to be classified as DME.

For Medicare, payment can be made for replacement of DME that is lost, stolen, irreparably damaged, or has been in continuous use for the equipment’s reasonable useful lifetime (RUL). In general, the RUL for DME is established as five years (42 CFR 414.210(f)). Computation of the RUL is based on when the equipment is delivered to the beneficiary, not the age of the equipment. The RUL is used to determine how often it is reasonable to pay for the replacement of DME under the Medicare program and is not explicitly set forth as a minimum lifetime standard.

Although Medicare has not created an official definition, a warranty is commonly considered to be a guarantee by a manufacturer promising to repair or replace an item, if necessary, within a specified period. Warranty requirements are primarily regulated by each state. Medicare does not specify warranty requirements except to say that repairs and replacements covered by warranties are not eligible for program reimbursement. Warranty coverage is not a substitute for MLR.

Manufacturers are reminded that MLR compliance is established with either objective usage data or simulated usage testing (e.g., mean time between failure or similar) that demonstrates retention of full functionality after three years of regular use. Information that establishes the three-year durability MLR must be available upon request.

Published by Noridian as the PDAC, February 2018. Republished by Palmetto GBA as the PDAC, January 2019