Home health companies that provide oxygen therapy are unhappy about new Medicare rules that limit reimbursement, and they warn that the policy change could harm patients.

Medicare officials, however, say patients are not in danger of losing oxygen service and the providers are needlessly frightening elderly people.

"It’s an issue of concern," said Laurence Wilson, director of chronic care policy at the federal Centers for Medicare and Medicaid Services. "Some of these letters (being sent to patients by the companies) are saying some pretty disturbing things."

Some companies have informed customers that they will have to pay out of their own pocket for delivery, supplies and emergency service. An Ohio company even told patients it was going to come to their homes and take away their equipment, leaving them without access to oxygen.

Scott Lloyd, president of the Extrakare home health company in Gwinnett County, believes some of these misleading statements arose from initial confusion over what the new rules meant.

"I will acknowledge that there have been companies elsewhere in the country that have distributed incorrect information," he said. "(But) we in the industry do believe it will have an adverse effect on patients."

The new rules originated from the Deficit Reduction Act of 2005, when Congress decided Medicare was spending too much on durable medical equipment such as hospital beds and oxygen concentrators.

An oxygen concentrator is a machine that draws in regular air and boosts the oxygen percentage. It provides an alternative to using tanks filled with compressed oxygen.

Wilson said about 90 percent of patients on oxygen therapy use a concentrator. A basic model costs about $600.

"So the equipment is actually paid off in just a few months," he said. "But prior to the 2005 law, Medicare just kept making monthly payments (to the oxygen companies) indefinitely."

Then the law was changed so that after 36 months, the payments would end and the patient would own the machine.

But the companies objected to that provision, preferring to retain ownership of the equipment. So Medicare rescinded that part of the law.

Now, Medicare will stop making payments to the companies after 36 months. But because the expected useful lifespan of an oxygen concentrator is five years, the company is required to continue providing service for another two years.

Companies will no longer get reimbursed during those last two years.

"They will lose 30 percent of their oxygen revenue," said Lloyd.

Medicare officials contend that the companies aren’t losing anything. After being paid about $200 a month for three years, the providers will have accumulated far more money than what the concentrator and supplies are actually worth.

But Lisa Getson, executive vice president of government relations for Apria Healthcare, a home health company, said Medicare isn’t factoring in the cost of labor.

"They’re saying that providers were given enough money in the first three years to cover everything that comes after," she said. "But only 28 percent of our cost is equipment. The rest is service."

Getson said Medicare is treating oxygen companies differently than any other segment of the health care market, and she fears it will lead to the companies having to lay off employees.

Getson said Medicare rewrote the rules in late 2008 and allowed little time for public comment. "It caught the industry by surprise," she said. "Companies will probably start having cash-flow problems by March, if you combine the effects of these cuts with the credit crisis."

The companies have also agreed to a 9.5 percent cut in reimbursement, in exchange for Medicare not including oxygen in its competitive bidding process.

Lloyd said he’s OK with that, but he’s concerned about the patients.

"Our position is not that we should be paid more, but we think the revenue should be tied to the patient for the entire length of time under which they require service," he said.

Wilson said Medicare spends about $3 billion a year on the oxygen benefit, and that’s an unacceptable burden on taxpayers.

"(These changes) are about paying a more reasonable amount for what we saw as an overpriced service," he said.

Wilson added that the new rules also will cut patients’ out-of-pocket expenses.

"The beneficiary pays 20 percent of the cost, so this will save them money on co-insurance," he said.