On July 8, 2013, CMS published a proposed rule to update Medicare end-stage renal disease (ESRD) prospective payment system (PPS) rates and policies for 2014. While CMS proposes a 2.5% base rate update (a 2.9% market basket update reduced by an estimated 0.4% ACA multi-factor productivity (MFP) adjustment), this amount would be more than offset by a -12% drug utilization offset. Specifically, under the American Taxpayer Relief Act of 2012, CMS must reduce the ESRD PPS base rate to reflect estimated change in the utilization of ESRD-related drugs and biologicals since 2007. CMS invites comments on whether this change should be phased in over more than one year (which CMS often does in the face of steep payment swings). In total, CMS estimates that CY 2014 ESRD PPS rates will decrease by 9.4% -- or $780 million -- compared to 2013 after application of all rate adjustments in the proposed rule. CMS also proposes to update ESRD Quality Incentive Program (QIP) measures and scoring methodologies for payment year 2016. In addition to ESRD policy changes, the proposed rule addresses Medicare coverage of and payment for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), including the definition of routinely purchased DME; the three-year Minimum Lifetime Requirement; and fee schedules for splints, casts, and intraocular lens (IOLs) inserted in a physician’s office. The DMEPOS provisions are discussed in a separate post. CMS will accept comments on the proposed rule until August 30, 2013.