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Bill Flap Could Lift Lincare

A so-called clerical error could spare home health care providers like Apria (AHG) and Lincare (LNCR) from deep Medicare cuts.

Some people claim the House of Representatives never actually passed the official Deficit Reduction Act that was apparently signed into law last month by President Bush. By the narrowest of margins, these people insist, the House passed a slightly different bill calling for more generous Medicare coverage. They add that due to this clerical error, only the Senate's version of the bill wound up on the president's desk.

As a result, a diverse group of critics has called for the law to be thrown out. Some Democrats in Congress contend the missteps point to an abuse of power by the administration, while Jim Zeigler -- a past member of Bush's own legal team -- has sued to have the law declared unconstitutional for other reasons.

"This is Constitutional Law 101," Zeigler told on Tuesday. "The same bill must pass the House and the Senate and then be signed by the president. Case over."

The dispute could undermine a measure that stood to sharply reduce reimbursement for companies like Apria and Lincare.

Critics say the House and Senate passed bills that differ in one critical way. Specifically, they say, the House voted for Medicare to cover durable medical equipment for 36 months. In contrast, they say, the Senate voted for Medicare to cover only oxygen equipment for 36 months -- and other supplies for just 13 months.

Previously, they add, Medicare covered durable medical equipment indefinitely.

CRT Capital analyst Sheryl Skolnick says that players throughout the health care industry have reason to dislike the law. Skolnick points to medical equipment suppliers, including Walgreen (WAG), and respiratory therapy players like Apria and Lincare in particular.

Skolnick then goes on to name some less-obvious victims as well. She says that home nursing providers, such as Amed (AMED - Get Report) and Gentiva (GTIV), face Medicare cuts of their own. But, if anything, she portrays free-standing imaging companies among the hardest hit of all.

Under the new law, Skolnick estimates, those imaging companies face a 6% cut in Medicare payments this year and a far deeper cut -- of between 21% and 25% -- the next.

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