Medicare Patient Home Oxygen Protection Act of 1986

Medicare Patient Home Oxygen Protection Act of 1986 - Amends part B (Supplementary Medical Insurance) of title XVIII (Medicare) of the Social Security Act to direct the Secretary of Health and Human Services to establish monthly capitation fee schedules on a regional, Statewide, or carrier service area basis for Medicare oxygen therapy services. Requires payments to be made on the basis of the number of units of oxygen prescribed for a patient per month. Prohibits payments for oxygen therapy services prescribed by a physician who has a significant ownership in, or a significant financial or contractual relationship with, the entity furnishing oxygen therapy services, unless such entity is the sole supplier of such services in a community. Requires the Secretary to pay, or notify the entity providing such services of a defect in, a payment claim within 22 days of its receipt. Imposes interest penalties on late payments.

Bases the oxygen therapy fee schedules on the reasonable charge level for oxygen therapy services determined for the 12-month period ending June 30, 1986. Provides Medicare coverage for 80 percent of the fee schedule amount. Directs the Secretary to provide a minimum monthly amount to assure the availability of oxygen therapy services for individuals requiring only small amounts of oxygen.

Requires the Secretary to report to the Congress on the implementation and effects of these provisions by July 1, 1988.