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Medicare Raising Bar for “Big-Ticket” Items Coverage

Medicare coverage for “big-ticket” and sometimes controversial drugs, imaging, surgeries, procedures, and devices were more likely to be approved without restrictions 15 years ago than in recent years. This is according to a study published in Health Affairs that examined coverage determinations for medical interventions since 1999. The study sought to determine whether or not such determinations have become more restrictive over time as well as how policies changed over time.

In this context, ‘coverage determinations’ do not mean the Part D pharmacy prior authorizations we are all familiar with, but the process that the traditional Medicare fee-for-service (FFS) system uses to determine whether ground-breaking advances in medical care are actually a covered service under the health care program for the elderly and disabled.

Medicare coverage is limited to items and services that are “reasonable and necessary for the diagnosis or treatment of an illness or injury.” In addition, they must be reasonably in the scope of a given Medicare benefit category. National Coverage Determinations (NCDs) are governed by the Centers for Medicare and Medicaid Services (CMS) and made through an evidence-based and consultative process. They usually involve coverage that can have a significant financial impact to the program. If there is no NCD, an item or service may also be covered at the discretion of the Medicare Fiscal Intermediaries (FIs), also known as Medicare Administrative Contractors (MACs), using the local coverage determination (LCD) process. Decisions at this level are good only for those regions served by the FI or MAC unless adopted as NCDs later. Why is this significant for Medicare Advantage (MA) plans? MA plans are obligated to follow established NCDs and LCDs in their service regions. In these cases, plans must first determine if a given item or service is a covered benefit under Medicare and then can use consistently applied medical necessity criteria to evaluate whether it is appropriate in a given case. A plan cannot arbitrarily deny coverage for such services if it has been determined covered through an NCD or LCD process.

The study looked at drugs, procedures, or devices – the expensive and controversial items on the cutting edge of medical science. There were 213 coverage determinations from February 1999 to August 2012 that were reviewed using data on the Centers for Medicare and Medicaid Services (CMS) website. Of the 213 coverage decisions, 126 were positive decisions, 74 were deemed non-covered, and 13 were defined as “coverage with evidence development policies.”

The study found that more recent coverage determinations for these big-ticket items (from mid-March 2008 through August 2012) were 20 times less likely to be approved than earlier coverage determinations (from February 1999 through January 2002) for similar items.

What drove positive coverage decision? Over the entire review period, medical items or services with favorable randomized controlled trials were 7 times more likely to receive coverage than those without. Treatments with favorable clinical guidelines were 5 times more likely to be covered. The availability of alternative approaches and cost-effective evidence also played a role in favorable coverage.

When the evidence recommending a treatment is strong, Medicare tends to cover it. When the evidence is weaker, it either doesn’t cover it or provides “coverage with evidence development” policies. In this latter case, coverage is granted with study participation, which may later lead to complete coverage or possibly removal of coverage.

In summary, it seems the evidentiary bar for coverage is rising, particularly for high-end treatments. Coverage policy is an important payer tool for promoting the appropriate use of medical items or services, but CMS’s rising evidence standards also raise questions about patients’ access to new technologies and about hurdles for the pharmaceutical and device industries as they attempt to bring innovations to the market. Overall, this change over time may be part of CMS’ effort to strengthen the role of consistent evidence-based decision-making in both the traditional and Medicare Advantage settings. It has a triple aim: ensure equity for all beneficiaries, improve quality, and rein in the overall costs and inflationary trends that are expected to make Medicare’s unfunded liability a huge fiscal headache in the not-too-distant future.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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