INTRODUCTION
On May 16, 2000, the Health Care Financing Administration ("HCFA") published a Federal Register notice announcing its intention to publish a proposed rule outlining the criteria the agency will use to make certain Medicare national coverage decisions ("NCDs"). 65 Fed. Reg. 31124. The criteria also would be used by HCFA contractors in making local coverage decisions ("LCDs"). Although the criteria still are being developed, HCFA outlines the approaches it is considering at this time -- including the controversial use of cost considerations in making coverage decisions.
HCFA states that it expects its coverage criteria to "facilitate timely and expanded access for Medicare beneficiaries to appropriate new technologies." The agency also asserts that the criteria would make the national and local Medicare coverage processes more transparent, timely, and predictable to manufacturers or other requestors seeking Medicare coverage of an item or service. Note, however, that the criteria also could result in Medicare’s withdrawing coverage of a currently-covered item or service. In particular, HCFA notes that "if a new item or service is equivalent in benefit, is in the same clinical modality, is thus substitutable for the existing service, and is lower in costs," it would consider withdrawing coverage for the more expensive, currently-covered alternative service.
HCFA is soliciting advance public comments on the criteria, which are due by June 15, 2000. HCFA states that it will consider comments as it develops the proposed rule. When the proposed rule is issued, interested parties will have another opportunity to comment before the criteria are finalized.
BACKGROUND
The Medicare statute gives the Secretary of Health and Human Services the authority to decide which specific items and services within broad benefit categories (i.e., hospital services, skilled nursing facility services, home-health services, and durable medical equipment ("DME")) can be covered by Medicare. The statute also provides that no Medicare payment shall be made for any items or services that are not "reasonable and necessary for the diagnosis or treatment of illness or injury, or to improve the functioning of a malformed body member."
The Medicare program traditionally has exercised this authority to determine whether specific services fit into one of the benefit categories and meet the "reasonable and necessary" standards through the development of national and local coverage decisions. National coverage decisions ("NCDs") grant, limit, or exclude Medicare coverage for a specific medical service, procedure, device, or drug. In the absence of a specific NCD, coverage decisions are left to the discretion of the local Medicare carriers and intermediaries. Contractors also may publish local coverage decisions ("LCDs") to provide guidance to the public and medical community within a specified geographic area, but an LCD may not contradict an NCD. An LCD is not binding on a contractor in another area of the country or on an administrative law judge who decides cases at higher stages of the appeal process.
On April 27, 1999, HCFA issued a notice detailing the specific process and procedures it uses for making NCDs. Specifically, the notice outlined: how the public may request NCDs; timelines for reviewing requests; and the roles of HCFA staff, the Medicare Coverage Advisory Committee ("MCAC"), and technology assessments in NCDs. The notice also detailed methods HCFA will use to keep the public informed about the status of coverage reviews, and it outlined how HCFA will reconsider coverage decisions based on new scientific and medical information. (fn1)
The May 16, 2000 notice goes beyond the specific process identified in the April notice, and enunciates HCFA’s intent to issue a proposed notice establishing criteria for making national and local coverage decisions under the reasonable and necessary provisions of section 1862(a)(1) of the Social Security Act. The notice does not (and HCFA does not anticipate that the proposed rule will) address individual medical necessity determinations, claims adjudication, or Medicare payment policies.
After HCFA publishes a final coverage criteria rule, it expects to issue service-specific guidance documents to supplement the final rule. According to a HCFA press release, these guidance documents will explain how the criteria apply to specific health care services, such as diagnostic labs, radiology tests, surgical procedures, biologics, and DME.
PROPOSED COVERAGE CRITERIA
Criteria For Medicare Coverage Decisions
HCFA anticipates applying two criteria when it makes an NCD, or when a contractor makes an LCD: (1) the item or service must demonstrate medical benefit, and (2) the item or service must demonstrate added value to the Medicare population. To ensure consistent interpretation and application of these criteria, HCFA would use the following sequential steps:
- Step 1 -- Medical Benefit
Is there sufficient evidence that demonstrates that the item or service is medically beneficial for a defined population?- If no, the item or service is not covered under Medicare.
- If yes, proceed to Step 2.
- Step 2 -- Added Value
For the defined patient population, is there a medically beneficial alternative item or service that is the same clinical modality and is currently covered by Medicare?- If no, the item or service is covered under Medicare for the defined population.
- If yes, proceed to Step 3.
- Step 3 -- Added Value
Is the item or service substantially more or substantially less beneficial than the Medicare-covered alternative? (fn2)- If the item or service is substantially more beneficial (that is, a breakthrough), it is covered under Medicare for the defined population.
- If the item or service is substantially less beneficial, it is not covered under Medicare for the defined population.
- If the item or service is neither substantially more nor substantially less beneficial (that is, it is equivalent in benefit), proceed to Step 4.
- Step 4 -- Added Value
Will the item or service result in equivalent or lower total costs for the Medicare population than the Medicare-covered alternative?- If yes, the item or service is covered under Medicare for the defined population.
- If no, the item or service is not covered under Medicare.
Comparisons of the medical benefit of two or more items or services would involve the same patient population, the same clinical circumstances, and the same clinical modality. HCFA invites public comments on this sequential step approach and suggestions as to feasible alternatives.
HCFA also notes that a requestor may use the coverage reconsideration process to modify a request that resulted in a denial of coverage for an item or service. For example, a requestor could seek a more limited coverage decision targeting a narrower population for which there is no Medicare-covered alternative, or a requestor could submit new evidence that demonstrates that the item or service is substantially more beneficial than the Medicare-covered alternative.
Definitions, Discussion, And Questions
- Medical Benefit
According to the notice, HCFA considers an item or service to be medically beneficial if "it produces a health outcome better than the natural course of illness or disease with customary medical management of symptoms," as demonstrated by "objective clinical scientific evidence."
HCFA also announces that it believes Medicare should move towards "quality of life" (rather than only mortality and life-expectancy) as an acceptable health outcome. An acceptable health outcome should be quantifiable along a standard scale or metric, HCFA cautions. To that end, HCFA seeks suggestions on a standard metric system for measuring quality of life outcomes. HCFA also believes that a beneficiary’s preference, compliance, and well-being are meaningful outcomes, and HCFA seeks comments on the standardized metric systems or methodologies the agency should use to quantify and compare such outcomes.
In addition, HCFA notes that it must develop systems for measuring the magnitude of the improved health outcome and assessing whether benefits outweigh risks when a treatment includes the risk of adverse side-effects. - Added Value
A controversial section of the proposal considers how cost issues should affect coverage determinations. HCFA believes that an item or service "adds value" to the existing mix of covered items or services if it: substantially improves health outcomes; provides access to a medically-beneficial, different clinical modality; or if it can "substitute" for an existing item or service and lower costs for the Medicare population. In making Medicare coverage decisions under these new criteria, HCFA would not compare an item or service that falls within a statutory benefit category to one that is outside the scope of the Medicare program.
HCFA provides several examples of situations in which a new item or service would add value compared to the current mix of services. For instance, if a new item or service that falls within a Medicare benefit category would be medically beneficial for an individual with a given clinical circumstance, and there is no Medicare-covered medically beneficial alternative, HCFA believes this item or service would add value to the program. It should be covered without consideration of costs during the coverage process, according to HCFA.
HCFA also addresses coverage procedures for a new item or service which would be medically beneficial, but is a different clinical modality than a Medicare-covered, medically-beneficial alternative (i.e., a covered medication versus surgery). HCFA notes that value is added to the program when Medicare beneficiaries and providers are given access to competing items or services of different clinical modalities. HCFA therefore believes that it should cover the items or services without consideration of costs during the coverage process.
Moreover, HCFA would view value as being added when the magnitude of the benefit of an item or service is substantially more than a Medicare-covered alternative of similar clinical modality (a so-called "breakthrough"). In such cases, HCFA believes it should cover the substantially-superior service without any consideration of cost during the coverage process.
HCFA also states that value would be added when a new item or service is equivalent in benefit, is in the same clinical modality for a Medicare-covered alternative, and has equal or lower total costs for the Medicare population. Conversely, when a service that has equivalent health outcomes and the same clinical modality is substantially more expensive than a Medicare-covered alternative, cost considerations would lead HCFA to deny coverage for the service. HCFA explains that since it anticipates limiting the application of cost considerations to a "narrow situation when two services have equivalent health outcomes and are of the same clinical modality," it need only do a simple cost-analysis in such cases.
HCFA requests comments on a variety of definitions associated with its proposed "added value" criteria. For instance, HCFA solicits suggestions on how to define "same clinical modality," "Medicare-covered alternative," and "equivalent benefit." Similarly, HCFA encourages suggestions on how best to define "substantially more beneficial." HCFA gives several possible examples, such as the benefit is so large that most clinicians would believe that the item or service should be the new standard of care and, thus, completely replace the Medicare-covered alternative. Another example is that the benefit is so large that the clinical experts in the relevant clinical discipline believe that the item or service should be the new standard of care and, thus, HCFA should cover the new item or service and withdraw coverage of the Medicare-covered alternative. A third way would be to try to establish a quantifiable statistical "effect-size" of the new item or service compared with the Medicare-covered alternative.
HCFA also requests comments on the alternative of covering a new item or service that is "substitutable" for a Medicare-covered alternative. HCFA asks whether, if the substitutable item or service has greater total costs to the Medicare program, it should deny coverage and allow the requestor through the reconsideration process to alter the request to seek a positive coverage decision. Another alternative would be simply to cover the new item or service but reduce the payment rate to the same rate as the Medicare-covered alternative (such as the "least costly alternative" adjustment for DME).
HCFA reiterates that coverage of new items and services under the new criteria may lead to the examination of current coverage policies. HCFA seeks comment on whether, if a new item or service is "substitutable" for a Medicare-covered alternative and has lower costs for the Medicare program, it should deny coverage for the higher-cost Medicare-covered alternative or lower the payment for the Medicare-covered alternative so that the total costs for the Medicare program are, at a minimum, equal.
HCFA also is interested in suggestions on the type and extent of information that parties seeking coverage decisions should be required to provide regarding associated costs or savings to the program, in addition to the direct costs of the item or service. Finally, HCFA is soliciting comments on the implications for private sector insurers of the proposed approach. - Demonstration Through Scientific Evidence
As noted above, HCFA asserts that it would measure both the medical benefit and the added value criteria by clinical scientific evidence. To that end, HCFA is interested in comments on the proper evidentiary standard. For instance, should there be one standard for all services or should there be different standards for different health care sectors (i.e., surgical procedures, diagnostic tests, and biologics)? How should HCFA deal with bias and external validity? Under what circumstances can clinical trial findings be generalized from the study population to the Medicare population? In addition, when can the controlled delivery setting of the clinical trial be generalized and reproduced in the current or different health care delivery setting?
CONCLUSION
The final coverage criteria adopted by HCFA could have a dramatic impact on Medicare coverage policies for a wide range of items and services, and as such will be important for many hospitals, physicians, providers, suppliers, and manufacturers.
The criteria under consideration pose both opportunities and risks for the health care industry. On the positive side, the policy could result in greater consistency and continuity for providers and manufacturers seeking coverage determinations. It also would provide an opportunity to demonstrate a positive quality of life impact and/or cost effectiveness in seeking Medicare coverage.
On the other hand, HCFA’s emphasis on cost-effectiveness would, at a minimum, require significant changes in the data manufacturers will need to collect and present to be assured Medicare coverage in many cases. In the worst case, cost-effectiveness considerations could jeopardize long-standing coverage of items and services if a more cost-effective alternative is presented.
- (fn1) An April 30, 1999 Reed Smith Client Memoranda on the notice entitled, "HCFA Announces Procedures For National Medicare Coverage Decisions," is available from our office or on our Internet site, www.reedsmith.com.
- (fn2)Note that some of the new Medicare criteria parallel the criteria used by the Blue Cross and Blue Shield Association’s Technology Evaluation Center, which considers improvement in net health outcomes.
Please do not hesitate to contact Elizabeth B. Carder (202/414-9213), Gordon B. Schatz (202/414-9259), or any other member of the Reed Smith health care group with whom you work if you would like additional information.
The contents of this Memorandum are for informational purposes only, and do not constitute legal advice.