On Tuesday, September 1, 2020, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule addressing the Medicare coverage standard and expedited coverage for certain medical devices. If finalized, the proposed rule would define in regulation the Medicare “reasonable and necessary” standard, with commercial insurance coverage potentially considered in assessing coverage. In addition, CMS’s proposed rule would establish a “Medicare Coverage of Innovative Technology” (MCIT) pathway, which would be a voluntary expedited pathway to Medicare coverage for medical devices designated with “breakthrough” device status by the Food and Drug Administration (FDA).

Proposed new "reasonable and necessary" regulatory standard

A key statutory pre-condition to coverage under Parts A and B of Medicare is that an item or service must generally be “reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.” Social Security Act (SSA) § 1862(a)(1)(A).

CMS and its contractors have long determined whether items and services are reasonable and necessary, either through the case-by-case review of the clinical appropriateness of claims or through local and national coverage policies, such as Local Coverage Determinations (LCDs) and National Coverage Determinations (NCDs). They have done so without this reasonable and necessary standard being defined in regulations, and this rulemaking would change that.

Regulatory codification of Medicare Program Integrity Manual “reasonable and necessary” standards, with modifications

CMS’s proposal would largely codify in regulation the “reasonable and necessary” criteria found in CMS’s Program Integrity Manual (PIM), with some modifications. CMS’s proposed definition specifies that an item or service would have to satisfy three factors to be reasonable and necessary:

• Factor 1: Safe and effective;
• Factor 2: Not experimental or investigational (except for Category B Investigational Device Exemption devices); and
• Factor 3: Appropriate for Medicare beneficiaries, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it —
  1. Meets all of the following criteria:
     1. Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
     2. Furnished in a setting appropriate to the patient’s medical needs and condition;
     3. Ordered and furnished by qualified personnel;
     4. One that meets, but does not exceed, the patient’s medical need; and
     5. At least as beneficial as an existing and available medically appropriate alternative; OR
  2. Is covered by commercial insurers, unless evidence supports that differences between Medicare beneficiaries and commercially insured individuals are clinically relevant.

Except for CMS’s new commercial insurance coverage sub-criterion, the proposed factors in the regulation are substantially similar to factors already found in CMS’s manual guidance at PIM, ch. 13, § 13.5.4.

New proposed “commercial coverage” standard for determining if an item or service is appropriate for Medicare beneficiaries

While the bulk of the language in the proposed definition of "reasonable and necessary" is taken from the PIM, what CMS would add is an alternative pathway for evaluating whether an item or service satisfies the “appropriate for use in Medicare beneficiaries” (Factor 3) requirement in the agency’s reasonable and necessary standard. Under its proposal, interested parties can demonstrate that an item or service is appropriate for Medicare beneficiaries based on evidence of commercial coverage, except where evidence supports that there are clinically relevant differences between Medicare beneficiaries and commercially insured individuals.

Items and services under this pathway would not need to satisfy the other Factor 3 sub-criteria, but would still need to be safe and effective (Factor 1) and not experimental or investigational (Factor 2). CMS also only proposes to look to commercial coverage for purposes of this sub-criterion. In other words, CMS’s proposed commercial coverage pathway would not evaluate coverage under Medicaid managed care, Medicare Advantage, and other government administered health care coverage programs.

When Medicare beneficiary appropriateness is determined on the basis of commercial coverage, CMS proposes to adopt the least restrictive coverage policy for the item or service among the offerings they examine. However, CMS also solicits a wide range of potential alternative variations of its commercial coverage sub-criterion, such as adopting coverage restrictions that are “largely similar and present” across the majority of offerings; using the most restrictive commercial insurance coverage policy available; or deferring to the Medicare Administrative Contractors (MACs) to tailor restrictions based on what the MACs observe in the commercial market. CMS also solicits comments on use of commercial coverage as the standard and using the current definition of “appropriate” only when there are clinically relevant differences between Medicare beneficiaries and commercially insured patients. CMS’s proposal could provide a helpful new way to secure coverage, particularly in cases where Medicare lags behind commercial payers.

Other solicitations for comments

As noted above, on paper, the proposal would codify existing guidance in regulation, with an alternative basis to secure coverage. However, CMS explicitly invites comments on many aspects of the reasonable and necessary definition such that where the final rule lands could alter significantly the impact of the proposed rule. For example, CMS solicits comments on:

• the sources of data that could be used to implement this policy, and whether CMS should make this information public and transparent;
• the most appropriate source(s) for these coverage policies, and the best way to determine which commercial plan(s) CMS should rely upon on for Medicare coverage;
• how stakeholders wishing to gain coverage may demonstrate that the item or service is covered by at least one commercial insurance plan policy;
• whether CMS should limit its consideration of commercial plan offerings or covered lives to a subset of the commercial market in the interest of simplicity, including looking at geographic subsets, subsets based on number of enrollees, subsets based on plan type (HMO, PPO, etc.), or other subsets of plans, including utilizing a singular plan;
• whether, given considerations such the variation and distribution of coverage policies and access to innovations, CMS should only cover an item or service if it is covered for a majority, or a different proportion such as a plurality, of covered lives among plans, or a majority, plurality, or some other proportion of plan offerings in the commercial market;
• whether CMS should grandfather its current coverage policies for items and services; and
• the role of MACs in this process.

New expedited coverage pathway for breakthrough medical devices

CMS also proposes to establish a new “Medicare Coverage of Innovative Technology” (MCIT) coverage pathway for breakthrough medical devices. Under the proposed pathway, manufacturers can choose to obtain immediate nationwide Medicare coverage for on-label uses of a breakthrough device, starting on the date of FDA market authorization and lasting up to four years.

More specifically, under CMS’s proposal, the MCIT pathway would provide Medicare coverage only for breakthrough medical devices, as determined by the FDA, used for on-label indication for up to four years from the date of approval or clearance, provided that the device falls within a Medicare benefit category and is not statutorily excluded from coverage. The proposed MCIT pathway is voluntary, as manufacturers with qualifying medical devices would have to notify CMS if they desire expedited coverage under the pathway. At the end of the four year coverage period, the device would either (a) have a favorable NCD; (b) have a non-coverage NCD; or (c) have coverage decided by the MACs (case-by-case or through an LCD). If a manufacturer desires an NCD for a device initially approved under the MCIT pathway, CMS recommends that it approach the agency during year three of coverage under the MCIT pathway to ensure seamless national Medicare coverage.

CMS also solicits comments on whether it should automatically open a national coverage analysis to establish an NCD if there is no LCD within six months of the termination of an MCIT pathway device’s four year coverage period. In addition, CMS solicits comments on the length of its proposed two year lookback period, under which devices are only eligible for the new pathway if FDA market authorized was no more than two years prior to the effective date of CMS’s eventual final rule (or thereafter). The proposed rule addresses coverage only; it does not describe any changes to payment or coding for these technologies.

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CMS is accepting comments on both aspects of the proposed rule until November 2, 2020. After considering public comments, CMS will prepare a final rule that would likely be effective 60 days after publication of the final rule.

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