On September 1, 2020, CMS published a proposed rule that would define “reasonable and necessary” for purposes of coverage under Part A and Part B of the Medicare program, and that would establish a new expedited Medicare coverage pathway for FDA-designated breakthrough devices (the Proposed Rule). The proposed definition of “reasonable and necessary” would codify the current definition in the Medicare Program Integrity Manual (MPIM), but would also establish a new, alternative basis for determining whether an item or service is appropriate for Medicare patients, based on whether the item or service is covered by commercial insurers. The deadline for submitting comments is November 2, 2020.

Definition of “Reasonable and Necessary”

Under existing law, with limited exceptions, Medicare Part A and Part B will not pay for any expenses incurred for 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.” 42 U.S.C. § 1395(a)(1)(A). To date, CMS has never defined the “reasonable and necessary” standard in a regulation. Instead, the factors that Medicare Administrative Contractors consider when making Local Coverage Determinations are specified in Chapter 13 of the MPIM, available here.

Under the Proposed Rule, CMS would codify the MPIM definition of “reasonable and necessary,” and would incorporate a new, alternative basis for determining whether an item or service is “appropriate for Medicare patients.” As proposed, an item or service would be considered “reasonable and necessary” if it is:

• Safe and effective;
• Not experimental or investigational; and
• Appropriate for Medicare patients, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it:

1. 1. Meets all of the following criteria:

• • • 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;
    • Furnished in a setting appropriate to the patient's medical needs and condition;
    • Ordered and furnished by qualified personnel;
    • One that meets, but does not exceed, the patient's medical need; and
    • At least as beneficial as an existing and available medically appropriate alternative; OR

1. 2. Is covered by commercial insurers, unless evidence supports that the difference between Medicare beneficiaries and commercially insured individuals are clinically relevant.

The alternative, commercial insurance-based test is a new method for determining whether an item or service is “appropriate for Medicare patients,” and is not found in the MPIM. Otherwise, the proposed definition mirrors the existing definition in the MPIM. In assessing the commercial market, CMS would examine the coverage policies of non-governmental entities that sponsor health insurance plans, and would exclude Medicaid managed care, Medicare Advantage, and other government-administered healthcare coverage programs.

CMS is seeking comment on several issues, including whether the agency should limit its consideration of commercial plan offerings or covered lives to a subset of the commercial market. The agency suggests that such subsets might be based on geography, number of enrollees, plan type (HMO, PPO, etc.), or might even utilize a singular plan. CMS is also considering an alternative approach, under which it would cover an item or service only if it is covered by a certain proportion (e.g., a majority or a plurality) of covered lives amongst plans, or a certain proportion of plan offerings in the commercial market. CMS also seeks comment on the sources of data that the agency could be used to implement its assessment of commercial coverage policies, and whether the agency should make this information public and transparent.

Medicare Coverage of Innovative Technology Pathway

Under existing law, CMS uses several coverage pathways for items and services, including medical devices. These coverage pathways include National Coverage Determinations (NCDs), LCDs, claim-by-claim adjudications, NCD 310.1 (Routine Costs in Clinical Trials), and parallel review by FDA and CMS. CMS observes that none of these existing coverage pathways are readily available to provide immediate and predictable coverage concurrently with FDA market authorization.

Under the Proposed Rule, CMS would create a new Medicare Coverage of Innovative Technology (MCIT) pathway that would provide immediate national coverage for breakthrough devices for a time-limited period, beginning on the date of FDA market authorization and continuing thereafter for up to four years. The MCIT pathway would be voluntary and would be initiated when a manufacturer notifies CMS of its intention to utilize the pathway. CMS explains that under the new pathway, an item or service that receives breakthrough device designation from the FDA would be considered “reasonable and necessary” for purposes of Medicare coverage because such devices have met the FDA’s unique criteria and are innovations that serve unmet needs.

Medical Device Eligibility

The MCIT pathway would be available only to medical devices that are:

• Designated by the FDA as “breakthrough devices”;
• FDA market authorized at most two years prior to the effective date of the final rule and thereafter;
• Used according to their FDA approved or cleared indication for use;
• Within a Medicare benefit category;
• Not the subject of an NCD; and
• Not otherwise excluded from coverage through law or regulation.

Coverage of Items and Services

Unless otherwise excluded from coverage, covered items and services furnished within the MCIT pathway could include:

• The breakthrough device;
• Any reasonable and necessary procedures to implant the device;
• Reasonable and necessary costs to maintain the device;
• Related care and services for the breakthrough device; and
• Reasonable and necessary services to treat complications arising from the use of the breakthrough device.

Coverage Period

The coverage period established under the MCIT pathway would begin on the date the breakthrough device receives FDA market authorization. The coverage period would continue thereafter for up to four years, but would terminate earlier if: (i) a manufacturer withdraws the device form the pathway; or (ii) the device becomes the subject of a NCD or otherwise becomes noncovered through law or regulation.

The Proposed Rule is available here, and the CMS fact sheet is available here.