Medicare’s Regulations Regarding Coverage

The FDA’s regulations state that isolated case reports, random experience, reports lacking enough detail to permit scientific evaluation, and unsubstantiated opinions do not constitute valid scientific evidence. More device manufacturers are recognizing the importance of considering Medicare coverage and reimbursement principles during the development of their new technologies. By adopting long- and short-term strategies that incorporate these principles, manufacturers can avoid certain foreseeable delays in bringing devices to market. Although the roadmap for demonstrating to the FDA the safety and efficacy of a device has been well established, the steps for obtaining private payers’ approvals have been less apparent.

Medicare’s reimbursement methodologies are often followed by other payors. Enough payment amount, of course, is as important as a coverage decision, because inadequate payments can render even a seemingly favorable coverage decision meaningless. Medicare’s coverage principles may be understood by examining how the program’s “reasonable and necessary” standard has been interpreted. This standard differs from the FDA’s “safe and effective” standard, which is at the core of the FDA’s regulatory approvals. Companies that design appropriate well-designed clinical studies with both goals in mind can avoid some of the otherwise frustrating realizations that clinical studies designed for FDA purposes do not automatically provide assurances for coverage and reimbursement purposes.

CMS and its local contractors have discretion to determine whether the device and or service using the device may be covered under their program. Decisions regarding coverage of specific devices not otherwise specified or expressly excluded by Congress are based on the statutory reasonable and necessary standard. The statutory standard is an exclusionary standard, which precludes coverage for those items and services “not reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member”. This standard is relied upon for all coverage decisions rendered by CMS and its local contractors.

To date, CMS has not published criteria for cost as an evaluation for coverage, despite several attempts to do so. Yet, there is a considerable amount of information available from the coverage decisions that CMS has made over the years. Medicare excludes preventive services, because they are not designed to treat or diagnose an illness. For devices, CMS has historically interpreted “reasonable and necessary” to mean that the product must, at minimum, be safe, i.e., benefits greater than risks, and effective. CMS also looks to authoritative objective evidence from published clinical studies and gives the most weight to those prospective, randomized studies published in peer-reviewed journals, as well as data regarding whether the item or service has been generally
accepted in the medical community. Consequentially, CMS has adopted and employed principles of evidence-based medicine. The agency seeks to identify quality data and whether the item or service has been generally accepted both for the condition for which it is used and for Medicare beneficiaries in general. Indeed, showing how the

Medicare population would benefit from the technology should be a key feature for any strategy for Medicare coverage.