Medicare’s Coverage Determination Process

By September 28, 2011 Commentary

Obtaining reimbursement for health care products and some services is increasingly subject to a complex and often not transparent coverage and rate setting process.  As Medicare becomes responsible for a greater share of national health expenditures, obtaining coverage and payment from that program has taken on greater significance, especially since many other payers tend to follow Medicare’s lead.  A Robert Wood Johnson Foundation brief looks at the coverage process and makes suggestions for improvement.   (RWJ Paper) As the brief points out, Medicare really makes very few national coverage determinations and many coverage and payment decisions are made by its various administrative contractors, who tend to operate at a regional level.

In addition, while CMS has stated a goal of improving beneficiaries’ experience of care, improving their health and reducing the per capita costs of care, Congress has constrained the agency’s ability to take cost into account in making coverage determinations.  Even in the realm of efficacy and safety, that is, determining whether the product or service will actually work to improve health and will not harm patients, CMS often lacks, and vendors seldom provide, good solid clinical trial evidence to demonstrate that the product should be covered.  CMS does not have funds to conduct such research itself.  As a result, on a number of occasions very expensive items or services have been covered which later turn out to be ineffective, or worse, injurious to beneficiaries.

CMS has increasingly used coverage with conditions or coverage with evidence development to try to deal with the uncertainty around the value of some health products and services.  The authors recommend that CMS  adopt a more systematic approach to coverage issues, focusing on high dollar, frequently used items; that prior authorization be specifically approved by Congress and used by CMS; that CMS be given an ability to influence research agendas; and that Congress explicitly allow least costly alternative pricing and otherwise be able to consider cost in making coverage and reimbursement arrangements.  All very sensible ideas, but we will see if all the lobbying and campaign contributions that vendors throw at Congress ever permit these sensible ideas to be adopted.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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