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CMS Proposes Expanded Options for Determining “Reasonable and Necessary”

The Social Security Act has long held that Medicare coverage is only available when the item or service is “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. § 1925(a)(1)(A). The Centers for Medicare & Medicaid Services (“CMS”) and its contractors have had wide discretion in determining whether items or services met this standard, and in the view of many, used that discretion to unnecessarily limit or delay coverage. Under a recent proposed rule, CMS plans to “clarify” the reasonable and necessary standard, while also providing a significant new way to seek coverage, particularly for innovative technology. See 85 Fed. Reg. 54327 (Sept 1, 2020) (the “Proposed Rule”). Indeed, if CMS finalizes this Proposed Rule, it will allow evidence of commercial coverage to show that a service or item is “reasonable and necessary.” While there is a fair amount of clarification needed to implement such a change, this rule change would seemingly allow for faster path to coverage for emerging treatments.

The Proposed Rule followed an Executive Order in October 2019 in which the White House, among other instructions, directed CMS to promulgate regulations or guidance clarifying the application of the reasonable and necessary standard. Historically, CMS laid out three standards for determining whether an item or service is “reasonable and necessary:”

  • Is the item or service safe and effective;

  • Is it not experimental or investigational;

  • Is it appropriate?

CMS provided its Medicare Administrative Contractors (“MACs”) and Medicare audit contractor’s additional guidance related to whether an item or service is “appropriate” in the Medicare Provider Integrity Manual. See MPIM, Ch. 3, § and Ch. 13, § 13.5.4. An item or service is “appropriate” for Medicare patients, including the frequency and duration considered appropriate for the item or service, if it is:

  • 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.

CMS plans to promulgate this standard through the Proposed Rule. This change would not be significant as it has already been the standard under which the MACs have operated.

CMS proposed a more significant change, however, in the rulemaking. If finalized, CMS and the MACs would also consider an item or service “appropriate” if it is covered in the commercial insurance market, unless there are clinically relevant differences between Medicare beneficiaries and commercially insured individuals. If the item or service is covered by a commercial plan, the other appropriateness criteria would not also need to be met.

CMS hopes this addition would help bring more timely coverage to innovative technologies, in that coverage decisions would bring in the expertise of commercial insurers and would follow the “principles of patient safety, marketbased policies, and value for patients.”

CMS will accept comments on the Proposed Rule through November 2, 2020. While at first blush it would appear that opening different avenues to seek Medicare coverage is beneficial, the effectiveness of such a provision is in the details.

Medicare providers, suppliers and practitioners should consider commenting on issues such as: 

  • How many commercial plans must provide coverage to meet the standard? Is coverage from one plan enough?

  • What if different plans have different standards for coverage, frequency or duration? Should Medicare follow the least or the most restrictive commercial plan?

  • Should Medicare look to regional or other subsets of plans to determine coverage?

Questions remain as to how CMS would use this rule change in practice, but to the extent it leads to a more efficient path to Medicare coverage for new and innovative treatments; it will be a welcome change.

Besides the reasonable and necessary discussion, the Proposed Rule also outlines specific proposals for expediting coverage of “FDA-designated breakthrough medical devices.” The proposal, if finalized, would provide national Medicare coverage on the same day as FDA market authorization for breakthrough devices for four years. More information on this component of the Proposed Rule can be found here.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 296

About this Author

Bragg E. Hemme, Polsinelli PC, Medical Licensure Lawyer, State Hospital Regulatory Attorney

In order to assist health care clients address their targeted business concerns, Bragg Hemme draws on a wealth of practical experience and a solid understanding of the industry gained during her time as both external and internal counsel. Her experience includes advising clients regarding the complex and ever-changing federal and state regulatory environment. She focuses her practice on government payer concerns such as:

  • Medicare, Medicare advantage and Medicaid reimbursement

  • Enrollment issues and...