Medicare:

Divided Authority for Policies on Coverage of Procedures and Devices Results in Inequities

GAO-03-175: Published: Apr 11, 2003. Publicly Released: May 12, 2003.

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Critical choices on whether new technology will be covered for Medicare's 40 million beneficiaries are made nationally by the Centers for Medicare & Medicaid Services (CMS)--the agency that administers Medicare--or locally by contractors that process and pay claims. GAO was asked to review the degree to which new procedures and devices are incorporated into Medicare, the effect of Medicare coverage policy-making processes on beneficiaries, and to what extent CMS has addressed concerns about its national coverage process.

Medicare Covered Most New Procedures and Devices: Medicare covered about 99 percent of the procedures and devices that were assigned codes by an American Medical Association panel or a committee of insurers in 2001. About a quarter were introduced into the program without coverage policies that describe the circumstances for Medicare coverage or place restrictions on their use. Another quarter were affected by national coverage policies and the rest were affected only by local coverage policies. Variations in Local Coverage Led to Inequities: Because contractors can determine coverage for beneficiaries being treated in their jurisdictions, coverage inequities for beneficiaries with similar medical conditions have resulted. For example, until recently, coverage for a new treatment for debilitating tremors, called bilateral deep brain stimulation (DBS), had been allowed only for beneficiaries treated in some states. On April 1, 2003, CMS implemented a consistent national coverage policy on DBS, but coverage variation continues for other procedures. National Coverage Development Process Raises Concerns: While CMS creates national coverage policies that apply equally to all Medicare beneficiaries, criticisms of its slow pace and its closed policy development process prompted CMS to take steps to make its process more understandable, open, and timely. Nevertheless, the national process remains flawed because it lacks clear coverage criteria, remains closed in fundamental ways to physician and beneficiary input, and has not consistently met timeliness goals.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Medicare Modernization Act required modifications of the previous national coverage decision process that became effective January 1, 2004. CMS announced those changes in a note on its web site and will publish guidance documents later this year. The new process requires publication of a draft decision 6 months after opening the decision with a 30-day comment period prior to posting the final decision. This process is currently in effect and will allow stakeholders with scientific, clinical, and programmatic expertise, as well as the public, to comment on proposed coverage decisions.

    Recommendation: To ensure that all Medicare beneficiaries are treated equitably, the Administrator of CMS should establish a new process for making national coverage policies that requires public input on draft policies, adheres to time frames, and provides for routine consultation with key Department of Health and Human Services and external stakeholders with scientific, clinical, and programmatic expertise.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  2. Status: Closed - Implemented

    Comments: The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) required that CMS develop a plan to promote the consistency of coverage determinations (coverage policies). Specifically, consistent with our recommendation, Section 731 of MMA required that CMS develop a plan to evaluate new local coverage determinations to determine which should be adopted nationally and to what extent greater consistency could be achieved among them. Pursuant to this MMA provision, CMS established a process to evaluate whether local coverage determinations developed on or after June 19, 2006, should be adopted nationally. Under this new process, CMS has tasked its contractors to identify local coverage determinations that might be appropriate for consideration as national coverage determinations and submit them and related documentation to a newly-established advisory group for national coverage determination consideration. This group then forwards its determination to the CMS's Coverage and Analysis Group, which is responsible for developing national coverage determinations. The Coverage and Analysis group then follows its already established process for dealing with requests for national coverage determinations that are generated from within CMS. Prior to this, CMS required its contractors to review their local coverage determinations at least annually to identify those policies that are obsolete, those that would benefit from nationalization, and those that require revision.

    Recommendation: To ensure that all Medicare beneficiaries are treated equitably, the Administrator of CMS should develop and implement a plan to evaluate the merits of all existing local coverage policies that affect procedures and devices with established codes, with the intent of incorporating appropriate aspects of local policies into national coverage policies and eliminating the remainder.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  3. Status: Closed - Not Implemented

    Comments: HHS did not agree with this recommendation and argued that it would drastically alter the intended design of Medicare as a regional program. As of August 2005, this position has not changed.

    Recommendation: To ensure that all Medicare beneficiaries are treated equitably, the Administrator of CMS should eliminate the ability of claims administration contractors to develop new coverage policies for procedures and devices that have established codes.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

  4. Status: Closed - Implemented

    Comments: Although HHS did not concur with this recommendation, GAO provided input to the staff developing the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which subsequently required HHS to make available to the public the factors that are considered in making national coverage decisions concerning whether an item or service is considered reasonable and necessary. In September 2004 CMS issued a notice in the Federal Register that explained a method that would be used to develop and make available to the public guidance documents consistent with this MMA requirement. In addition, in April 2005 CMS issued draft guidance for the public, industry, and CMS staff on the factors that CMS may consider in making coverage decisions on whether a certain item or service is reasonable and necessary when sufficient data are not available concerning the appropriateness of coverage. CMS also stated that it will seek public input on possible topics for new guidance documents and on proposals for review or revisions of existing ones.

    Recommendation: To ensure that all Medicare beneficiaries are treated equitably, the Administrator of CMS should promulgate written criteria for assessing whether a service or item is reasonable and necessary.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

 

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