CMS Proposes New Medicare Coverage Pathway for Breakthrough Devices and Regulatory Definition of “Reasonable and Necessary”

Basis for the Proposed Rule: Executive Order 13890

CMS states that the proposed rule “respond[s] directly to” directives in an executive order that President Donald Trump issued on October 3, 2019 (EO 13890), titled “Executive Order on Protecting and Improving Medicare for Our Nation’s Seniors.” That executive order instructed the Secretary to “propose regulatory and sub-regulatory changes to the Medicare program to encourage innovation for patients” within one year of the issuance of the executive order. The executive order also directed the Secretary to “clarify the application of coverage standards.”

Based on those directives, CMS proposes a new coverage pathway “to accelerate the coverage of new, innovative breakthrough devices to Medicare beneficiaries” and seeks comments on whether the pathway should apply more broadly than just “breakthrough devices” as designated by the U.S. Food and Drug Administration (FDA). In addition, CMS proposes to codify a regulatory definition of “reasonable and necessary” for determinations under the statutory Medicare coverage provision at section 1862(a)(1)(A) of the Social Security Act (SSA). CMS states that these proposed standards would be used “for items and services that are furnished under [Medicare] Part A and Part B.”

Proposed New Pathway for Medicare Coverage of Innovative Technology

 Under the proposed rule, a new coverage pathway, Medicare Coverage of Innovative Technology (MCIT), would be available for medical devices that receive FDA designation as “breakthrough devices.” FDA designation as a breakthrough device is available for certain medical devices and device-led combination products that FDA determines provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions. If finalized, the MCIT would allow such products, if the manufacturer “opts in” to the MCIT pathway, to receive immediate and national coverage for a period of four years, effective as of the date that the device receives FDA market authorization. After the four-year period, CMS proposes that coverage of the device would be subject to the availability of another existing Medicare coverage pathway — such as a National Coverage Determination (NCD), a Local Coverage Determination (LCD), or claim-by-claim adjudication at the discretion of Medicare Administrative Contractors (MACs).

To be eligible for the proposed MCIT pathway, in addition to being an FDA-designated breakthrough device, CMS proposes that the technology would need to be used consistent with its FDA approved or cleared indication for use, be within a Medicare benefit category, not be the subject of a restrictive Medicare NCD, and not otherwise be excluded from Medicare coverage through law or regulation. CMS proposes that devices that entered the market within the past two years, as of the effective date of the final rule, would also be eligible for MCIT.

CMS states that the proposed MCIT pathway would not require that devices be part of a clinical trial for purposes of MCIT coverage; CMS expressly requests comments, however, on “whether CMS should require or incentivize manufacturers to provide data about outcomes” during the four-year MCIT coverage period or whether the manufacturer “should be obligated to enter into a clinical study similar to CMS’s Coverage with Evidence Development (CED) paradigm.”

More broadly, CMS also requests comments on whether changes should be made to any of the existing Medicare coverage pathways, including NCDs, LCDs, and claim-by-claim adjudication (as well as clinical trial policies and parallel review) in order to “achieve the goals set out by E.O. 13890.”

Proposed Regulatory Definition of “Reasonable and Necessary”

The proposed rule also would establish a new regulatory definition addressing the standards for “reasonable and necessary” determinations. To date, the factors used in making such determinations have not been codified in regulations for Medicare coverage purposes. In the proposed rule, CMS asserts that it has authority to establish regulations regarding what it means for an item or service to be “reasonable and necessary.” CMS states that the proposed regulatory standards would “be used in making reasonable and necessary determinations under section 1862(a)(1)(A) of the [SSA] for items and services that are furnished under Part A and Part B.”

Under the proposed definition, an item or service would be considered “reasonable and necessary” if the item or service is (1) safe and effective; (2) not experimental or investigational; and (3) appropriate for Medicare patients, including the duration and frequency considered appropriate for the item or service. CMS further proposes that in order to be “appropriate for Medicare patients” under the third prong of this definition, the item or service would also need to meet the criteria for one of two alternative options under the proposed regulatory provisions.

• Under the first option, the item would need to meet all of the following criteria: (A) be “[f]urnished 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”; (B) be “[f]urnished in a setting appropriate to the patient’s medical needs and condition”; (C) be “ordered and furnished by qualified personnel”; (D) be “[o]ne that meets, but does not exceed, the patient’s medical need,” and (E) be “[a]t least as beneficial as an existing and available medically appropriate alternative.”

• Under the second option, CMS proposes that an item or service could meet the “appropriate for Medicare patients” prong of the regulatory “reasonable and necessary” definition if it “[i]s covered by commercial insurers, unless evidence supports that differences between Medicare beneficiaries and commercially insured individuals are clinically relevant.”

CMS specifically requests comments on how to implement this proposed policy, including comments on the types and sources of data that should be considered “and the best way to determine which commercial plan(s) we would rely on for Medicare coverage” under the second option noted above. Under the proposed rule, CMS would exclude Medicaid managed care, Medicare Advantage, and other government-administered healthcare coverage programs from the types of coverage CMS would consider under this “commercial coverage” analysis.