HCFA Proposes Cost As A Medicare Coverage Criteria If Alternatives Exist

The Health Care Financing Administration would consider cost in deciding whether Medicare should cover a medical technology that employs the same "clinical modality" as an alternative treatment used for the same indication and already covered by Medicare.

Cost would not be included in a coverage assessment when a new technology falls into a different clinical modality than existing Medicare-covered treatments for the same indication, an agency regulatory notice states.

While the determination of a product's "clinical modality" appears to represent a critical step in the agency's analysis, HCFA has not yet fully defined the term and requests public comment on the matter.

Clinical modality could be determined simply according to benefit category, the document suggests.

The notice of intent to publish a proposed rule is scheduled to appear in the May 16 Federal Register. A 30-day public comment period will follow.

HCFA has been working on coverage regulations for more than a decade. A proposed rule was issued in 1989, never made final, and ultimately rescinded in April 1999. The attempt to introduce cost as an explicit component in coverage determinations was a significant factor in that history.

Industry's antipathy to any inclusion of cost or "added value" in HCFA's coverage criteria could make the process of defining clinical modality a moot point.

At a December meeting of the Medicare Coverage Advisory Committee, the Health Industry Manufacturers Association asserted that "economic factors should play no role" in the coverage decision.

"Nothing in the Medicare law [gives] HCFA authority to make coverage decisions based on economic information," HIMA maintained.

Industry has long contended that cost issues should be dealt with exclusively by the agency's payment system as opposed to its coverage and analysis unit. The higher cost of one technology over an alternative should never cause HCFA to completely rule out a favorable coverage decision, industry has argued.

The notice leaves open the possibility of covering more expensive technologies at a lower payment rate.

Specifically, the agency is seeking comments on whether it "should simply cover the new item or service but reduce the Medicare payment rate for the incurred expenses to the same rate as the Medicare covered alternative."

Cost also falls under the larger rubric of "added value," which is one of the two general "criteria" with which the agency would make coverage decisions.

Before considering potential added value, however, a new technology must first demonstrate "medical benefit," the other proposed criteria.

In order to demonstrate medical benefit, a technology must "produce a health outcome better than the natural course of illness or disease with customary medical management of symptoms," the document states.

The notice sets forth a proposed sequence of steps that would be used to assess added value, including whether a Medicare-covered alternative in the same clinical modality exists; whether the new service offers the same medical benefits as the covered alternative; and whether the new service would result in equivalent or lower total costs for the Medicare population.

If there is no Medicare alternative in the same clinical modality as the new item, or if the new item offers significantly greater benefit than the existing Medicare item in the same modality, then the new item will be covered by Medicare without consideration of cost, the document states.

While the document embraces a multiple modality approach to disease treatment, it would appear to limit coverage within the same modality to the one treatment HCFA determines to be superior, either in cost or in medical benefit.

Under such an approach, older technologies could be at risk of losing Medicare coverage if HCFA decides that a new option offers increased benefits. "If a new item or service is equivalent in benefit, is in the same clinical modality, is thus substitutable for the existing service, and is lower in costs, we would consider withdrawing coverage for the more expensive currently covered alternative service," the notice states.