CMS “Breaks Through” Medicare Coverage Delay and Defines “Reasonable and Necessary” in Proposed Rule


On September 1, 2020, CMS published a new proposed rule that would create a streamlined Medicare coverage pathway for new and innovative medical devices that are deemed “breakthrough” by the Food and Drug Administration (“FDA”). If the proposed rule is finalized, the Medicare Coverage of Innovative Technology (“MCIT”) pathway would provide for Medicare coverage of devices that meet the listed criteria on the date of FDA market authorization and would continue for four years. Additionally, the proposed rule would codify a definition of what items and services are “reasonable and necessary” for purposes of coverage under Medicare Parts A or B. This new proposed rule is open for comments until November 2, 2020.

MCIT Coverage Pathway

This new proposed coverage pathway would provide Medicare coverage of devices that are designated as part of the FDA’s Breakthrough Devices Program and are market authorized by the FDA. The MCIT pathway will be a voluntary program that device manufacturers need to inform CMS that they want to pursue. In order for a device to receive a “Breakthrough Device” designation from the FDA, it must provide “for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions” and must satisfy one of the following criteria:

  • It represents a breakthrough technology;
  • No approved or cleared alternatives exist;
  • It offers significant advantages over existing cleared or approved alternatives; or
  • Device availability is in the best interest of patients.[1]

Under the MCIT coverage pathway, national Medicare coverage would begin when the device receives FDA market authorization. Devices that received FDA market authorization within the two years prior to the effective date of the final rule, would be eligible for coverage under this pathway; however, only the dates of service on or after the effective date of the final rule would be eligible for coverage. To be covered under this pathway, the device would still need to fit within a statutorily defined Medicare benefit category and the device would not be covered if the device does not have a Medicare benefit category or is otherwise excluded from coverage by statute. Devices covered under the MCIT pathway would be published on the CMS website so stakeholders would be aware of what is covered.

A device covered under the MCIT pathway would be covered for up to 4 years from the date it received FDA market approval, unless CMS issues a National Coverage Decision (“NCD”) on the device, i.e., decides that it cannot be covered by Medicare. After the four years, the device will either be subject to an NCD, which may include facility or patient coverage criteria, be subject to an NCD which determines the device will not be covered, or be left to Medicare Administrative Contractors’ (“MACs”) discretion for coverage. If manufacturers want their device to continue to be covered by Medicare immediately after this four-year period, they will be encouraged to submit an NCD coverage request during the third year of MCIT coverage.

The MCIT Coverage Pathway is designed to address many of the weaknesses and concerns with the NCD and Local Coverage Determination (“LCD”) processes. Currently, both of these processes take nine months or more. This time delay creates a coverage uncertainty period for new devices between the time they receive FDA market authorization and the finalization of a corresponding LCD or NCD decision.

This creates significant inconsistency within the Medicare system because, during this period of delay, MACs make coverage decisions for these new devices on a case-by-case basis. To date 10 of the 16 breakthrough devices that the FDA has market authorized, experience coverage variability. This proposed rule would clean up this inconsistency and would create a pathway for immediate national Medicare coverage if the device meets the parameters outlined in the proposed rule.

In addition to general comment, CMS is specifically seeking comments on certain provisions of the MCIT coverage pathway. First, CMS seeks comment on whether CMS should automatically open a NCD analysis if a MAC has not issued an LCD within 6 months of expiration of the device’s MCIT coverage. Second, CMS seeks comment on whether this pathway should include diagnostics, drugs, and/or biologics that meet similar FDA breakthrough criteria. Third, CMS seeks comment on whether manufacturers would prefer an opt-in system as proposed, or an opt-out system. If manufacturers would prefer an opt-out system, CMS solicits comments on how such a system should be implemented. Fourth, CMS seeks comments on whether the four-year coverage period is sufficient. Finally, CMS seeks comments on whether a manufacturer should be able to opt-out of MCIT pathway coverage after opting in.

Reasonable and Necessary Determination

Under section 1862(a)(1)(A) of the Social Security Act (codified as 42 U.S.C. § 1395y(a)(1)(A)), items that are not “reasonable and necessary” for the diagnosis or treatment of illness or injury are excluded from coverage under Medicare Parts A and B. However, up to this point, CMS has not codified what “reasonable and necessary” means. CMS now proposes that an item or service will be considered “reasonable and necessary” if it is (1) safe and effective; (2) not experimental or investigational; and (3) appropriate for Medicare patients, including the duration and frequency that is considered appropriate for the item or service. An item or service will satisfy the Medicare patient appropriateness test (the “Appropriateness Test”) if it is:

  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition;
  • 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.

Conversely, an item or service would be considered appropriate for Medicare patients if it is covered in the commercial insurance market, unless there is evidence that shows there are clinically relevant differences between Medicare beneficiaries and their commercially insured counterparts. If an item or service is deemed appropriate for Medicare patient coverage based on its corresponding commercial insurance coverage, then it does not need to meet the Appropriateness Test, but it would still need to meet the first two criteria, that it is safe and effective and not experimental or investigational.

Notably, under the proposed MCIT coverage pathway discussed earlier in this advisory, a device that receives a breakthrough device designation by the FDA would be considered “reasonable and necessary” for purposes of Section 1862(a)(1)(A) of the Social Security Act.

CMS specifically seeks several comments on the “covered in the commercial insurance market” portion of this proposed codification. First, CMS seeks comment on what data sources should be used to implement this policy, determine what is covered in the commercial insurance market, and if this information should be made public. Second, CMS is seeking comment on whether a party seeking coverage under this provision can submit information to CMS about its coverage in the commercial insurance market. Third, CMS seeks comment on any other limitations that should be put on the determination that an item or service is covered in the commercial insurance market such as if CMS should only examine certain subsets of the commercial insurance market or if CMS should only cover a device or service if it is covered by a majority or certain plurality of the commercial insurance market.

CMS is aware that different plans may place different coverage criteria on a health care item or service. Currently, CMS intends to adopt the least restrictive criteria of the commercial insurance coverage offerings they examine when CMS covers an item or service under this provision. However, CMS is seeking comments on whether it makes sense to instead adopt the most restrictive coverage criteria. As a third alternative, CMS seeks comments on whether it should instead adopt the coverage criteria of a plurality or majority of the policies it examines.


The proposed MCIT pathway would allow Medicare beneficiaries, mainly senior citizens, to access innovative technologies that could potentially improve the management and treatment of their medical conditions. It would eliminate the proverbial Medicare coverage “valley of death” that reportedly exists for innovative medical devices. The four-year MCIT coverage window gives manufacturers a grace period window to develop additional evidence that their devices are appropriate for the care and treatment of the Medicare population. Further, this proposed rule provides additional clarification and guidance to the long poorly-defined “reasonable and necessary” coverage requirement under Medicare Parts A and B, a rule change with potential implications beyond the MCIT issues. The provision of the proposed rule that provides for coverage of items and services that are covered by the commercial insurance market has the potential to greatly expand the covered items and services to which Medicare beneficiaries will have access to. The final rule, if adopted, is not likely until mid-2021.

If you or your practice have any questions about this proposed rule or would like assistance submitting a comment, please contact Peter Mellette, Harrison Gibbs, or Elizabeth Dahl Coleman at Mellette PC.

This client alert is for general educational purposes only. It is not intended to provide legal advice specific to any situation you may have and does not cover all the provisions of the proposed rule. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice.

[1] The FDA Breakthrough Device program is codified at 21 U.S.C. § 360e-3. Note that safety and risk assessments are not explicitly addressed in the MCIT pathway.