Reasonable and Necessary, Breakthroughs in Reverse; CMS Changes Course on Breakthrough Medicare Device Coverage and Definition of “Reasonable and Necessary”

Introduction

On September 1, 2020, CMS published a new proposed rule designed to create a streamlined Medicare coverage pathway for new and innovative medical devices deemed “breakthrough” by the Food and Drug Administration (“FDA”). Had the rule gone into effect, the Medicare Coverage of Innovative Technology (“MCIT”) pathway would have provided for Medicare coverage of devices that meet the listed criteria on the date of FDA market authorization. Additionally, the proposed rule would have codified for the first time a definition of what items and services are “reasonable and necessary” for purposes of coverage under Medicare Parts A or B. CMS published the Final rule on January 14, 2021, but when the Biden Administration took office a few days later, CMS delayed the effective date until December 2021, so it could review the rule. On September 15, 2021, CMS published a new proposed rule that would repeal the January 14 rule’s MCIT pathway and its definition of ‘reasonable and necessary.” The new rule is open for comments until October 15, 2021.

CMS Concerns over the MCIT Pathway

The January 2021 rule provided Medicare coverage of devices that are designated as part of the FDA’s Breakthrough Devices Program and are market authorized by the FDA. In order for the FDA to grant a product a “Breakthrough Device” designation, it had to provide “for more effective treatment or diagnosis of life-threatening or irreversibly debilitating human disease or conditions” and to 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]

CMS is proposing to repeal this rule because CMS’ current leadership had concerns that the FDA designation of a breakthrough devices would not adequately protect the public or be in the best interest of Medicare beneficiaries. The January 2021 rule would have expedited Medicare coverage after the FDA designated the product as a “breakthrough device”, even though the FDA does not require the manufacture to include Medicare beneficiaries in the clinical studies done before market authorization. CMS now believes such designation would not be in the best interest of Medicare beneficiaries, because it may have required Medicare coverage without adequate evidence that breakthrough devices would actually benefit Medicare beneficiaries.

CMS also stated that breakthrough devices may only be beneficial to a small portion of the Medicare population, or at least would only be beneficial if used by clinicians with specific training. Because getting the FDA breakthrough designation did not require clinical testing with Medicare beneficiaries, CMS would lack the evidence to determine if the breakthrough devices would result in good outcomes for Medicare beneficiaries. Without such evidence, Medicare could be covering and paying for devices with little or no evidence that they actually assist physicians treat Medicare beneficiaries.

That leads to a related CMS concern, that if Medicare covered a breakthrough device based on the FDA’s designation, providers could have an incentive to use those devices, instead of other devices or treatments that could be more beneficial (or equally beneficial at less cost) to the providers’ patients. CMS wants to avoid the situation where breakthrough devices become the standard of care, regardless of outcomes, and push out alternative, potentially better treatments.

When new proposed rule goes into effect, it would not bar Medicare coverage for breakthrough devices. Existing pathways for coverage would still apply. CMS also noted that FDA determinations if a device is designated a breakthrough device are not binding on Medicare coverage determinations. Each agency has its own laws and criteria for decision making.

CMS Concerns over Codifying the “Reasonable and Necessary” Definition

Under section 1862(a)(1)(A) of the Social Security Act (codified as 42 U.S.C. § 1395y(a)(1)(A)), items not “reasonable and necessary” for the diagnosis or treatment of illness or injury are excluded from coverage under Medicare Parts A and B. However, what is “reasonable and necessary” is often a medical judgment call. The January 2021 rule would have stated 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. The proposed rule would have expanded the definition of “reasonable and necessary” to include commercial insurance coverage policies as a factor in determining Medicare coverage.

The new rule would repeal the codification of reasonable and necessary. After further review, CMS determined that having to consider commercial insurance coverage policies would create implementation and appeals challenges. It would be difficult to implement because the standard was too vague. The new rule does not have an alternative definition and would just remove the January 14 definition. However, CMS welcomes interested parties to submit comments on alternative ways to define “reasonable and necessary” under Medicare Parts A and B.

Conclusion

When the Biden Administration took office, it directed all federal agencies, including CMS, to review all final rule that had not yet taken effect. This included CMS final rules that created a streamlined Medicare coverage pathway for new and innovative medical devices deemed “breakthrough” by the FDA and codified the definition of what items and services are “reasonable and necessary” for coverage under Medicare Parts A and B. CMS’s newly proposed rule would repeal the January 2021 rule, ending the MCIT and the new definition of “reasonable and necessary.” The rule is briefly open for comment until October 15, 2021, and CMS welcomes comments about the repeal of MCIT and alternative ways to define “reasonable and necessary.”

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. Our thanks to Aliyah Price, William and Mary Law ‘2022, for her assistance in preparing this advisory.

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.