The Scope of Medicare Reimbursement for New Medical Devices: Impact on Device Availability and the Standard of Care
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CitationThe Scope of Medicare Reimbursement for New Medical Devices: Impact on Device Availability and the Standard of Care (1995 Third Year Paper)
AbstractEvolving standards of care motivated by advances in medical technology alter the characteristics and costs of delivered health care. Faced with shifting reimbursement demands, the Health Care Financing Administration (HCFA) has promulgated regulations setting forth criteria and procedures for making coverage decisions about health care technology and setting prospective payment limits for health care services including those related to new technology. The effects of such regulations extend beyond the Medicare program due to the tendency of other health insurers to mirror HCFA coverage, the impact of Medicare payments on cross-subsidization and other effects of Medicare reimbursement decisions on the demand for and supply of health care. The principle statutory authority for rules limiting coverage of health care technology is Section 1862(a)( 1) of the Social Security Amendments of 1965 (codified in 42 U.S.C. Â§ 1395y(a)( 1)) which provides that no Medicare payment shall be made for items or services, including medical devices, "which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member." In 1989 HCFA proposed a rule describing criteria and procedures for health care technology Medicare coverage decisions. The rule defines a reasonable and necessary service as one which is safe and effective, cost-effective, appropriate, and not experimental or investigational. A provision of the rule categorizes a medical device that has not been approved by the FDA as experimental or investigational and hence not reimbursible under the reasonable and necessary standard. In this paper I will (1) consider the legal force and implications of the provision excluding Medicare coverage of all unapproved medical devices, (2) discuss HCFA's recent efforts to investigate billing for investigational cardiac devices, (3) consider the impact of reimbursement for investigational device on device availability and (4) consider ways to reconcile prudent control of health care expenditures with expeditious promotion of high standards of health care.
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