HCFA cost policy draft expected out this year

September 16, 1992

New devices may have to prove their cost-effectiveness as a criterionfor Medicare coverage, if guidelines proposed by the Health CareFinancing Administration are adopted as drafted. Medical manufacturers have traditionally had to prove thattheir new

New devices may have to prove their cost-effectiveness as a criterionfor Medicare coverage, if guidelines proposed by the Health CareFinancing Administration are adopted as drafted.

Medical manufacturers have traditionally had to prove thattheir new devices are reasonable and necessary, appropriate, andnot investigational or experimental. But in January 1989, HCFAproposed adding cost-effectiveness as a fourth criterion for coverage.Since then, the agency has been fine-tuning its coverage policy,which will likely be unveiled by year's end.

"We predict that if we were to use this criterion, onlya few decisions would be subject to formal cost-effectivenessanalysis," said Anne Marie Hummel, HCFA director of medicalservices payment policy. "Under our proposal, cost-effectivenesswould be an appropriate consideration only when comparing a technologywith already covered alternatives."

Hummel joined speakers from private and public industry ata forum on new medical technology organized by the Agency forHealth Care Policy Research. A report based on the forum was releasedby the AHCPR in July.

Under a cost-effectiveness scenario, proponents of a new technologywould have to prove significant medical benefit, notwithstandingcost. The technology would need to be less costly or at leastas effective as an alternative covered procedure or device. Ifthe technology is less effective and less costly than an existingalternative, proponents would need to prove that it is an acceptablesubstitute for some patients.

"Under the cost-effectiveness criterion, we will not denycoverage of a technology simply because of its cost," shesaid. "It's important to keep in mind that the Medicare programcannot deny coverage based on aggregate costs."

Opportunities to comment on HCFA's rule and its cost-effectivenessmethodologies will come after its publication in the Federal Register,Hummel said.

"We want the public to be aware of our proposed approachesand methodology and be given an opportunity for involvement,"she said.

Most coverage decisions are made in the field by Medicare contractorswho pay individual claims. Only about 10 to 20 issues of nationalsignificance are addressed by HCFA for a national coverage decision,she said.

Two imaging technologies, PET and MR angiography, are currentlyundergoing review for coverage. Factors that determine which technologiesare ripe for national coverage decisions include those that:

  • are likely to be used in more than one region of thecountry;

  • have potential for rapid diffusion and application;

  • are a significant advance of medical science;

  • constitute a new product for which no similar technologyis already covered under Medicare; or

  • might be a significant expense to the program.

National coverage issues are often considered when there issubstantial disagreement among experts regarding safety, efficacyand appropriateness, or because of inconsistent coverage decisionsby contractors, Hummel said.

The bottom line for HCFA is ensuring that coverage is awardedto the technologies that deserve it most from a quality-care standpoint,she said.

"We pay for the best care that we can get for our beneficiaries.We do not want to use all of our available resources for a technologythat only marginally improves health or for which questions aboutsafety and efficacy remain unanswered," she said.