Defining ‘Reasonable and Necessary’ Coverage for Medicare

Medicare won’t provide coverage for items and services that are not reasonable and necessary for the diagnosis or treatment of an illness or injury. National coverage determinations (NCDs) are made through an evidence-based process, with opportunities for public participation. In the absence of NCDs, an item or service may be covered at the discretion of the Medicare contractors based on a local coverage determination (LCD).

No payment may be made under Part A or Part B for any expenses incurred for items or services not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed (misshapen) body member. When you are submitting claims to Medicare, your medical documentation should clearly demonstrate that the service meets all of the above criteria. Such documentation should be maintained in the patient’s medical record and must be available to the contractor upon request.

Defining ‘Reasonable and Necessary’

Under a recently proposed rule (the final rule is effective on March 15, 2021.), CMS clarified the reasonable and necessary standard while providing a significant new way to seek coverage, particularly for innovative technology. As per this proposed rule, it will allow evidence of commercial coverage to show that a service or item is “reasonable and necessary.” While there is a fair amount of clarification needed to implement such a change, this rule change would seemingly allow for a faster path to coverage for emerging treatments.

CMS laid out three standards for determining whether an item or service is “reasonable and necessary under §1862(a) (1) (A) of the Act if the service is:

  • Safe and effective;
  • Not experimental or investigational; and
  • Appropriate

CMS provided additional guidance related to whether an item or service is ‘appropriate’ in the Medicare Provider Integrity Manual. An item or service is ‘appropriate’ for Medicare patients, including the frequency and duration considered appropriate for the item or service, if it is:

  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the beneficiary’s condition or to improve the function of a malformed body member;
  • Furnished in a setting appropriate to the beneficiary’s medical needs and condition;
  • Ordered and furnished by qualified personnel; and
  • One that meets, but does not exceed, the beneficiary’s medical need

CMS plans to promulgate this standard through the Proposed Rule. This change would not be significant as it has already been the standard under which the MACs have operated. CMS proposed a more significant change, however, in the rulemaking. If finalized, CMS and the MACs would also consider an item or service “appropriate” if it is covered in the commercial insurance market unless there are clinically relevant differences between Medicare beneficiaries and commercially insured individuals. If the item or service is covered by a commercial plan, the other appropriateness criteria would not also need to be met.

For this proposed rule when the comments are submitted in November, AHA warned against replacing the appropriateness criteria entirely with a consideration of commercial market coverage, noting that such an approach could reduce coverage in the Medicare program and transparency in coverage determinations. Under the final rule, which takes effect March 15, CMS opted not to replace the appropriateness criteria entirely and will issue draft sub-regulatory guidance on the methodology for determining when and how commercial coverage will be determined relevant.

The final rule will establish a Medicare coverage pathway for innovative medical devices designated as a breakthrough by the Food and Drug Administration. According to CMS, the Medicare Coverage of Innovative Technology pathway will result in four years of national Medicare coverage starting on the date of FDA market authorization or a date within two years of authorization that the manufacturer chooses.

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