Inequitable Medicare Coverage Policy Can Impact Your Practice

   Scenario: The American Medical Association (AMA) or the Centers for Medicare and Medicaid Services (CMS) establishes a new billing code for a new wound care technology.

The wound of a Medicare beneficiary residing in Massachusetts is treated with that new technology. The claim for the service and new technology is submitted to a Medicare fiscal intermediary and paid. Several weeks later, the clinician in Massachusetts meets a colleague from Nevada at a national wound care conference and touts the success of this technology and confirms that it is, indeed, covered and reimbursed by Medicare. The wound care clinician from Nevada uses the new technology on the next Medicare beneficiary for whom it is deemed appropriate. The claim is submitted to the Medicare fiscal intermediary and immediately denied as non-covered.

   This is a common scenario that often occurs even within the same state due to the disparity between authorities who establish Medicare coverage policy. The existence of a CPT or HCPCS code is not a guarantee of Medicare coverage or payment - neither at a national nor a "local" (ie, fiscal intermediary and carrier) level. In fact, in 2001 about 25% of the new codes established for procedures and devices resulted in no Medicare coverage policy whatsoever. Another 25% had national policies established, and the remainder was affected by local coverage policy. How and why does this happen? And is it fair to the Medicare beneficiaries who pay the same premiums and deductibles in one state as in another?

   The Centers for Medicare and Medicaid Services contracts with commercial insurance companies (called contractors, carriers, or fiscal intermediaries [FI]) to process claims from nearly 1 million Medicare providers. Currently, 19 carriers process Part B claims and 27 FIs process Part A claims. Hospitals and other Part A providers can choose their FI. This means that different FIs may serve providers in the same state or even in the same city. The government has no requirement that FIs or carriers develop consistent policies for the same service, supply, procedure, or technology. The only contractors that have (and are required to have) identical coverage policies are the four Durable Medical Equipment Regional Carriers (DMERC) who process claims for durable medical equipment, orthotics, prosthetics, and medical supplies.

   For a supply or service to be eligible for Medicare coverage, it must fit into one of about 55 categories of benefits described in the Medicare statute. The Secretary of the Department of Health and Human Services (HHS) has legal authority to specify which procedures, devices, and services are covered in the broad benefit categories and under what conditions. The Secretary delegates this responsibility to CMS, which, in turn, delegates some of the responsibility to its contractors.

   The Centers for Medicare and Medicaid Services goes through a formal process of determining whether a procedure, service, or device should be included in the Medicare program. At the completion of this process, CMS can issue 1) a national noncoverage policy, which prohibits contractors from making payment for the item or procedure, 2) a coverage policy with specific restrictions, 3) a policy that allows contractors to use their discretion about coverage or noncoverage in their service areas, or 4) a coverage policy with no national restrictions. It is important to remember that a national policy applies to all Medicare beneficiaries regardless of their treatment location.

   In addition to CMS's national policies, carriers and FIs have the authority develop coverage policies that apply to the claims they process, as long as their policies do not conflict with the national coverage policy. For example, the contractor may develop specific policies that delineate the circumstances under which the use of a new device is considered "reasonable and necessary" - a term that has not been clearly defined by CMS, and is, therefore, left open for interpretation. Contractors develop local coverage policies for a variety of reasons, including: 1) to specify conditions to automatically deny inappropriate claims through their automatic claims processing software, or 2) to guard against fraud and abuse.

   The results of these national and local coverage determination processes are time-consuming (CMS coverage decisions can take from 3 to nearly 14 months), duplicate efforts, result in redundancy and inefficiency within the Medicare program, and create inequities of service and payment based solely on the location where they receive care for Medicare beneficiaries with similar medical conditions.

   This past April, the United States General Accounting Office (GAO) investigated the disparities in Medicare coverage policies and their effect on Medicare beneficiaries' access to equitable treatment as well as the cost of inefficiencies within CMS's process to determine coverage or noncoverage policies. The report made specific recommendations, including the elimination of local Medicare coverage policies for emerging technologies, an evaluation of existing local coverage policies to decide if they should be eliminated or made into national policies, and the establishment of a new, centrally managed process that is more open, understandable, and timely to develop national coverage policies that use expertise from other sources outside of the government.

   The entire report, entitled, "Divided Authority for Policies on Coverage of Procedures and Devices Results in Inequities," is available at: www.gao.gov/cgi-bin/getrpt?/GAO-03-175.