Friday, July 28, 2023

JAMA x 2: When CMS does NOT Pay for Something: Legalisms

 Most readers of this blog probably wouldn't be amazed at the idea, that CMS may "NOT" pay for something.  New devices and diagnostics are routinely classifed as "not reasonable and necessary."

The Medicare law is written, Medicare can NOT pay for services that are NOT reasonable and necessary.   This use of the double-negative leaves a little vagueness to the opposite concept, what Medicare DOES have to pay for.   Does it have to pay for on-label drugs, for example?  

JAMA Internal Medicine provides a legal memo by Davai and Kesslheim on this topic, accompanied by an Op Ed by  Crosson and Redberg.

Find the article HERE, the Op Ed HERE.

The article is 4700 words, the op ed is 1800.

The article brings out some old favorites, like courts ruling against "least costly alternative" some years ago.  Both articles assert that CMS authority to deny coverage of FDA-approved items is very clear, yet, with rather helter-skelter logic, both then ask that Congress rapidly reaffirm this fact.  I can see the present SCOTUS could find that Congress' instruction to CMS is unacceptably vague and thus gives unacceptable authority to the agency.   Both troop out sky-high sales of Aduhelm as a threat averted but it's highly unclear such a drug with difficult administration and high side effects, would ever had had big sales (see case study: Provenge).  

AI summaries follow.



The Op Ed discusses the need for public recognition and support of the US Centers for Medicare & Medicaid Services (CMS) to make coverage decisions for Medicare beneficiaries. The article highlights concerns regarding FDA-approved drugs and devices with limited evidence of clinical benefit, and the pressure from pharmaceutical and medical device industries influencing approvals. The authors recommend that Congress strengthen CMS's authority to include drug/device cost as part of its reasonable determination. They argue for clear standards on what constitutes "reasonable and necessary" medical products, especially for fast-track and accelerated approvals. Congress should act to protect the health of beneficiaries and the Medicare program by upholding CMS's decision-making authority.



This medical legal essay explores the Centers for Medicare & Medicaid Services' (CMS) authority to limit coverage for FDA-regulated products under Medicare Part B. CMS has employed various strategies, including Coverage with Evidence Development (CED), to condition coverage on patients' participation in clinical trials or registries approved by CMS. 

The essay discusses court rulings upholding CMS's authority to make such coverage decisions, emphasizing the difference between Medicare's coverage criteria and the FDA's approval standards. The authors suggest that Congress may need to clarify CMS's coverage discretion and consider setting appropriate reimbursement rates to prevent exorbitantly priced products from burdening the Medicare budget. As the FDA approves treatments based on surrogate measures, pressure on CMS to cover products with limited evidence will grow, necessitating clearer statutory authorization for CED determinations.

Additional Request:

Discuss how Medicare currently defines "reasonable and necessary," any resulting problems or legal debates, and potential next steps or improvements.  Take as much text as you need.  You are writing for an expert reader.


Medicare currently defines "reasonable and necessary" as a key criterion for determining coverage under Medicare Part B. This term is derived from the Social Security Act, specifically Section 1862(a)(1)(A), which states that Medicare will not pay for any item or service that is not "reasonable and necessary for the diagnosis or treatment of illness or injury." However, the law does not provide a precise definition of what constitutes "reasonable and necessary," leaving room for interpretation and administrative discretion.

The lack of a specific definition has led to significant challenges and legal debates. 

The Centers for Medicare & Medicaid Services (CMS) has the authority to make coverage determinations based on its interpretation of the "reasonable and necessary" requirement, and its decisions have significant implications for patients, providers, and manufacturers. Courts have generally upheld CMS's authority to make these determinations, emphasizing that the agency's expertise in public health and its statutory discretion warrant deference.

One contentious issue arises from the potential inconsistency between FDA approval and CMS coverage. While the FDA evaluates drugs and devices for safety and efficacy, Medicare coverage decisions focus on clinical necessity and cost-effectiveness. As a result, some FDA-approved products may not be covered by Medicare, leading to challenges from industry and beneficiaries seeking broader coverage.

Another area of concern is the use of Coverage with Evidence Development (CED) programs. These programs condition coverage on patients' participation in clinical trials or registries approved by CMS, aiming to generate additional evidence while limiting inappropriate coverage. While CED can be a valuable tool, there have been debates about its scope, with some arguing that it may lead to limitations in access for certain patients.

Furthermore, the lack of explicit consideration of cost in Medicare coverage decisions has been a topic of debate. Medicare is a significant payer in the healthcare system, and its coverage decisions can impact healthcare costs and patient access. Some experts argue that considering cost in coverage decisions could help promote more efficient resource allocation and prevent the potential budgetary strain caused by costly treatments.

Potential next steps and improvements to address these challenges include legislative actions to clarify CMS's coverage discretion and potentially allow the consideration of cost in coverage determinations. Congress could provide clearer statutory authorization for CED programs, validating CMS's approach to incentivize the development of valuable therapies while ensuring appropriate coverage.

Additionally, efforts to improve transparency and public input in the coverage determination process could enhance public trust and understanding of CMS's decisions. Clearer communication about the basis for coverage decisions and the consideration of evidence could help stakeholders better navigate the complex landscape of Medicare coverage.

Furthermore, research and data collection to assess the impact of coverage decisions on patient outcomes, costs, and access to care could inform future policy improvements. Collaboration between CMS, the FDA, and other stakeholders may also facilitate a more integrated approach to coverage decisions, considering both clinical evidence and cost-effectiveness.

In conclusion, defining "reasonable and necessary" in Medicare coverage decisions remains an ongoing challenge, leading to legal debates and potential disparities in access to innovative medical treatments. Addressing these issues requires a balanced approach, ensuring patient access to effective therapies while promoting cost-effectiveness and responsible use of Medicare funds. Legislative clarifications, improved transparency, and evidence-based decision-making are crucial steps toward enhancing the Medicare coverage process for the benefit of patients, providers, and the healthcare system as a whole.

Debates about the scope of CED Coverage with Evidence Development, have gone as far as legal positions that CED is not legal for CMS.  Is this topic discussed?


Yes, the topic of whether Coverage with Evidence Development (CED) is legal for the Centers for Medicare & Medicaid Services (CMS) has been a subject of legal debate. While CMS has implemented CED as a strategy to condition coverage on patients' participation in clinical trials or registries, there have been challenges and legal positions questioning the legality and scope of this approach.

The legal basis for CED is rooted in the Medicare statute, which broadly prohibits payment for items or services that are not "reasonable and necessary" for a medical purpose. However, a narrower provision within the statute prohibits payment for "research conducted" by the Agency for Healthcare Research and Quality (AHRQ) that is not "reasonable and necessary to carry out" its clinical research mission. CMS has relied on this research-based provision to support its CED program, suggesting that payments for research may be appropriate even when clinical benefit is not fully established.

Critics argue that the statutory authority for CED is not explicitly stated and that CMS's use of CED goes beyond its legal boundaries. They contend that conditioning coverage on participation in research studies may lead to limitations on access to certain treatments, and that this approach could result in inequalities in healthcare access for Medicare beneficiaries.

As with many legal issues, there are differing perspectives on the interpretation of the Medicare statute and the scope of CMS's authority. While courts have upheld CMS's ability to limit coverage to research settings, there remains ongoing debate about the appropriateness and legality of CED as a coverage determination strategy.

To address these concerns, potential legislative actions or explicit statutory authorization for CED could provide a clearer legal basis for CMS's approach and help validate the use of CED programs. Moreover, increased transparency and public engagement in the coverage determination process may help to better address potential legal challenges and foster a more informed and inclusive decision-making process.