Case Overview, Coverage of Medical Devices Under Medicare

This document provides background information and summarizes the debate over revising the criteria and process used by HCFA to determine the coverage of medical devices under Medicare. The links to the left will lead you to public documents that we have found.

           Inventing a medical device that alleviates a serious disease or disability is one thing; getting the government to cover payment for it under one of its two mammoth programs, Medicaid or Medicare, is quite another. A large segment of the American population utilizes at least one medical device, ranging from pacemakers, insulin pumps, and saline breast implants to old standby's like wheelchairs and walkers. The technological prowess of American industry and the availability of capital for potentially lucrative markets translate into a steady stream of new medical devices. Yet without government approval for payment for a device, any such product faces a limited market. Depending on the circumstances, private insurers may follow the government's lead and, thus, no significant market may exist without government approval.
           Over time and for a variety of reasons pressure built for changes in the government process for approving devices for coverage under Medicare, the government program for insuring senior citizens. The bureaucratic process was centered in the Health Care Financing Administration (HCFA). (HCFA was later reorganized as the Centers for Medicare and Medicaid Services. Another bureaucracy, the Food and Drug Administration, evaluates devices for safety and reliability and its approval must precede any consideration for coverage under Medicare.) Device manufacturers were critical of HCFA because the process was largely secret and in their minds, devoid of clear standards for evaluating their products. They couched their criticism in high-minded terms. As one lobbyist put it, "The problems that are being raised about the criteria and process may seem arcane and technical but the issue is really about appropriate access to care and the highest quality of care for Medicare patients."
           More dispassionate observers would conclude that the real problem from the point of view of the industry was that the process was closed off to lobbying. Another industry lobbyist complained "[our applications] just sort of went into a black hole and you didn't really know what happened. Months might go by, sometimes years before you would know whether you got covered, that is made eligible for payment."
           Another issue was raised not by manufacturers but by physicians. Doctors want decisions about patient care to reside with doctors, not with insurance companies or government regulators. Unless they're dealing with a wealthy senior citizen, it's pointless to prescribe a treatment that isn't approved for Medicare reimbursement. Thus, professional associations representing physicians, such as the American Medical Association, were pressing HCFA for greater involvement in the approval process by doctors.
           Under the pressure from a lawsuit, a bill antagonistic to HCFA backed by some prominent legislators, and the lobbying of trade groups, the agency announced in 1999 that they were reforming the approval process. The new process, if not transparent, is more open. A new Medicare Coverage Advisory Committee was established, and physicians, scientists, and consumers were slated to fill the bulk of the positions on the board. A spokesman for a physicians group noted with satisfaction, "There wasn't anyplace on the panels for industry. Industry was going to be the presenters." Even so, the new procedures were a step forward for manufacturers since they would be able to monitor the process much more closely than before.