For most categories of services covered, Medicare pays for “reasonable and necessary” services. This definitions, however, is fairly vague. CMS does issue about 20 national coverage determinations (NCDs) each year to clarify which services are permitted. [Here is a list of the CMS’s pending national coverage analyses]. Foote et al. (2008) elaborate on how NCDs are implemented.
CMS can trigger an NCD based on its own internal judgment or upon request of an external party. The final NCD is transmitted to local contractors for implementation. Although CMS can issue noncoverage NCDs, such as acupuncture in 2004 and artificial lumbar spinal disk replacement in 2006, it rarely does so. The majority of NCDs establish evidence-based conditions of use.
Not all coverage, however, is determined at the national level. In 1990, contractors acquired authority to issue local coverage determinations (LCDs)–also known as local medical review policies (LMRPs)–which are applicable in their own jurisdictions if no NCD applies. Both Fiscal Intermediaries (which process Part A claims) and Carriers (which process Part B claims) can issue LCDs. FIs and Carriers are required because the Centers for Medicare and Medicaid Servcies (CMS) itself does not process claims; instead it delegates this responsibility to the FIs and Carriers.
“A majority of LCDs focus on appropriate utilization of widely used services that are subject to overuse such as routine chest X-rays.” A Health Affairs article classifies LCDs according to three types: three policy types: new technology (NT),extensions of covered technology (TE), and utilization management (UM). Between 70-90 percent of LCDs are for UM, depending on how these types are interpreted.
A number of studies have examined the effect of LCDs on utilization. Foote et al. (2008) rely on a difference in difference approach and examine the change in utilization for Carriers who issued a LCD the change in utilization for those Carriers who did not. The study found that:
…in only one case (transesophageal echocardiography) out of eight did utilization change (reduced by 13.6 percent) after the effective date of the local policies. There is no systematic pattern that policies affect utilization, and the type of coverage policy does not seem to play an important role in its impact.
How much variability is there across carriers in their LCD policies? It turns out that the answer depends on what type of LCD it is. A paper by Foote et al. (2005) found the following:
We found substantial similarity, however, among policies covering the NT and TE types. We found significantly more variation among our UM-type case studies.
Examples of NCDs
- Deep Brain Stimulation (NT, Treatment). Deep brain stimulation is a neurosurgical procedure that uses electrical stimulation of subcortical structures (the thalamus or the basal ganglia) to control tremors.
- Helicobacter pylori Breath Test (NT, Diagnostic). Helicobacter pylori is a gram-negative rod that has been causally linked to chronic gastritis, peptic ulcers, gastric cancer, and gastric lymphoma. Helicobacter pylori breath tests are noninvasive diagnostic procedures to determine the presence of active infection.
- Urethral Stents (TE, Treatment). Male urethral obstructions may result from infections, an enlarged prostate, prostate cancer, prostatitis with fibrosis, and other constrictions. Elimination of the obstruction includes medical and surgical options. Urethral stenting is an extension of the growing use of stents to hold open occluded vessels.
- Transesophageal Echocardiography (TE, Diagnostic). Transesophageal echocardiography (TEE) applies an ultrasound generator to the exterior chest wall or in the esophagus to obtain additional cardiovascular information. The instrumentation is invasive with potential for serious complications.
- Toenail Debridement (UM, Treatment). Toenail debridement involves the reduction of a thickened dystrophic nail resulting from mycosis or a severe systemic condition using specialized equipment, such as forceps or a rotary drill.
- Cardiovascular Stress Test (UM, Diagnostic). Cardiovascular stress testing uses cardiac physiological monitoring during and after stress, with or without subsequent cardiac imaging. A diseased heart responds abnormally, allowing a diagnostic determination.
- Susan Bartlett Foote, Beth A Virnig, Robert J Town, and Lacey Hartman. The Impact of Medicare Coverage Policies on Health Care Utilization. Health Serv Res. 2008 August; 43(4): 1285–1301.
- Susan Bartlett Foote, Douglas Wholey, Todd Rockwood and Rachel Halpern. Resolving The Tug-Of-War Between Medicare’s National And Local Coverage. Health Aff July 2004 vol. 23 no. 4 108-123.
- Foote SB, Halpern R, Wholey DR. Variation in Medicare’s local coverage policies: content analysis of local medical review policies. Am J Manag Care. 2005 Mar;11(3):181-7.