Your browser doesn't support JavaScript. Please upgrade to a modern browser or enable JavaScript in your existing browser.
Skip Navigation U.S. Department of Health and Human Services www.hhs.gov
Agency for Healthcare Research Quality www.ahrq.gov
Archive print banner

This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: https://info.ahrq.gov. Let us know the nature of the problem, the Web address of what you want, and your contact information.

Please go to www.ahrq.gov for current information.

Using Evidence

Coverage Decisions

Presenters:

Hugh Hill, M.D., J.D., Acting Director, Coverage and Analysis, Office of Clinical Standards and Quality, Health Care Financing Administration (HCFA) Baltimore, MD.

Annette Hanson, M.D., Medical Director, Massachusetts Division of Medical Assistance, Boston, MA.

Brent O'Connell, M.D., M.H.S.A., Vice President and Medical Director, Highmark Blue Cross Blue Shield, Camp Hill, PA.


This session highlighted three examples of processes for making coverage decisions. Private, State, and Federal healthcare policymakers are all faced with difficult decisions about what benefits and services should be covered under their health plans and which patients should receive these covered benefits. Although medical policy decisions used to be made reactively and with little clinical input, the increasing complexity of medical practice (and the legal implications of making poor coverage decisions) have led most payers to establish formal processes for evaluating new and existing technologies and making coverage decisions.

Highmark Blue Cross Blue Shield (BCBS), one of the largest BCBS plans in the country, has established a thorough process for gathering information, assessing new technologies, and making coverage decisions.

According to Dr. Brent O'Connell, the Highmark coverage-decision process has to be clear and understandable but also flexible enough to accommodate a number of contractual limitations on a given benefit, including exclusions or caps on certain benefits, and provider licensure requirements. The Highmark process must also take into account policy issues, such as when and how often a service is received, how a service is coupled with other therapies, and the purpose of the service (e.g., screening versus diagnosis).

Highmark's coverage process is built around a contractual definition of "medical necessity," which includes the following criteria for establishing the medical necessity of a service:

  • Appropriate for symptoms, diagnosis, and treatment of a condition, illness, or injury.
  • Provided for diagnosis, direct care, or treatment.
  • In accordance with standards of good medical practice.
  • Not primarily for the convenience of the member or member's provider.
  • The most appropriate supply or level of service that can be safely provided to the member.

To determine what services meet this definition, Highmark has:

  • An information-gathering process that includes systematic reviews of published literature.
  • A consulting program with practicing physicians.
  • Review of coverage decisions by Highmark managers.
  • Review by an independent Medical Affairs Committee.

In the Massachusetts Medicaid program, the coverage-decision process is built on evidence-based assessment of new interventions and a statutory definition of medical necessity. The Massachusetts coverage-decision process is based on the care management principle that clinical outcomes will be most favorable if patients receive the right care in the right amount at the right time and in the right setting.

According to Dr. Annette Hanson, new developments that have complicated coverage decisionmaking in Massachusetts include:

  • Increases in the volume of new technologies and pharmaceuticals reaching the healthcare marketplace.
  • Increases in the cost of these new technologies and pharmaceuticals.
  • Recognition of the difference between clinical effectiveness and research efficacy.
  • Consideration of costs versus benefits and cost offsets.

The Massachusetts statutory definition of medical necessity establishes the criteria a treatment must meet to be considered medically appropriate. The definition specifies that there must be no comparable treatment that is "more conservative or less costly" and that all treatments must meet the "professionally recognized standard of healthcare," as determined by peer-reviewed medical literature or local and regional medical experts. Dr. Hanson notes that having a clear, statutory definition of medical necessity makes coverage decisions easier, because it establishes a consistent, understandable process for decisionmaking. Dr. Hanson asserts that having a consistent process and a set of criteria every decision must meet makes coverage decisions both more credible and more defensible.

At the Federal level, the Health Care Financing Administration (HCFA) makes national coverage decisions for the Medicare program. HCFA's legal authority to make coverage decisions stems from section 1862 of the Social Security Act, which states:

"No payment may be made...for any expenses incurred for items or services...which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the function of a malformed body member."

If a service or technology meets this definition and falls into 1 of 55 statutorily defined "benefit categories," it can be considered under HCFA's general coverage-decision process.

Like private and State policymakers, HCFA has established a coverage-decision process that is thorough and relies heavily on scientific evidence and accepted medical opinion.

According to Dr. Hugh Hill, the Medicare coverage-decision process is complicated because HCFA shares authority for coverage decisions with local Medicare contractors who review and adjudicate claims for services under Medicare Parts A and B. In 90 percent of all cases, coverage decisions are made at the discretion of local Medicare contractors. In the remaining 10 percent of the cases, HCFA has established a national coverage policy to which all local contractors must adhere.

A national coverage decision from HCFA can be triggered by either an internal or an external coverage-decision request. Dr. Hill remarked that national coverage-decisions can be made for any number of reasons, including inconsistency among Medicare contractors; the potential high cost of a new technology; or the existence of poor or inadequate evidence for a given technology.


Previous Section Previous Section         Contents         Next Section Next Section


The information on this page is archived and provided for reference purposes only.

AHRQ Advancing Excellence in Health Care