CMS Proposes Clarified Medicare Coverage “Reasonable and Necessary” Criteria for Breakthrough Devices

On Sept. 1, CMS proposed a new rule that would, among other things, shed some light on an issue that has been a perennial compliance and reimbursement stumbling block for developers of new lab tests: What makes a new “breakthrough” service or product “reasonable and necessary” for Medicare coverage purposes? Here’s the lowdown.

The Reasonable and Necessary Rule

Medicare covers only medical services and products that are “reasonable and necessary.” The Social Security Act (Section 1862((a)(1)(A), to be precise) gives the Secretary of Health and Human Services (HHS) the authority to determine whether a particular service or product meets the standard. However, HHS has never established a formal regulation to define “reasonable and necessary.” Instead, the current working definition used for Medicare coverage determinations comes from the Program Integrity Manual which provides instructions to Medicare contractors in deciding if a service or product is covered.

The Newly Proposed 3-Pronged Definition

The proposed rule would codify the Manual definition into a regulation. Specifically, an item or service would be deemed “reasonable and necessary” if it’s:

  1. Safe and effective;
  2. Not experimental or investigational; and
  3. Appropriate for Medicare patients.

What “Appropriate for Medicare Patients” Means

The proposed rule also establishes parameters for the third and most nebulous prong of the new definition. “Appropriate for Medicare patients,” the proposed rule explains, must take into account appropriate duration and frequency in terms of whether the service or product:

  • Is furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient’s condition or to improve the function of a malformed body member;
  • Is furnished in a setting appropriate to the patient’s medical needs and condition;
  • Is ordered and furnished by qualified personnel;
  • Meets, but doesn’t exceed, the patient’s medical need; and
  • Is at least as beneficial as an existing and available medically appropriate alternative.

There’s also another way a medical service or product could be deemed “appropriate for Medicare patients” even if it doesn’t meet the above bullets, namely, if it’s covered in the commercial insurance market. Exception: The commercial insurance coverage rule wouldn’t apply where the evidence shows that there are clinically relevant differences between Medicare beneficiaries and individuals who are commercially insured.


The proposed rule actually deals with Medicare coverage of breakthrough medical devices in the Medicare Coverage of Innovative Technology (MCIT) pathway. That doesn’t include lab tests. However, CMS has made it clear that it’s considering extending the new “reasonable and necessary” definition to breakthrough diagnostics, drugs and/or biologics that aren’t currently in the MCIT pathway. CMS will be fielding public comments on the proposed rule until Nov. 2.


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