SIDEBAR 3
Coverage of Tests
Once a laboratory test has traveled the long road from research and development through validation of its safety and efficacy, there is still the issue of getting the test reimbursed by insurers so that when it is ordered by a physician, the patient’s health insurance will pay the laboratory performing the test.
As a general rule, tests or the process a test performs are assigned a current procedural terminology (CPT) code by the American Medical Association (AMA). Government payers (Medicare and Medicaid) and private insurance companies have adopted CPT codes to identify the service provided for a patient. The AMA publishes a list of such codes annually in the CPT Manual, which is used by health insurers to determine reimbursement for medical technology and practices.
CPT 2002 contains more than 8,000 codes and descriptors.
The next step is a coverage determination by private and government insurers. Private insurers include those used by companies for their employee health insurance plans and policies that individuals can purchase for themselves or their families. Government insurers include Medicare, the federal health insurance program for 39 million elderly and disabled Americans, and Medicaid, which are administered by the Centers for Medicare and Medicaid Services (CMS). Coverage by Medicare is critical for determining whether and at what level a device or a test will be paid, inasmuch as private insurers often follow Medicare’s standards. However, many tests are covered by private payers that are not recognized by Medicare; tests for which Medicare coverage precedes private payment are typically those that impact elderly populations.
Ideally, if a test was cleared or approved by the FDA, it would automatically be covered by an insurance plan. However, the criteria that insurers use in coverage decisions vary. For example, Medicare uses a different standard than the FDA for evaluating new technologies. While the FDA uses a “safe and effective” standard, Congress requires that Medicare employ a “reasonable and necessary” criteria in deciding whether the program will pay for a treatment, drug, procedure, or device. In addition, the process can vary in cases where local insurance carriers differ in how – or whether – a device meets the “reasonable and necessary” criteria. Historically, insurance companies that contract with Medicare to process claims have used Local Medical Review Policies (LMRPs), a consensus process of their local providers, to determine coverage policies for new technologies.
This has resulted in significant variation throughout the country. For example, a national clinical laboratory could perform the same series of tests in several states, submit the claims to their local insurance carrier, only to find that some would pay but others would not. The bottom line is that there is no single, national coverage policy for all laboratory tests.
To improve the process by which coverage decisions for laboratory services are made, in 1997 Congress required CMS to overhaul their policies. Under the new system, developed over two years through a process of negotiated rule making, CMS will launch national coverage reviews when:
- conflicting local policies occur,
- a service represents a significant medical advance and no similar service is covered,
- there is substantial disagreement among medical experts about a service's efficacy or medical effectiveness, and
- a service is covered but is widely considered to be ineffective or obsolete.
Once a review is accepted, a decision by CMS is supposed to be made within 90 days, although the agency built in additional time for technical evaluations.
[The general notice of process change can be found in the April 27, 1999 issue of the Federal Register, page 22619. A notice of intent to publish a proposed rule on the criteria used to determine whether a medical test or service will be covered was published in the May 16, 2000 issue of the Federal Register, page 31124.]
In the past, however, national coverage decisions for medical devices and tests have been rare, said Dr. Murray. “This will change … when the 23 National Coverage Decisions developed through Negotiated Rulemaking go into effect. When that happens, about half of all tests that are submitted for reimbursement will be subject to national standards for coverage.”
