- The Washington Times - Wednesday, October 11, 2000

New medical technology and old politics are clashing over the cost of Medicare payments.
Physicians, patients, members of Congress and the makers of such pain-erasing and lifesaving devices as heart pumps and hip replacements declare the government is crippling medical innovation and cheating the sick.
They charge the agency that runs Medicare with delaying or denying reimbursement for breakthrough medical tests, therapies and devices. They complain the agency sometimes sets reimbursement rates so low that doctors and hospitals can't afford to apply the new remedies.
Now a bipartisan group of 31 U.S. representatives has petitioned the House Ways and Means Committee to force reforms on the agency the Health Care Financing Administration (HCFA) and to eliminate what they call the "barriers to innovative medical technologies."
Nineteen patient and professional medical groups have sent a similar appeal, and Sen. Orrin G. Hatch, Utah Republican, has introduced a companion reform measure in the Senate.
Complaints about the financing administration are not new. It has been the subject of numerous critical General Accounting Office reports. One released last spring declares the HCFA typically "falls short in addressing weaknesses repeatedly cited in audits and other reviews."
Indeed, Congress last year passed a measure requiring the agency to create a new payment method to cover innovative medical technologies. To a large degree that hasn't happened, and Congress faults the recalcitrant agency.
Asked for the financing administration's response to such criticism, a spokesman produced a statement declaring the HCFA has a "new, open and accountable coverage process" that will "facilitate prompt coverage."
The new process has been implemented. Because of its limited success, the 31 representatives and their allies are asking Congress to fuse with forthcoming balanced-budget legislation the provisions of a bill called the Medicare Patient Access to Technology Act.
Among other things, that measure would force the financing administration to update Medicare payment programs each year, to improve and report annually on the "timeliness and appropriateness of reimbursement decisions" and to open for scrutiny certain decision-making procedures.
The sponsors of the bill say it is absolutely necessary. But understanding this new urgency for reform takes some explaining.
Medicare is, of course, a $200 billion federal health insurance policy and program that covers 38 million Americans who are 65 years old and older, plus the disabled and those with permanent kidney failure.
The HCFA commonly called "Hic Fah" is the agency within the Department of Health and Human Services that manages Medicare.
From a central office in Baltimore and 11 regional facilities, the agency's 4,200 civil servants also administer Medicaid, the insurance program for those with low incomes, and the $24 billion Children's Health Insurance Program. Additionally, they regulate and certify certain activities of hospitals, nursing homes, home health agencies and intermediate care facilities for the mentally retarded.
Nancy-Ann M. DeParle, a former Rhodes scholar and lawyer by training, heads the agency. She was appointed by President Clinton in 1997. Miss DeParle left the agency Oct. 1 to take a temporary teaching job at Harvard. Her deputy, Michael Hash, has been named acting director.
HCFA decrees what medical items and services the insurance will cover and how much it will pay. Importantly, the agency's reimbursement decisions typically set the standard for private insurers as well. Thus, HCFA policies may affect people not covered by Medicare. The agency's decisions even influence what medical products will be developed, marketed and used.
Agency documents explain that although HCFA can make coverage and policy decisions that apply uniformly everywhere in the nation, it mostly leaves the decision making to 51 "local contractors," all private insurers who process and pay Medicare claims.
The Social Security law that created Medicare in 1965 demands that HCFA limit its payouts to medical tests and procedures that are deemed "reasonable and necessary."
The law also mandated the system of using local contractors. However, many in medicine question whether insurance-company deciders who may or may not be medically trained or experienced actually are capable of judging whether a procedure or device is necessary or reasonable.
Further, since local contractors make the decisions, coverage for tests and procedures may be approved in one community and denied in another. Also, the criteria for approving or denying coverage can vary from place to place. And since the contractors' decisions are made case by case, decisions about the same product or process may be made over and over.
The Food and Drug Administration (FDA) figures in all this, too.
Before the financing administration can even think of covering a new procedure or product, it must pass rigid FDA scrutiny as "safe and effective."
Only when the test, device or procedure has the FDA's imprimatur can the manufacturer turn to the financing administration for a "code."
The authoritative and critical codes describe the obscure medical language of doctors, insurers and government agencies. They standardize billing.
Medical device makers must apply for a code that represents the formal medical description of their product or procedure. Without a code, there can be no coverage and no payment. And without payment, the product is not likely to be used.
Physicians and medical-device makers have problems with the way codes are granted.
They say, for example, that it takes 600 to 800 days for the agency to process a coding application. They believe that is unreasonable.
What's more, the agency often requires manufacturers to demonstrate six months of "market experience" before allowing them to apply for a code. That's a disincentive. It requires the device maker to persuade hospitals and physicians to use its product and charge patients full price instead of using a Medicare-covered product the patient usually can more readily afford.
Dr. Lowell Satler, director of Coronary Intervention at the Washington Hospital Center, says: "Often we're in the position of needing to use new technology but can't because of reimbursement issues. It is a major problem in all subspecialties."
The financing administration's critics say unexplained requirements, paperwork delays and repeated demands for documents and clinical data cause manufacturers impenetrable confusion while adding backbreaking costs. They offer examples to illustrate HCFA dysfunction:
In 1987, technologists developed DEXA (dual-energy X-ray absorptiometry), a pain-free bone-density test. DEXA equipment eliminated the need to inject patients with dyes, and for the first time allowed physicians to diagnose osteoporosis, a common and costly disease that dangerously weakens bones.
Previously, physicians diagnosed and began treating the disease after patients' bones broke. But with DEXA they can spot the disease, begin medicating and prevent fractures. Doctors considered that a humane, cost-saving development.
The FDA quickly sanctioned the DEXA system. But the financing administration demanded new "technology assessments." After six years, the HCFA still had made no decision. Then Congress yielded to intense patient demand and passed a law requiring Medicare to cover the testing. The law took effect in 1998.
In 1984, the FDA approved the first cochlear implant, then a revolutionary device.
The cochlea is a tube within the inner ear. It's shaped like a snail's shell and contains nerve endings that transmit sound. When the implant's electrodes are connected to the cochlea and linked to a powerful, but tiny, computer and an earpiece microphone, the device simulates sound. It can cure many among the profoundly deaf.
In 1986, two years after FDA approval, the financing administration authorized Medicare payments for cochlear implants. But it covered just a part of the cost, effectively limiting its use.
Cochlear implants have improved dramatically since 1984. So has their cost. And Medicare reimbursement has not kept pace. Hospitals now pay about $21,000 for the devices. At best, Medicare pays $11,500, and typically hospitals lose $9,000 on every cochlear implant a loss most can't afford.
So although 54 percent of all patients needing the implant are Medicare eligible, just 15 percent have received them.
In the mid-1980s, devices that can save patients from fatal heart problems became available.
They are called automatic implantable cardioverter/ defibrillators, or AICDs. They are electronic devices with a battery, computer and electrodes that are surgically attached to a patient's heart.
The financing administration decided to cover the implant but again refused to meet costs. Example:
Basing its reimbursement on evidence the medical community insisted was flawed, Medicare paid $9,300 for a procedure costing $17,620. That left $8,320 for the hospital or whomever to make up.
Finally, an audit by an outside firm showed that the protesting medics were correct. So after four years of controversy the agency adjusted its payment policy.
Now HCFA policies are said to be hindering use of the improved next-generation implants.
It might be argued that in limiting insurance payouts, the financing administration is justifiably holding down costs.
Yet, Dr. Kang, a top HCFA official, declared that "promoting biomedical research and ensuring that Medicare beneficiaries receive the highest-quality care possible are long-standing priorities."
Pamela Bailey, head of AdvaMed, the Advanced Medical Technology Association, says: "It's not a matter of money or costs. Many of the new technologies are cost savers. They reduce the need for hospitalization.
"What's involved is reforming the process in Medicare for assessing and making available new technologies. The situation steadily worsens because of staffing problems at Medicare and because science is advancing so rapidly that Medicare can't keep up with the progress."
Miss Bailey's trade association represents 800 makers of medical devices, diagnostic products and medical information systems. Her association recently joined hands with the Lewin Group, a prominent health care consulting firm, to do a detailed study of HCFA-Medicare procedures. The resulting two-volume report indicates just how numerous and complex the issues are.
After all, says Cliff Goodman, the study's author, "The Medicare system is designed to pay bills, not to accommodate timely adoption or value-based payment of new technologies."
The trouble is, though, that the system has a direct impact on technology development and patient care. "What we need is a consistent, transparent set of ground rules, and getting them is a legitimate concern of manufacturers," Mr. Goodman adds.
Dr. Satler puts it this way: "I don't want to be negative regarding Medicare. However, if the equipment and procedures are eligible for use and the FDA approves them, Medicare should pay."

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