CMS Finalizes Definition of ‘Reasonable and Necessary’

WASHINGTON, D.C. (January 22, 2021)—A definition of “reasonable and necessary” was included of the recently finalized rule, Medicare Program; Medicare Coverage of Innovative Technology (MCIT) and Definition of ‘‘Reasonable and Necessary’’. 

This rule also establishes a Medicare coverage pathway to provide Medicare beneficiaries nationwide with faster access to new, innovative medical devices designated as breakthrough by the Food and Drug Administration (FDA). The Medicare Coverage of Innovative Technology (MCIT) pathway begins national Medicare coverage on the date of FDA market authorization and continues for four years. As part of this, the Centers for Medicare & Medicaid Services (CMS) will codify the definition of reasonable and necessary to align with the goals of MCIT.  

CMS finalized that an item or service would be considered ‘‘reasonable and necessary’’ if it is

1. safe and effective; 
2. not experimental or investigational; and 
3. appropriate for Medicare patients, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it 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; 
• Furnished in a setting appropriate to the patient’s medical needs and condition; 
• Ordered and furnished by qualified personnel; 
• One that meets, but does not exceed, the patient’s medical need; and 
• At least as beneficial as an existing and available medically appropriate alternative
• Covered in the commercial insurance market, except where evidence supports that there are clinically relevant differences between Medicare beneficiaries and commercially insured individuals.   

An item or service deemed appropriate for Medicare coverage based on commercial coverage would be covered on that basis without also having to satisfy the bullets listed above. CMS will look to commercial insurance coverage policies in cases where there is insufficient evidence regarding appropriateness for National or Local Coverage Determination (NCDs or LCDs). CMS will consider coverage to the extent the items or services are covered by most commercial insurers. As part of CMS’s consideration, CMS will include in the national or local coverage determination its reasoning for its decision if coverage is different than most commercial insurers. Not later than March 15, 2022 CMS will issue draft subregulatory guidance on the methodology of which commercial insurers are relevant based on the measurement of the majority of covered lives.

The above definition is nearly identical to the definition of reasonable and necessary in chapter 13, section 13.5.4, of the Medicare Program Integrity Manual and had been generally used to make determinations of “reasonable and necessary” but had not been codified. This final rule codifies the definition and is effective March 15, 2021.

The National Association for Home Care & Hospice had submitted comments on the proposed rule and recommended that the definition be expanded to include palliative care in addition to “treatment” and that CMS not utilize coverage policies of commercial insurers to restrict or deny coverage. CMS did not add palliative care to the definition but did indicate in the final rule comments that it will not use commercial coverage policies to restrict or deny coverage.