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Testimony on Health Technology Assessment by Nancy-Ann Min DeParle
Administrator, Health Care Financing Administration
U.S. Department of Health and Human Services

Before the Senate Labor & Human Resources Committee, Subcommittee on Public Health & Safety
March 12, 1998


Thank you for the opportunity to talk with you about Medicare health technology assessment issues. Over the past 30 years, the Medicare coverage process has evolved from a relatively informal set of procedures to a sophisticated process that includes extensive medical advice and state-of-the-art technology assessments. This evolution has been necessitated by the multiple changes that have occurred in the provision of health care services in this country and the rapid growth of new medical technologies. The goal of our coverage process is to assure that beneficiaries have access to the best medical care, while protecting them from services whose effectiveness is unproven. This is one of the greatest challenges facing the Health Care Financing Administration (HCFA) today as we try to keep pace with the myriad number of medical advances occurring every year.

In order to face the challenge of making appropriate coverage decisions, HCFA has moved toward the increased use of evidence-based decision-making. We often rely on technology assessments done by agencies such as the Agency for Health Care Policy and Research (AHCPR) as well as the advice of the Food and Drug Administration, the National Institutes of Health, the Department of Veterans Affairs, the Department of Defense, and on many experts in the medical community and private sector. Obtaining authoritative evidence of the value of individual services assures that beneficiaries will receive high quality and effective care.

First, I would like to outline briefly the overall process for making Medicare coverage decisions and then address more specifically the role that AHCPR has in this process.


Medicare's coverage decisions are based on broad statutory authority given to the Secretary of the U.S. Department of Health and Human Services. The law says the following:

"Notwithstanding any other provisions of this title, no payment may be made for items or services which are not reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member."

This provision is the starting point for making coverage decisions and gives HCFA the ability to make determinations about what Medicare benefits are appropriate in the face of changing medical practice. National coverage decisions are issued by HCFA after a thorough assessment of the clinical issues and available data. These decisions are binding on Medicare contractors. In the absence of national decisions for particular services, contractors have the discretion to issue local coverage policies.

Although there is value to allowing the carriers to establish local policies that reflect medical practice in their area, HCFA realizes that there is a need to create greater consistency in coverage among the carriers. In the past, HCFA attempted to foster greater consistency through prompting carriers to coordinate their local policies. We now plan, instead, to place a greater reliance on national coverage decisions. We are also working to refine the national coverage process to provide for more public participation from medical specialists, health industry representatives, and other interested parties. We should have a new mechanism in place allowing for this participation later this year.

The explicit criteria used by HCFA to determine that a service is reasonable and necessary have been developed to assure the best care for our beneficiaries. These criteria that now guide the coverage process are: (1) demonstrated effectiveness; (2) appropriateness; and (3) comparability to similar services. I will discuss each of these in turn.

Demonstrated Effectiveness

Demonstrated effectiveness is the first criterion for determining that a service or health care technology meets the Medicare coverage requirements. This means that authoritative evidence must demonstrate that the benefits of a service or technology to the patient outweigh its reasonably anticipated risks. We look at whether the use of the service or technology will result in improved patient management or health outcomes, such as decreased morbidity or mortality, more accurate diagnoses, or significantly increased quality of life. In addition, items or services that are regulated by FDA must have received approval for marketing.

An often-asked question is: what constitutes authoritative evidence of the effectiveness of a service? In general, we rely on the following:

  • controlled clinical trials, controlled studies, or case studies published in peer-reviewed medical or scientific journals;

  • formal technology assessments from recognized government and private entities, which examine both published and unpublished data;

  • evaluations or studies initiated by Medicare contractors; and

  • authoritative approvals of other agencies, such as the FDA.

With increasing frequency, HCFA relies on formal technology assessments as a tool to aid in determining the demonstrated effectiveness of a service or technology. These assessments focus on the effectiveness of technologies in general medical practice and on patient outcomes, including morbidity, mortality, health status and health-related quality of life. They are valuable because they use systematic methods for evaluating the quality of the scientific evidence available rather than relying on the less formal examination of medical opinion or consensus. They also grade the quality of the evidence based on the study methods.


In addition to demonstrated effectiveness, a service must be appropriately provided. This means that the service must be suitable for, but not in excess of, the beneficiary's medical needs and condition. The service must also be furnished by personnel who are qualified through adequate training, experience and licensure. And the service must be furnished in a setting that is suitable for, but not in excess of, the beneficiary's medical needs and condition and must meet any facility requirements established by HCFA.

Comparison with Similar Technologies

Finally, if a service is an alternative or a replacement for a currently covered service, we consider how this new service compares with such other service. The purpose of this comparison is to address payment rather than coverage issues. Let me be clear: HCFA does not and will not refuse to cover a service simply because it is costly. Nevertheless, as a prudent purchaser of health care, if a service is an alternative or a replacement for a currently-covered service for the same diagnostic or therapeutic purpose, HCFA will examine both the relative costs and effectiveness in determining what Medicare payment policy should be. For example, if a new service is more expensive but equally effective as the currently-covered service, it would still be covered but paid at the rate of the lower cost alternative. If, however, the service is found to be more effective, it would be paid at the higher rate. This criterion assures that the Medicare program and its beneficiaries receive the best value.


As Medicare increases it reliance on national coverage decisions to further coverage policy, there is a greater need for technology assessments performed by organizations such as AHCPR. I would now like to turn to a discussion of the role of AHCPR in HCFA's coverage determination process.

The proliferation of new medical technologies on the market present an almost overwhelming challenge for physicians, patients, and insurance programs. AHCPR has provided valuable information to HCFA about effectiveness of these new technologies (both high and low-cost), the criteria under which services should be provided, the appropriate use of services and technology, and technologies that have become outdated.

Prior to FY 1996, AHCPR received funding directly from the Medicare Trust Funds, and HCFA requested a steady stream of technology assessments. Beginning in FY 1996, however, HCFA began a more formal relationship with AHCPR. In FY 1996, HCFA and AHCPR entered into an Intra-Agency agreement for the acquisition of technology assessments. HCFA transferred funds to AHCPR totaling $700,000 under these interagency agreements, and we expect such funding to continue. Through this agreement, HCFA has been able to purchase technology assessments on a task order basis through AHCPR's Evidence-Based Centers.

As a means of understanding HCFA's reliance on AHCPR, I would now like to provide you some examples of areas in the past where an AHCPR assessment has aided in a Medicare coverage decision.

Lung Volume Reduction Surgery - The first example, with which many of you are familiar, is lung volume reduction surgery (LVRS). LVRS is a relatively new procedure that is intended to improve lung function and relieve debilitating symptoms for emphysema patients. Beginning in 1993, LVRS began to diffuse rapidly despite the many unanswered questions about risk, appropriate selection of patients for surgery, differences in surgical techniques, and qualifications of physicians performing the surgery.

In 1996, AHCPR completed a technology assessment of LVRS and concluded that there was not sufficient evidence to make a scientific judgement about its effectiveness. Although available data suggests benefits to some patients in terms of improving lung function and exercise tolerance, the evidence is insufficient to draw scientific conclusions about the overall risks or benefits for Medicare beneficiaries. AHCPR recommended that Medicare coverage be provided within the scope of a clinical trial.

Based on this recommendation, the National Heart, Lung, and Blood Institute (NHLBI) and HCFA worked together to develop a mechanism whereby this suggestion could be implemented. NHLBI has put an enormous effort into developing the protocol for a clinical trial on LVRS, called the National Emphysema Treatment Trial, and AHCPR is supporting the cost-effectiveness component of the trial.

Although Medicare does not normally cover patient care costs associated with clinical trials, Medicare will cover, in this instance, the cost of care for individuals enrolled in the National Emphysema Treatment Trial, which will take place at 18 clinical centers now participating under the trial's protocol. This targeted coverage is an example of what we call coverage with conditions. It is used when existing data suggest a potential benefit to some patients, but when there is not sufficient information available to determine the effect of widespread use or to determine appropriate patient selection criteria. The data that will be received from the National Emphysema Treatment Trial should provide additional information about the effectiveness and risk of LVRS and assist HCFA in determining whether this procedure should be covered for a broader group of patients.

Magnetic Resonance Angiography - Magnetic Resonance Angiography (MRA) is an application of magnetic resonance imaging that provides visualization of blood flow, as well as images of normal and diseased blood vessels. Several years ago, it was seen as a rapidly developing technology with the potential for rapid diffusion, although its clinical effectiveness had not yet been determined for all anatomical regions of the body. In 1994, HCFA received a technology assessment from AHCPR on the use of MRA in the measurement of blood flow and the determination of blood vessel morphology. The AHCPR assessment recommended limited coverage of MRA, specifically for evaluating blood flow in internal carotid vessels located in the head and neck for certain indications. AHCPR also recommended that we monitor other uses for potential coverage in the future.

As a result of this analysis, HCFA issued a national coverage policy in October of 1995 for MRA generally consistent with AHCPR recommendations. HCFA continued to monitor the development of this technology and subsequently revised its policy to expand coverage of MRA to evaluate peripheral vessels of the lower extremities under certain conditions. HCFA is in the process of revising the policy again to cover MRA for abdominal and chest uses.

Simultaneous Pancreas-Kidney Transplants - AHCPR also completed an assessment of the clinical effectiveness and appropriateness of simultaneous pancreas-kidney transplants and sequential pancreas-after-kidney transplants for insulin dependent diabetics with end-stage renal disease. AHCPR recommended in its analysis that Medicare cover these transplants for Type I insulin-dependent diabetics with ESRD who do not respond well to exogenous insulin. They also recommended that coverage be limited to facilities that have performed at least 30 pancreas transplants and be contingent upon the hospital's agreement to provide data to be used for evaluation.

HCFA decided to cover pancreas-kidney transplants based on a model that is similar to that of coverage for lung volume reduction surgery. HCFA is collaborating with the National Institute on Diabetes, Digestive and Kidney (NIDDK) Diseases to provide Medicare coverage for pancreas transplantation for patients who receive their transplants at a facility participating in a registry compiled and supported by NIDDK. Certain facilities will be eligible to participate in the registry and will provide data on the effectiveness of pancreas transplants through the International Pancreas and Islet Transplant Registry. The Memorandum of Agreement between HCFA and NIDDK is nearing completion, and it is anticipated that Medicare coverage could begin in July of this year. Medicare will cover simultaneous pancreas-kidney transplants and is considering the coverage of pancreas after kidney transplants as well.

PET Scans Using Rubidium-82 - In 1994, AHCPR also did an evaluation of the safety and effectiveness of positron emission tomography (PET) using rubidium-82. Based on this report, HCFA issued a coverage policy in 1995 covering PET scans for imaging of the perfusion of the heart using Rubidum 82 under certain conditions and at certain facilities.


In the next few years, we look forward to receiving additional technology assessments that we have requested of AHCPR, such as: the effectiveness of cryosurgical treatment of the prostate, an evaluation of the use of the prostate specific antigen test for benign prostate hyperplasia, testosterone suppression for prostate cancer, and appropriate treatment for dysphagia (swallowing disorders). In addition, we are continuing to evaluate our need for advice in other areas and anticipate a continued long-term need for further assessments.


HCFA today must react expeditiously to rapid advances and changes made in medical science and technology and define and clarify the benefits under the Medicare program. This is a challenge because, like all health plans, Medicare often faces the dilemma of having inadequate data to make evidence-based coverage decisions for new technologies and services. AHCPR thus plays a crucial role in providing needed information on medical effectiveness and outcomes, which assists in the adoption of appropriate coverage policies. This, in turn, serves beneficiaries by assuring that they have access to the current beneficial medical advances, are treated appropriately, and are protected from ineffective and potentially unsafe services.

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