Final Thoughts

Published: April 1, 2004
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The Medicare Modernization Act: What’s in it for IVDs

By: Linda Ivor



Linda Ivor is associate director of government affairs at Gen-Probe Inc. (San Diego). She can be 
reached at

On December 8, 2003, President Bush signed into law the most comprehensive Medicare reform package since Medicare started in 1965. While few of its 415 pages address IVDs directly, the relevant sections do bring tidings of good cheer to the industry. 

Key improvements were secured in the processes for determining payment for new clinical lab tests, the timing for national coverage decisions (NCD), the formation of a Council for Technology and Innovation at the Centers for Medicare and Medicaid Services (CMS; Baltimore), and the avoidance of competitive bidding and beneficiary copayments. Other improvements include the retention of the local coverage decision (LCD) process and implementation of temporary national codes. However, in every negotiated process, there are compromises; for clinical labs, there is a five-year freeze on the fee schedule and requirements for a competitive bidding demonstration project. Nonetheless, not a bad scorecard for the IVD industry.

Before providing more details on these provisions, it is important to recognize the significant efforts made by the IVD industry and its representatives who engaged in the legislative process. The industry is finding it necessary to consider political solutions to the complexities of coding, coverage, and payment, which have created barriers to the successful commercialization of IVD products.

These complexities were due in part to the closed decision-making processes at CMS. Contributing to the complexities was the introduction of more-innovative tests, such as those using molecular probes, that had no precedent current procedural terminology (CPT) codes or existing product similarities. In addition, the IVD industry had limited opportunities to interact within the system, which made commercialization a difficult and challenging process. One option for improving the process was through federal legislation. 

Most of the IVD provisions in the Medicare reform bill evolved from earlier legislative efforts that were promoted by trade and professional organizations such as the American Association for Clinical Chemistry (AACC; Washington, DC), the American Society for Clinical Pathology (ASCP; Chicago), and especially the Advanced Medical Technology Association (AdvaMed; Washington, DC). Acting as advocates for its membership, AdvaMed worked with legislators and provided legislative text on all IVD provisions, with the exception of the clinical laboratory fee freeze and the competitive bidding project that were addressed by ASCP, AACC, and others. Advocacy efforts with Congress included drafting proposed legislation, working with House and Senate committees, supporting the issues through the floor votes, tending to the conference committee negotiations and agreement report, and having discussions up to the final vote. The point is that the IVD industry needs access to legislators and the legislative process to ensure that implementation of new technologies will be timely and supported. The benefits reaped by the IVD industry from this Medicare reform bill would not have happened without these efforts.

So what do these new Medicare provisions mean for the IVD industry? This article discusses some of the key provisions that will affect different aspects of the payment process for new and existing IVD technologies. 

Improvements in Oversight of Technology and Coverage

Effective for those clinical laboratory test CPT codes assigned on or after January 1, 2005, section 942 mandates the formation of a CMS Council for Technology and Innovation that will coordinate Medicare coverage, coding, and payment processes for new technologies. Composed of CMS senior staff and clinicians, this council will be chaired by a noncareer appointee who reports to the head of CMS. The council’s responsibilities include coordinating coverage, coding, and payment processes for new technologies and procedures, and exchanging information on new technologies with other entities making similar decisions.

This section also requires the establishment of methods for determining the basis and amount of payment for new clinical laboratory tests or those assigned a new healthcare common procedure coding system (HCPCS) code. Specifically, there will be a public listing (Internet or other means) of tests requiring payment determinations. On the same day, a notice will announce that a public meeting will be held within 30 days. During the public meeting, CMS will accept comments and recommendations on the proposed determinations. CMS will take the public comments into account and then publish the final determinations with supporting explanations and relevant data.

By establishing the council along with its composition and duties, the Medicare reform act has satisfied one of the IVD industry’s long-held desires for a structure to address payment of new technologies. Taken from the Medicare Innovation and Responsiveness Act legislation, these provisions address concerns that new IVDs such as molecular methods for genetic disease, cancer, and pharmacogenomic testing will be crosswalked to existing and inappropriate CPT codes, resulting in inadequate reimbursement. On a cautionary note, the industry should monitor the implementation of the council’s exchange of information with other entities. While there may be direct benefits from FDA and CMS exchanging information on new tests, the timing, access, and type of information could be critical due to the proprietary nature of regulatory submissions. 

The section of the conference agreement report covering this statute also indicated that payment criteria should be established to evaluate if a test could be coded by gap-filling or crosswalking to an existing code. Following the open and transparent process initiated by FDA, CMS will now engage all stakeholders in the payment process and be accountable for its decisions. Including this provision in the Act ensures that the intent to keep the process open is maintained under statutory requirements. This will also encourage the IVD industry to be active in watching for the issuance of notices, formulating rational justifications, and participating in the process.

At the same time, the Medicare reform act does not contain provisions for adopting the House recommendation to replace the ICD-9-CM coding system with ICD-10. However, the conference agreement report acknowledged that the National Committee on Vital and Health Statistics recommended that the change be implemented as quickly as possible. The ICD-10 system addresses the deficiencies of the 23-year-old ICD-9 coding system, which limits the number of available codes for new technologies and overburdens the laboratories in establishing medical necessity. 

Clinical Laboratory Fee Schedule Freeze

Effective January 1, 2004, section 628 enacts a freeze on the consumer price index (CPI) update to the Medicare clinical laboratory fee schedule for a five-year period through 2008.

As with any negotiated process, compromises are required to offset the cost of the legislation. In this case, imposing the CPI update freeze came as an alternative to a 20% beneficiary copayment requirement for lab tests. The clinical lab industry has successfully fought the copay issue for years by drawing attention to added billing costs for funds that already have a low likelihood of being collected. However, Congress was not willing to take both the copay and CPI update freeze issues off the table. A compromise was reached, and the update freeze stayed in the bill. The implications for current tests could include behavioral changes in the labs, where test menus may change to accommodate a healthier financial status.

Demonstration Project for Clinical Laboratory Services

With an interim report due to Congress by December 31, 2004, section 302(e) requires conducting a competitive bidding demonstration project for clinical laboratory tests that do not involve face-to-face encounters with individuals. Unlike the proposal for durable medical equipment, the lab tests must comply with the Clinical Laboratory Improvement Amendments of 1988 standards rather than the quality standards established for suppliers under competitive acquisition procedures. 

While requirements for competitive bidding for clinical lab tests were not included, there are requirements for demonstration project reports. Several members of Congress still believe that competitive bidding will yield savings in clinical lab costs without sacrificing quality. Depending on the outcome of the demonstration project, Congress may again consider competitive bidding. Therefore, the IVD and clinical laboratory industries must carefully scrutinize the protocol developed for the demonstration project and the report as to the outcomes and conclusions. 

National Coverage Decision Process

Effective January 1, 2004, Section 731 mandates that factors used to determine NCDs are made public and that related guidance documents are developed similar to those available from FDA. 

From the time a request is made, a proposed NCD will be posted on the CMS Web site within six months for those cases that do not require a technology assessment or review by the Medicare Coverage Advisory Committee (MCAC). For those requests requiring a technology assessment, there is a nine-month time limit. Following a proposed NCD notice, public comments will be accepted during a 30-day period. A final decision will come within 60 days of the conclusion of the comment period and include summaries of the comments as well as evidentiary data if the decision is contrary to MCAC recommendations. Therefore, the total time required for an NCD should not exceed 9 or 12 months, depending on the assessment status. 

In addition, effective July 1, 2004, revised procedures will allow the issuance of temporary national HCPCS codes.

This provision represents a significant change over current procedures that were conducted in obscurity and could take five years to complete. The major changes include openness, standardization, and interaction with CMS. While NCDs are sought for a small number of IVDs, the availability of guidance documents developed with the IVD industry and knowledge of requirements in advance will enable a more consistent and reliable process. The comment period for those products needing technology assessments will also provide an opportunity to engage in an open process. While an NCD determination may not be pursued for many IVDs, the process and timeliness afforded by this statute may make this option more attractive. 

Local Coverage Decision Process

Effective July 1, 2004, section 731 also modifies LCDs in that a plan is required for evaluating new technologies and identifying those that are more appropriate for an NCD. In addition, CMS will consult with the local carriers in making this determination. Furthermore, CMS will act as an information dissemination center for all carriers regarding new LCDs.

While LCDs are going to continue, it appears that CMS is tightening its hold on the LCD process and lessening the control of the local carriers. While this provision supports the continued use of LCDs, the centralized control may lead to endorsements by other carriers through the distribution process. This issue will warrant continued review as the process, time frames, and opportunity for interactive determinations are further defined.

Mediation Process for Local Coverage Determinations

Section 940A requires the hiring of physician mediators to help mediate disputes between stakeholders and Medicare carrier medical directors.

This provision will provide a method for appealing decisions made by medical directors regarding local decisions. Although the selection process of physician mediators is not defined, this provision provides one pathway for addressing systematic complaints regarding the decisions made by medical directors.

Coverage of Cardiovascular and Diabetic Screening Tests

Effective January 1, 2005, sections 612 and 613 provide coverage of cardiovascular and diabetic screening for individuals at risk. Tests covered by these provisions include a blood test for the early detection of cardiovascular disease, fasting plasma glucose tests, and other such tests that the secretary of Health and Human Services deems appropriate. Coverage of cardiovascular screening tests is limited to those recommended by the U.S. Preventive Services Task Force (USPSTF).

The implications for new technologies that support diabetes screening are significant as these provisions allow for an expedited path to reimbursement once the regulatory review is completed. However, the cardiovascular screening test requirement for a USPSTF recommendation may result in no changes in reimbursement time, or delays in coverage due to the extensive evidence required and time needed for assessment. 


The advances made in establishing open, rational, and interactive processes in the Medicare reform act are significant. These advances have also addressed many of the IVD industry’s concerns regarding coding, coverage, and payment of new technologies and their access to Medicare beneficiaries. While the act conveys the intent of Congress, agency rule making and guidances will be developed to provide the steps for implementation. The industry must now address this effort to prevent the gains made from slipping away in the regulatory process. 

Copyright ©2004 IVD Technology

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