Improving the Quality and Efficiency of the Medicare Program Through Coverage Policy

In the face of large and growing budget deficits, finding ways to bend the health care cost curve and improve the efficiency of the Medicare program has been a central focus of budget policy. Medicare spends more than $500 billion annually for more than 46 million senior and disabled beneficiaries, and research suggests new medical technologies such as drugs, devices, diagnostics and surgical techniques are a major driver of increasing costs. For example, some novel anti-cancer drugs now cost significantly more than older alternatives, many new diagnostic technologies are additive rather than replacing outmoded or older services, and advances in minimally invasive surgical techniques have substantially expanded the number of people who are now surgical candidates. Within the fee-for-service environment, which makes up the vast majority of Medicare spending, there are few incentives to be efficient or economical. While some advances in medicine undoubtedly have contributed to reductions in morbidity and mortality, new technology and new uses of established technology are often adopted with little evidence that they work better than existing treatments. There is even less evidence about which patients might actually be harmed by their use. Coverage policy examines the clinical evidence to decide which services and treatments should be paid for by insurance and under what circumstances. Medicare coverage determinations can act as a policy lever to influence both the appropriate use of medical technology and the creation of better evidence to support clinical and health policy decisions.