The Centers for Medicare and Medicaid Services (CMS) got its start in the 1960s as a claimspaying public insurance agency — an identity that was reflected in its original name, the Health Care Financing Administration (HCFA). Congress intended HCFA to pay for care delivered largely by privately run physician practices and hospitals, but not to meddle in the practice of medicine. Noninterference was a key element of efforts to promote Medicare to influential segments of the American medical community that were suspicious of “socialized medicine.” But Medicare’s hands-off policy carried the seed of a problem: how to ensure that the products and services being prescribed and paid for actually worked? For drugs and high-risk medical devices, CMS could usually rely on the Food and Drug Administration (FDA), which approved products on the basis of their safety and effectiveness, though questions often lingered about whether and how well they worked for Medicare patients, who are typically older and sicker than patients studied in clinical trials conducted for FDA approval. Moreover, those trials have historically enrolled a limited number of women and non-White participants. Medicare typically pays for medical and surgical procedures as “generally accepted” medical practice. Medicare was authorized to decline reimbursement for items and services that were not “reasonable and necessary” for the diagnosis and treatment of illness or injury. Mostly, though, CMS paid claims without a great deal of its own assessment. On occasion — roughly 5 to 10 times per year — the agency opened national coverage determinations to assess whether particularly costly or controversial technologies met the “reasonable and necessary” standard. In addition, CMS subcontracted with regional Medicare Administrative Contractors that made numerous local coverage determinations, applying the same statutory standard.
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