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Jan 10, 2014

Office of Inspector General Finds Local Coverage Determinations (LCDs) Create Inconsistency in Medicare Coverage

Published

Jan 10, 2014

The HHS OIG released a report on the local coverage determination (LCD)-caused variation in coverage of Part B items and services.

The findings show that:

  • There is no correlation between the number of states with LCDs for an item or service and the unit cost or utilization rate of the item or service.
  • 59 percent of Medicare procedure codes are subject to two or more different coverage policies.
  • In some states, LCDs affect as few as 5 percent of Part B items and services while they affect over 50 percent in others.
  • Procedure and diagnostic codes to describe Medicare’s coverage of a given therapy often vary across LCDs.
  • Nearly 1/3 of LCDs that explicitly prohibit coverage are for new technologies.
  • Though CMS established an LCD review process and work group, an LCD evaluation plan was never put in place.

In light of these findings, OIG made the following recommendations to CMS:

  1. CMS should establish a plan to evaluate new LCDs for national coverage consistent with Medicare Modernization Act (MMA) requirements. While CMS concurred with all three recommendations, it considers its work group to be in compliance with the MMA and believes it has already made great strides in encouraging MAC collaboration. While manufacturers will continue to see varying coverage of their products across states, this trend could change as MACs begin to work to develop more consistent policies across jurisdictions.

  2. CMS should continue efforts to increase consistency among existing LCDs by establishing a process to identify, prioritize, and evaluate topics addressed in multiple LCDs.
  3. CMS should consider requiring Medicare Administrative Contractors (MACs) to jointly develop a single set of coverage policies.

In its comments to the report, CMS stated that it will not establish a national set of coverage policies due to administrative barriers. While CMS will not establish a formal process to harmonize LCDs, informal collaboration between MACs could effectively result in a national set of policies.

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