Rules for Medical Markets: The Impact of Medicare Contractors on Coverage Policies

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Objective. Examine Medicare's local contractors' claim payment rules, focusing on how technology affects the balancing of competing demands to respond to local medical markets (rule heterogeneity) with concerns about national consistency in payment rules (rule homogeneity).

Data Sources. Local medical review policies (LMRPs) posted in policy sets by contractor organizations on the Centers for Medicare and Medicaid Services (CMS) website and a survey of Contractor Medical Directors.

Study Design. We classified LMRPs based on type (NT=new technology; TE=technology extensions, and UM=utilization management), and examined the effect of technology type on LMRP focus, evidence use, policy revisions, implementation speed, and reference material citation characteristics of LMRPs using multivariate analysis.

Principal Findings. NT policies were more homogenous, as were policies among contractors related through multistate affiliation or through informal networks. UM policies were more heterogeneous. NT policies were more likely than UM policies to cite research journals as evidence while UM policies were more likely to cite medical reference materials.

Conclusions. Coverage policies associated with new technologies diffuse rapidly and are homogenous compared to utilization management coverage policies. This suggests that new technology policies are responsive to the development of new technologies at the national level. In contrast, utilization management policies are responsive to local heterogeneity in health care practice. Congress has mandated reforms to the contracting process to achieve consistency and reduce duplication. Our data elucidate the nature and sources of variation and will help policymakers strike a balance between homogeneity and local adaptation.

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