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The Centers for Medicare and Medicaid Services (CMS) recently issued a draft rule that could dramatically improve access to evidence-based treatments that can be delivered virtually. But it won’t unless CMS makes another seemingly simple change regarding benefit categories.

Covid-19 has killed more than 180,000 Medicare beneficiaries to date, representing about 80% of all Covid-19 deaths in the U.S. That means there’s a pressing need for safe and effective socially distanced digital therapeutics.


The Medicare Coverage for Innovative Technology (MCIT) proposed rule would cover the use of medical devices designated as “breakthrough” technologies as soon as they are approved by the U.S. Food and Drug Administration. That represents a big change: These technologies are currently reviewed and approved by the various Medicare contractors responsible for each of Medicare’s several multi-state regions. This process can take years and may lead to a technology being covered in one region and not in another.

The current coding, coverage, and payment processes are complex and CMS has acknowledged it has challenges keeping coverage determinations on pace with device innovation.

The proposed rule (comments can be made on it through November 2, 2020) would potentially cover everything from the Orteq artificial knee meniscus and the Thermedical radiofrequency ablation catheter to treat ventricular tachycardia to digital therapeutics — evidence-based interventions driven by high quality software programs to prevent, manage, or treat a medical disorder or disease. One promising breakthrough-designated digital therapeutic that could be affected by the proposed rule is MedRhythms, a platform for treating chronic stroke symptoms.


The hitch for digital therapeutics is that, under Medicare’s outdated interpretation of regulatory language, digital therapeutics do not have a benefit category recognized by CMS, which is a requirement for Medicare coverage under the proposed rule.

Digital therapeutics are most commonly regulated under the Software as a Medical Device (SaMD) framework, which the FDA defines as software intended to be used for one or more medical purposes without being part of a hardware medical device.

Medicare reimbursement for digital therapeutics could happen either of two ways.

Congress could establish a Medicare benefit category for digital therapeutics, much as it established categories for mammography screening and other preventive benefits, home infusion therapy, and treatment services for opioid use disorder. A bill with bipartisan support, the Access to Prescription Digital Therapeutics Act of 2020, has been introduced into the U.S. Senate, but the congressional stalemate makes its advancement unlikely during this Congress.

While a legislative solution would be welcome, a more timely mechanism would be to have CMS use the Medicare Coverage for Innovative Technology rule to clearly state that the existing benefit category, durable medical equipment, which includes things like hospital-grade beds and wheelchairs, also applies to many digital therapeutics and that breakthrough-designated software as a medical device could be subject to this coverage and subsequent payment.

Some commercial payers have successfully paid for digital therapeutics. One approach has been to create a digital formulary, such as Cigna’s Express Scripts partnering with companies like Propeller Health, a digital health platform for asthma and COPD. But in the absence of traditional Medicare coverage for software as a medical device, the payment approaches in the commercial space require significant recreating of the contractual wheel each time a technology manufacturer seeks to establish a business relationship with a new payer. This redundancy adds to the wasteful spending in the already overly expensive American health care system and delays evidence-based treatments from getting to the people who need them.

Medicare has lagged behind commercial payers because it has not assigned or created a benefit category for digital therapeutics. This has further widened the equity gap for American seniors, people with disabilities, people with end-stage kidney disease, and other beneficiaries of traditional Medicare. To make matters worse, the Covid-19 pandemic has disproportionately affected Medicare beneficiaries, further worsening health disparities. While CMS has made meaningful strides during the Covid-19 pandemic through its flexibility with telehealth, its outdated view on software as a medical device and digital therapeutics has limited its ability to close health gaps.

CMS was understandably reluctant to cover digital therapeutics when they first emerged. This reticence stemmed from four root causes. First, Medicare staffers must thoroughly review the literature for new technologies and, by their innovative nature, early digital therapeutics initially had limited research. Second, the Medicare program is obligated to avoid fraud, waste, and abuse to ensure good stewardship of taxpayer dollars. Third, CMS staff harbored residual fear from the Supreme Court hand slap in a decision about CMS rule-making procedural missteps in Allina v. Azar. Fourth, CMS’s interpretation of the definition of what constitutes durable medical equipment is too concrete. (I’ve written elsewhere a more detailed analysis of CMS’s overly rigid interpretation of durable medical equipment.)

These four drivers make CMS staff apprehensive to move out of their coding and coverage comfort zone.

With more than 1 million Medicare beneficiaries having already contracted Covid-19 — and more to come — and the emergence of post-Covid syndrome, the demand for safe and effective socially distanced digital therapeutics during and beyond Covid-19 should push CMS out of its regulatory routine and habit. The four barriers to CMS’s coverage and reimbursement for digital therapeutics are not only outdated but also stifle equitable access to care for millions of Americans amid this pandemic.

The rigor and quality of digital therapeutics has evolved dramatically over the last decade. The FDA’s evidence review of them should suffice for CMS’s need for proof of clinical effectiveness.

There are other reasons for CMS to be on board with digital therapeutics. The digital exhaust from them is far more granular and real time than the analog paper trail for traditional durable medical equipment when used to detect and prevent fraud, waste, and abuse. The data from digital therapeutics could also support continuous improvement in outcomes or reductions in health care system costs. The value of these data could be incorporated into Medicare coverage and payment decisions.

In the Medicare Coverage for Innovative Technology proposal, CMS has appropriately followed rule-making protocol, thus protecting its staff from getting burned by the legal hot water of Allina v. Azar.

And based on the CMS coding decision tree and regulatory definition of durable medical equipment, many breakthrough-designated digital therapeutics meet the criteria for creating a new or miscellaneous health care common procedure code which is needed for medical providers to submit health care claims to Medicare and other health insurance companies.

According to CMS Administrator Seema Verma, reversing course on virtual care would be a mistake. The need for virtual care existed before Covid-19 and will persist beyond it. This pandemic has served as a regulatory catalyst for advancing telehealth and, with the introduction of the Medicare Coverage for Innovative Technology proposed rule, Covid-19 can trigger advances in other virtual modalities to meet the needs of Medicare beneficiaries.

But for the initiative to have teeth and fulfill its intent, CMS must clearly state that the durable medical equipment benefit category applies to many digital therapeutics and that breakthrough-designated software as a medical device should be subject to this coverage and subsequent payment. Doing so would help eliminate disparities in treatment for Medicare beneficiaries and balance accountable chronic disease management with the need for social distancing in the Covid-19 era and beyond.

Andrey Ostrovsky is a pediatrician, managing partner at Social Innovation Ventures, and the former chief medical officer for the Center for Medicaid and CHIP Services.