The Medicare Technology Crunch, by Matt Patterson

Procedures, Technologies and Medicines Covered by Private Insurers Aren’t Necessarily Covered by Medicare


Technological innovation contributes to Americans’ unparalleled standard of living, and is key to our vibrant, dynamic economy. The health sector is no exception: According to economist Glen Whitman and physician Raymond Raad, in some areas of medical science the United States is responsible for more innovations than all other countries combined.1 Writing for Forbes, Whitman and Raad give a partial listing of America’s astounding medical contributions:

Of the top 27 diagnostic and therapeutic innovations over the past four decades, work in the U.S. contributed significantly to 20, including nine of the top 10. By contrast, all European Union countries together with Switzerland had a hand in 14 of those advances, and just five of the top 10.2

No wonder, then, that the American health care system is the envy of the world. Indeed, leaders from across the globe routinely come to the United States when their health is in danger. Most recently, the premier of Canada’s Newfoundland province Danny Williams made a much-publicized trip to Miami’s Mount Sinai Medical Center for heart valve surgery in February of 2010.3 And Mr. Williams is not alone; an estimated 40,000 of his countrymen come to the United States for medical treatment every year.4

Part of the reason for this medical flight is that Canadians have limited access to advanced, often life-saving, medical technologies. As Sally C. Pipes, president and CEO of the Pacific Research Institute, writes: “Compared to other developed countries, Canada ranks 14th out of 25 nations surveyed by the Organization for Economic Co-operation and Development in access to MRIs; 19th of 26 for CT scanners; and eighth out of 21 for mammograms.”5

The reason Canadians have such abysmal access to cutting edge medical technology is simple: When the government heavily manages medical care, as it does in Canada, it suppresses market forces which both lead to the development of new technologies and which brings those technologies to the market for the benefit of the consumer. In short, when a government guarantees access, it has no choice but to prioritize, i.e., ration, access to resources, including expensive technologies, in order to control costs. And so thousand of Canadians who can afford to do so migrate south when medical necessity dictates.

Or so they have done. Now that the United States has its own national health care regime in the form of ObamaCare, concerns are emerging about what this new law will mean for America’s ability to invent and bring to market medical advances of the kind that save lives and attract patients from around the world. And there is ample cause for concern: Long before the inauguration of ObamaCare, the United States had a government health care program allocated for the elderly and disabled – Medicare. And Medicare has long had institutional difficulties in bringing the most advanced technologies to Medicare enrollees, and for the same reasons that plague Canada’s system – the government’s need to control cost often takes precedence over the needs – and desires – of patients.

CT Colonography

Take, as an especially revealing example, Medicare’s decision not to cover computed tomographic (CT) colonography.6 CT colonography is a relatively new procedure for viewing the colon and large intestine to check for polyps and cancer, and is far less invasive, and far less dangerous, than traditional colonoscopy.7

The reason Medicare gives for not covering CT colonography? According to Peter J. Neumann, Sc.D., and Sean R. Tunis, M.D. writing on the New England Journal of Medicine website, the Center For Medicare Services (CMS) determined that “clinical trials showing a benefit of screening with CT colonography were not necessarily generalizable, because the mean age of trial participants was lower than that of Medicare patients.”8 In other words, because the test subjects weren’t elderly, Medicare could not be sure that the elderly would benefit from the procedure enough to justify coverage.

In fact, however, the elderly are among the most likely to benefit from CT colonography – and the most likely to favor this procedure. It carries a lower risk of perforating the colon than conventional colonoscopy and it is less likely to exacerbate existing heath problems, such as the chronic breathing and heart conditions9 which afflict many older Americans. In other words, this procedure is safer and more comfortable than the conventional alternative.

The life-saving potential of widespread CT colonography use is staggering: According to The National Cancer Institute Colorectal Cancer Progress Review Group, wider availability of screening procedures like CT colonography could save as many as 20,000 lives per year.10 It is hard to escape the conclusion that the decision not to cover the procedure was made purely on cost control grounds.

What is especially ironic is that Barack Obama, in his first official physical exam as president, received a CT colonography to screen for colorectal cancer.11 As James H. Thrall, MD, chair of the American College of Radiology Board of Chancellors put it, “The President and his doctors have unparalleled access to the latest medical and scientific information. The fact that he opted for CTC should put to rest any empty arguments against the viability of CT colonography. It’s time for all patients who want a CT colonography to be covered for this lifesaving exam. Medicare needs to provide coverage now.”12

Intraocular Lenses

Of course, CT colonography screens for a deadly disease – according to the National Cancer Institute, there were over 146,000 new cases of colon and rectal cancers diagnosed in 2009, taking a combined toll of 49,920 lives.13

But Medicare can also frustrate access to technologies which, while not life saving, are nonetheless certainly life improving. For example, cataract surgeries are one of the most common medical procedures done in the United States.14 A cataract is a clouding of the lenses that effects millions of elderly Americans; indeed, according to the National Eye Institute, “By age 80, more than half of all Americans either have a cataract or have had cataract surgery.”15

A common and popular remedy for cataract sufferers is the installation of an artificial, intraocular lens (IOL) to replace the patient’s degraded natural lens after it is removed during surgery. IOLs have existed since the 1960s, but only won FDA approval in 1981.16

Medicare generally pays for cataract surgery, and will also pay for intraocular lenses – to a point. Some classes of IOLs do not receive Medicare reimbursement. For example, many of the newer IOLs which correct for both distance and near vision are not covered because “these premium IOLs are more expensive and their special features tend to be viewed by insurers as ‘nice to have’ but not absolutely necessary.”17

Perhaps it is not an absolute necessity to have your eyes corrected for both near and distance vision. And yet, Medicare determined that one or the other is a medical necessity? And when you think about it, is vision even a “medical necessity?” Or is sight itself a “luxury?”

These are the types of absurdities one finds when government bureaucrats make it their business to decide which medical procedures to pay for and for whom from the public purse. As it stands, for the cataract patient who desires a cutting edge IOL to restore their sight, Medicare will generally reimburse up to the cost of a traditional IOL, and then “the patient will be responsible for the difference, which could be anywhere from $1,500 to $2,500 per eye, depending on the surgeon and the IOL.”18

At least, up until now, Medicare patients have had the option of paying beyond the government subsidy, of going outside the Medicare system. But what happens to seniors, what happens to us all, when our entire system becomes a de facto Medicare? When there is no “outside” the government system?

Something else to consider: Can there be any doubt that the innovators who invented these lenses counted on the private market to reward them for their years of effort and research? What happens when there is no more “private market” in health care? What will motivate the makers of these wondrous devices then?


In addition to medical devices like lenses and scanners, innovations in medication, both the pharmaceuticals themselves and the delivery systems which propel them into our bodies, are often inhibited by the lumbering bureaucracy that is Medicare.

Ilene Hays was a Medicare Part B enrollee diagnosed with Chronic Obstructive Pulmonary Disease (COPD),19 a class of illnesses which includes chronic bronchitis and emphysema.20 For her affliction, Hays was prescribed and used DuoNeb,21 an inhaled medication combining the powerful bronchodilators albuterol and ipratropium, used to “prevent bronchospasm in people with chronic obstructive pulmonary disease (COPD).”22

Medicare Part B assists elderly and disabled persons who qualify with some prescription medications, as well as some medical devices and equipment. According to statute, no Medicare Part B payments “may be made… for any expenses incurred for items or services which… are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”23

However, the Secretary of Health and Human Services can outsource some aspects of implementation of Medicare Part B, including “local coverage determinations” to outside contractors.24 These contactors, when determining local eligibility, can apply the “least costly alternative policy,” which says that Medicare can reimburse for treatments up to the point of the “reasonably feasible and medically appropriate” cheapest alternatives.25

For four years, Ilene Hays was using DuoNeb to treat her COPD, and was receiving reimbursements from Medicare according to statutory formula. However, in 2008, the contractors helping to dispense Ms. Hays’ Medicare reimbursements decided that albuterol and ipratropium would be cheaper to administer separately, rather than in a combined dose as delivered by DuoNeb, and that the medical necessity of delivering them together had “not been established.”26 They declined to further reimburse her for the drug.

Ms. Hays sued. In Hays v. Sebelius, a District Court handed down a judgment favoring Hays, holding that “the Medicare Act unambiguously forecloses that determination [of the contractors] and requires instead that Medicare pay for covered items or services at a statutorily prescribed rate.”27 The District Court decision was upheld by a Court of Appeals in December of 2009.

The Obama Administration was undetered by its judicial rebuke in the Hays case, however. As Scott Gottlieb, an internist and former senior official for the Centers For Medicare and Medicaid Services wrote in The Wall Street Journal, “The Obama team will use murky provisions embedded in the Senate [health care] bill to subtly attain in law those powers they couldn’t more artfully acquire in court. In fact, the bill lets Medicare seek almost any restrictive payment authority it wants from a Medicare Commission established for the purposes of cost control.”28

What will this mean for patients like Hays who may be denied access to advanced care in the future? Gottlieb warns ominously that the “Senate health-care bill… exempts Medicare’s actions from judicial review, taking away the right of patients to sue the government. Unlike existing Medicare coverage laws, patients won’t have the ability to appeal any of the decisions of this new Medicare Commission.”29


As the Hays case makes clear, a government bureaucrat can suddenly and seemingly arbitrarily deny people access to life-improving medicines and technologies just as easily as a private insurer.

And, in fact, it does so more often: According to a 2008 American Medical Association health insurer report card, Medicare denies 6.85 percent of its claims, and therefore has the dubious distinction of turning down patients more than any private insurer.30 Which makes one wonder: If our entire health care system becomes something like Medicare in the wake of ObamaCare’s passage, where will we go if and when the government refuses to pay for an advanced medical device or treatment that we may need or want?

And where will the Canadians go?


Matt Patterson is a policy analyst for the National Center for Public Policy Research and a National Review Institute Washington fellow.  


1 Glen Whitman and Raymond Raad, “The Healing Power Of Innovation,” Forbes, January 6, 2010, downloaded from on March 24, 2010.
2 Ibid.
3 Sally Pipes, “Why Canadian premier seeks health care in U.S.,”, February 25, 2010, downloaded from on March 29, 2010.
4 Ibid.
5 Ibid.
6 Peter J. Neumann, Sc.D., and Sean R. Tunis, M.D. , “Medicare and Medical Technology — The Growing Demand for Relevant Outcomes,” New England Journal of Medicine, January 10, 2010, downloaded from on March 11, 2010.
7 “CT Colonography,” Radiology Info, downloaded from on March 12, 2010.
8 Peter J. Neumann, Sc.D., and Sean R. Tunis, M.D. , “Medicare and Medical Technology — The Growing Demand for Relevant Outcomes,” New England Journal of Medicine, January 10, 2010, downloaded from on March 11, 2010.
9 “CT Colonography,” Radiology Info, downloaded from on March 12, 2010.
10 “President Obama Gets Virtual Colonoscopy (CT Colonography) But Medicare Denies CTC Coverage to Seniors,” American College of Radiology, March 2, 2010, downloaded from on March 15, 2010.
11 Ibid.
12 Ibid.
13 “Colon and Rectal Cancer” National Cancer Institute, downloaded from on March 29, 2010.
14 “Facts About Cataract,” National Eye Institute,” downloaded from on March 25, 2010.
15 Ibid.
16 “Intraocular Lenses (IOLs),” All About Vision, downloaded from on March 23, 2010.
17 Ibid.
18 Ibid.
19 Hays v. Sebelius, December 22, 2009, downloaded from on March 22, 2010.
20 “COPD (Chronic Obstructive Pulmonary Disease)” Medline Plus, downloaded from on March 21, 2010.
21 Hays v. Sebelius, December 22, 2009, downloaded from on March 22, 2010.
22 “DuoNeb,”, downloaded from on March 22, 2010.
23 Hays v. Sebelius, December 22, 2009, downloaded from on March 22, 2010.
24 Ibid.
25 Ibid.
26 Ibid.
27 Ibid.
28 Scott Gottlieb, “What Doctors and Patients Have to Lose Under ObamaCare,” The Wall Street Journal, December 23, 2009, downloaded from on March 23, 2010.
29 Ibid.
30 “2008 National Health Insurer Report Card” American Medical Association, downloaded from on March 29, 2010.

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