Statutory Authority for Medicare Coverage

There are four parts to the Medicare program: Part A is the Hospital Insurance program, covering primarily hospital inpatient services, skilled nursing facility services, home health agency, and hospice services; Part B is the Supplementary Medical Insurance program, covering outpatient and physician services, as well as laboratory services and products provided for home use; Part C is the Medicare Advantage program,5 which is a managed care program; and Part D is the new Prescription Drug Benefit program.4 In addressing coverage and payment, we focus on Parts A and B as they relate to the longstanding Medicare fee-for-service program.

The Secretary of Health and Human Services (HHS), who administers the Medicare program, has delegated that authority to a component agency, the Centers for Medicare and Medicaid Services (CMS). Through its central and field offices, CMS contracts with private organizations to assist with this administration. Medicare contractors generally are insurance companies, who process claims, interact on a day-to-day basis with health care providers, and typically provide these services for prescribed geographic regions.

The Medicare program is a defined benefits program (i.e., Congress has expressly prescribed how beneficiaries become eligible to receive payment for products and services and defined the scope of those products and services). The Medicare statute does not specifically identify all covered items, services, treatments, procedures, or technologies but rather describes the benefit categories in which items and services are classified. For coverage eligibility, a medical device must fit into one of these recognized benefit categories and not be otherwise excluded. The classification of the device into a benefit category also determines the Medicare payment methodologies for the device.

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