Health Insurance and Coverage of Evidence-Based Care

One of the most important questions that can arise under any type of health insurance is whether the terms of coverage reflect evidence-based standards of treatment. This question is especially important when the treatment at issue has a high cure rate and is designed for a condition that not only can cause disability and death but also is transmissible. Hepatitis C fits this profile.

This installment of Law and the Public’s Health considers legal protections governing access to evidence-based hepatitis C treatments for people insured through Medicaid. The article focuses on Medicaid because of the association between the hepatitis C virus (HCV) and poverty¹; however, HCV can strike anyone. Thus, the question of whether health insurance guarantees coverage that reflects evidence-based standards of care is of universal importance, although for reasons discussed hereinafter, the legal analysis would differ.

The article begins with a brief overview of HCV and the emergence in recent years of US Food and Drug Administration (FDA)–approved highly effective antiviral treatment regimens. The article then discusses the general question of the legal standards governing health insurance coverage and then turns to Medicaid’s coverage requirements for HCV under federal law, as interpreted by federal agencies and the courts. The article concludes with a discussion of the implications for public health policy and practice.

Hepatitis C

According to the Centers for Disease Control and Prevention, 2.7 to 3.9 million people in the United States are chronically infected with HCV annually.² Hepatitis C infection is most commonly spread through contact with infected blood as a result of hemodialysis, injection drug use, blood transfusions, or other means. After acute infection, the virus can remain in the body, causing long-term liver disease and death. For every 100 people infected with HCV, about 75 to 80 will develop chronic HCV, which is associated with drug use, alcohol abuse, and certain underlying bacterial and viral infections. Sexual contact with an infected person and shared use of personal items also are associated with the risk of HCV transmission.²

Although vaccines are available to prevent hepatitis A and B, no vaccine exists for hepatitis C.² However, increasingly effective treatments do exist. In late 2013, the FDA began to approve a new generation of antiviral drugs that have a therapeutic efficacy value exceeding 90%, along with a considerably shorter treatment regimen and fewer side effects than previous treatments.³ Although these new treatments may lead to long-term health and overall economic savings, they come with a hefty price tag: from $55 000 to $95 000 for a course of treatment.⁴

Laws Governing Health Insurance

The United States lacks any law that can ensure that emerging effective treatments translate into coverage across all forms of health insurance. Other nations, even those that depend on private health insurance sold by individual insurers, have legal mechanisms for ensuring that as new treatments emerge, evidence of efficacy translates into appropriate population-wide coverage.

The US legal system lacks such a holistic approach to coverage, however. With the arguable exception of mental health and substance use disorders parity law, which applies across multiple insurance markets other than Medicare, the regulatory framework is specific to the form of insurance involved: public and private employer-sponsored coverage, coverage through the individual market, Medicaid and its companion Children’s Health Insurance Program (CHIP), and Medicare. This enormous body of law consists of 51 bodies of state insurance laws applicable to the individual and group health insurance markets, 51 separate state Medicaid and CHIP programs, and a series of federal laws governing distinct insurance markets, each of which has a greater or lesser preemptive impact on state law (ie, an ability to override state law). Private employer plans (other than church plans) are governed by the federal Employee Retirement Income Security Act (ERISA). Separate laws establish and define Medicare, Medicaid, and CHIP. The Public Health Service Act sets minimum federal standards for health plans sold by insurance issuers in the individual and group markets. Distinct bodies of law also apply to plans covering public employees—civilian and military.⁵

Federal insurance laws are also highly variable. For example, ERISA contains relatively few standards governing coverage. Where coverage standards do exist, such as the essential health benefit standard that applies to all ERISA-governed plans sold in the small group market,⁶ they tend to be broadly worded, leaving insurers and plan administrators with considerable discretion on how to design the precise terms of coverage.

State insurance laws also are highly varied. Even where detailed state insurance laws exist, states tend to give insurers a considerable amount of discretion to define the precise treatments that they will cover. Furthermore, in the case of self-insured ERISA plans funded directly by employers rather than through the purchase of a group insurance policy, even if a state law mandates a particular treatment, ERISA preempts the state law.⁵ This situation is commonplace. In 2012, about 60% of US residents with coverage through a private employer were members of self-insured ERISA plans.⁷ In short, in the private and employer insurance markets, the terms of coverage can vary widely.

Medicaid is different. It is true that state Medicaid plans can differ substantially from one another. However, although federal Medicaid law is not as detailed as Medicare law (the most finely detailed of all federal health insurance laws), federal Medicaid law does contain extensive requirements that act as a condition of participation in state Medicaid programs.⁵ Understanding these requirements is important to public health because of Medicaid’s size and its role in financing health care for the nation’s most vulnerable populations. Medicaid is now the largest public insurer, enrolling >73 million people.⁸ Furthermore, because Medicaid eligibility is so closely tied to poverty—especially in the 31 states and the District of Columbia that, as of fall 2016, had adopted the Affordable Care Act’s Medicaid expansion—the program plays an especially important role for health conditions associated with poverty.

State Medicaid Coverage Restrictions and the Federal Response

Medicaid applies certain broad coverage requirements to which states must adhere. In the case of “traditional” Medicaid beneficiaries—people recognized as eligible under pre–Affordable Care Act coverage rules, including low-income children and pregnant women, children and adults with disabilities who are poor, and deeply impoverished parents of minor children—prescription drugs are an optional benefit; however, all states provide coverage. For people made newly eligible for Medicaid under the Affordable Care Act—predominantly nonelderly adults with family incomes up to 138% of the federal poverty level who do not fall into one of the traditional eligibility groups—coverage of all essential health benefit categories, which include outpatient prescription drugs, is a requirement.

Regardless of whether outpatient prescribed drugs are covered as a mandate or as an option, certain rules apply. First, as with Medicaid coverage generally, coverage of outpatient prescription drugs must be “sufficient in amount, duration, and scope to reasonably achieve its purpose.”⁹ Federal Medicaid law defines “prescription drugs” as “simple or compound substances or mixtures of substances prescribed for the cure, mitigation, or prevention of disease, or for health maintenance.”¹⁰ In determining whether state coverage limits satisfy Medicaid’s requirement for amount, duration, and scope, the courts historically have looked to the purpose of the benefit⁵; for prescription drugs, the benefit is defined not only in terms of mitigation of disease but also in terms of cure.

Second, for required services for newly eligible beneficiaries entitled to outpatient prescription drug coverage on a mandatory basis, federal law further provides that coverage may not be arbitrarily denied or reduced according to diagnosis or condition.⁹

Third, Medicaid is governed by a “reasonable promptness” standard.¹¹ Under this standard, covered medical assistance items and services must be furnished with “reasonable promptness.” This standard requires not only that coverage begin promptly once eligibility is determined but also that appropriate services themselves be covered reasonably promptly.

Finally, for outpatient prescription drugs, federal law establishes additional detailed coverage standards that define the scope of outpatient prescription drug coverage with even greater particularity. Under these detailed requirements, all Medicaid drug programs must cover all FDA-approved drugs, consistent with FDA labeling, whose manufacturers have entered into a prescription drug rebate program.¹² Thus, to the extent that the makers of hepatitis C antiviral drugs have a rebate agreement in place, coverage must conform to FDA labeling standards. States are permitted to use reasonable procedures to improve efficiency, such as prior authorization and rules that favor coverage for certain preferred drugs that are therapeutically equivalent to more costly treatments, but they cannot impose unreasonable standards or exclude coverage.

Despite these strong federal coverage standards, studies of state Medicaid coverage of the hepatitis C antiviral regiment showed widespread problems after FDA approval. One study that examined fee-for-service state Medicaid drug coverage policies found widespread state limitations not supported by evidence. (Although the study did not include Medicaid managed care plans, the likelihood that plans whose capitation rates do not assume evidence-based coverage of HCV antiviral therapy will offer more liberal coverage is nil.) Restrictions uncovered in the study included requiring additional prior authorization for the use of antiviral therapy, as opposed to the older generation of interferon-based drug treatments, coverage exclusions applicable to patients who had used alcohol or who had used illicit drugs for some period of time prior to treatment, and a liver disease severity score that was significantly higher than that recommended under FDA standards.¹³ A second study found that 19 states sought information on human immunodeficiency virus (HIV) status, and of these, 10 required active treatment for HIV infection at the time of HCV treatment. Still other states placed prescribing restrictions that did not comport with established professional standards.¹⁴

These studies, along with news stories reporting on Medicaid restrictions, triggered a legal response from the federal government as well as an intervention by a federal court in Washington State, one of the states reporting restrictions. In November 2015, the Centers for Medicare & Medicaid Services (CMS), which oversees Medicaid, sent a Medicaid Drug Rebate Program Notice¹⁵ detailing federal coverage expectations for HCV coverage. The notice clarified the agency’s concerns about criteria that “unreasonably restrict access” to the antiviral drugs, such as severity tests that exceed recommended standards, abstinence tests, prescriber restrictions, and other arbitrary requirements. CMS also noted the right of Medicaid managed care plan enrollees to full Medicaid drug coverage, regardless of whether the coverage was through the plan itself or was carved out and covered by the state agency separately and directly. CMS encouraged “states to exercise sound clinical judgment and use available resources to determine their coverage policies.” The “available resources” noted by CMS included pharmaceutical and therapeutics committees, drug utilization review boards, treatment efficacy research, and professional treatment guidelines for patients with underlying alcohol or illicit drug conditions, which included full access to antiviral treatment coupled with supportive counseling and rehabilitation services.¹⁵

In May 2016, 6 months after the CMS notice, a federal district court issued a first-of-its-kind decision striking down Washington State’s restrictions on access to HCV antiviral treatment through Medicaid. The state’s policy, established in 2015, imposed a severity-of-disease coverage restriction that was substantially harsher than recommended standards. Private insurers in the state had adopted similar severity policies but quickly lifted their restrictions in the face of multiple lawsuits. The Washington State Medicaid program, by contrast, had not done so but decided to await the court’s decision. (Whether or not insurers ultimately would have prevailed cannot be known.)

The federal court’s decision, which the state did not appeal, was based principally on the fact that under Washington State’s own law, coverage is determined in accordance with a medical necessity standard that turns on whether emerging treatments are able to satisfy an evidence rating test that runs from A to D, with A being the highest rating. The record in the case showed that the evidentiary base for more widely available HCV antiviral treatment received an A rating from experts. The record also showed that the state acknowledged that there was no equally effective treatment, thereby making more widely available HCV treatment a requirement under the state’s own Medicaid plan. The court further found that the state violated Medicaid’s “reasonable promptness” standard by denying coverage until liver damage reached its severest forms.

Implications for Public Health Policy and Practice

In the months since the CMS notice and the federal court ruling, information from around the country suggests that state Medicaid programs have begun to ease their coverage restrictions, and private insurers are following suit.⁴ However, important individual and community-wide health implications remain. The movement of some states toward more appropriate coverage standards by no means should be understood as signaling a nationwide shift. The CMS guidelines, although clear, are precisely that: only guidelines. CMS has not threatened to withhold federal funding from any state because of its failure to adopt appropriate standards governing HCV drug treatment coverage. The federal court decision signals the strength of the legal arguments in favor of more appropriate coverage standards, but the decision applies to Washington State only. Additionally, no empirical research exists documenting the extent to which insurers operating in the individual and group plan markets in fact are refusing to cover HCV treatment.

The nation is awash in discussions about the goal of “value based” coverage—that is, coverage of treatments that rest on solid evidence and provide value for the investment. Yet, the case of HCV illustrates not only how far we have to go in realizing this goal, but also the degree to which the nation lacks a formal process for translating treatment gains into coverage standards across all forms of health insurance. The absence of such a mechanism goes hand in hand with the lack of any formal mechanism for ensuring that the prices we pay for medical care—drugs or otherwise—are reasonable. As the HCV case demonstrates, the absence of these 2 basic tools for rationalizing and controlling health care costs exacts a high public health toll in the form of denial of access to treatments of profound importance, not only to individual patients, but also to population health.

At a minimum, public health officials should take steps to determine if their states have implemented the CMS Medicaid guidelines and have replaced prior restrictions with evidence-based coverage standards. Ultimately, the challenge for public health lies in communicating the importance of a population-based policy approach to insurance coverage, one that balances access and cost for all patients, regardless of the source of coverage, and that moves the nation toward fair treatment rather than reinforcing unequal access to care.