The Role of Coverage Policy in the Abandonment of Low Value ICDs

Many costly treatments are widely used even in the absence of evidence that they help patients. Insurers can discourage the use of low value treatments by refusing to cover them, but coverage policies must be enforced. In this paper we evaluate the returns to stepped-up enforcement of Medicare’s coverage policy for implantable cardiac defibrillators.

Since 2005 Medicare has stated that it will not pay for implanting defibrillators in patients who recently had a heart attack or revascularization procedure. Several randomized trials show that defibrillators do not improve survival in such patients. Following a 2010 False Claims Act lawsuit, the Department of Justice started investigating hospitals for implanting defibrillators in patients who do not meet Medicare coverage criteria.

Using 100% inpatient and ambulatory discharge data from Florida, we estimate that the lawsuit resulted in a 7% decline in defibrillator implantations, saving insurers over $500 million annually or almost $20 billion in present value. These savings dwarf the $273 million in damages that the Department of Justice recovered from hospitals. A large share of the savings accrued to private payers, suggesting physicians do not have separate treatment thresholds for privately-insured patients and Medicare beneficiaries. We conclude that coverage policy plus enforcement is a powerful tool for reducing the use of low value care.