CMS Repeals Final Rule on Digital Therapeutics in A Year of Shifting Guidance



The absence of an established, repeatable, and scalable path to commercialization and prescription of DTx has bottlenecked broader uptake, says one physician leader.

Key Takeaways

  • The Centers for Medicare & Medicaid Services has repealed its Medicare Coverage of Innovative Technology final rule.
  • The action leaves multiple unanswered questions for digital therapeutic reimbursement, with payers using a patchwork of existing coverage, benefit, coding, and billing options.
  • It is a scenario not uncommon to healthcare innovation: building the bicycle while riding it—and many others.

On November 14, 2021, the Centers for Medicare & Medicaid Services (CMS) repealed its final rule on Medicare Coverage of Innovative Technology (MCIT) and Definition of Reasonable and Necessary. The repeal marks the fifth MCIT action in 2021 as Medicare, Medicaid, and commercial payers await guidance on digital therapeutics (DTx), including those that require a prescription. Until the regulatory dust settles, DTx commercialization will continue to develop—like so many healthcare innovations—in a “both/and” world, one in which stakeholders work within and around existing frameworks while attempting to forge new ones.

The CMS MCIT 2021 timeline began in January with a final rule that would have “automatically provide[d] Medicare coverage for devices receiving FDA breakthrough designation for four years,” writes Health Affairs contributor and physician-investor Nisarg Patel. MCIT sought to close “the current nine- to twelve-month gap between FDA approval and Medicare National Coverage Determinations, as well as the inconsistent coverage by local Medicare administrative contractors.”


Two delayed effective dates and two proposed rules later, including the intent to repeal, stakeholders await guidance. While the delays have not kept payers from covering DTx products and manufacturers from forging pathways through PBMs, Health Affairs notes that additional federal legislation would have been required to make the DTx framework whole.

Federal legislation proposed in 2019 would have closed Medicare benefit category loopholes for DTx, while other legislation from 2020 would allow both Medicare and Medicaid “to cover all FDA-cleared or approved prescription digital therapeutics intended to prevent, manage, or treat mental health and substance use disorders.”


While CMS stated that the FDA breakthrough designation would have automatically satisfied part of its “reasonable and necessary definition” for medical devices, the agency’s proposal to expand this definition to consider commercial insurer coverage policies received significant objection during public comment. CMS noted that the inclusion “presents implementation and appeals process challenges that would likely persist.”

In its repeal, CMS also cited concerns with “Medicare patient protections and evidence criteria” and potential disadvantages for DTx technology that does not have FDA breakthrough designation.


America’s Health Insurance Plans (AHIP) summarized collective payer concern by noting “a number of unaddressed operational issues, including how and when CMS would communicate to health insurance providers information on benefit category and appropriate billing codes.”

The payer community shared these and other objections to CMS’ framework, including the fact that “[m]any of the eligible Breakthrough Devices are coverable and payable through existing mechanisms” and that “a review of claims data showed that Breakthrough Devices have received and are receiving Medicare coverage when medically necessary.”

UnitedHealth Group identified inconsistent scope in CMS’ proposal and requested “confirmation of all item categories (e.g., devices, drugs, biologics, diagnostics) that CMS deems eligible for the MCIT pathway” beyond FDA breakthrough status.

Cigna and the Blue Cross Blue Shield Association (BCBSA) both proposed utilizing existing codes for some prescription DTx (PDT) billing. This includes National Drug Codes (NDC), which Cigna noted “already provides a sufficient framework for accessing emerging technology that has proven clinical benefit to the Medicare population.” BCBSA added that an existing, unfinalized, and applicable rule on durable medical equipment benefit categories and payment provides an opportunity for integrated comment.


Benefits and coding represent both strategy and tactic for payers—the linkage of operations and strategy necessary for better healthcare access, quality, and affordability. Depending on whether DTx require a prescription and thus whether payers pursue reimbursement under the medical or pharmacy benefit, Health Affairs highlights the following coding strategies:

CPT and HCPCS codes: Using existing codes for remote monitoring, patient self-monitoring, and care management spanning initial provider set-up and education to data collection, monitoring, and interpretation.

CPT updates: Expect CPT codes also to change as DTx framework needs grow. Recent changes from the American Medical Association’s CPT Editorial Panel “will allow providers to adequately describe time spent delivering” cognitive behavioral therapy remote monitoring.

NDC: While NDCs could have provided a path for PDTs, they will be replaced with unique codes for software-as-a-medical-device products.


Even with so much to be determined, some DTx reimbursement contracts are launching as value-based purchasing (VBP) arrangements. In September, DTx provider Pear Therapeutics and PBM Prime Therapeutics announced the first VBP for digitally based substance and opioid use treatment. VBP may be the ideal model given the need for the long-term outcomes data that will demonstrate value and that is currently missing from the field, another concern associated with CMS’ now-repealed MCIT rule.

The value-based options proposed mirror those that are emerging for PDT’s pharmaceutical cousins: novel drug therapies whose results may or may not justify their price tags. These options include outcomes-based payments, rebates for poor performance, and even step therapy approaches.


Health Affairs author Patel concludes that “the absence of an established, repeatable, and scalable path to commercialization and prescription of DTx has bottlenecked broader uptake. Consequently, current DTx evaluation decisions among commercial payers are largely ad-hoc and based on individual priorities.” Regarding the evolution of NDC for DTx, Patel adds that it “may be difficult to wedge [unique device identifiers] into existing information exchange infrastructure.”

Welcome to healthcare. EHR and VBP implementation challenges have persisted for more than a decade for this very reason. In its most basic form, VBP continues to not only wedge itself into healthcare’s fee-for-service infrastructure but is still fundamentally dependent on it. As calls emerge for entirely new DTx benefit categories and codes, pioneering stakeholders will continue to operate in a both/and world—until and perhaps even after CMS lands on a final rule.

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