Least Costly Alternative Policy Changes

MACs Retire Least Costly Alternative Determinations

In 2010, all Medicare Administrative Contractors (MACs) retired their existing local coverage determinations (LCD) on least costly alternative (LCA) payments for luteinizing hormone-releasing hormone (LH-RH) drugs administered in the urologist's office.

Though some experts believe that the retirement of the LCA policies resulted after the District of Columbia Court of Appeals overturned an LCA policy on the pulmonary disease drug DuoNeb, the Centers for Medicare & Medicaid Services (CMS) has not acknowledged that is the reason for these actions. However, based on information posted on various MAC Web sites, we learned that CMS instructed contractors to eliminate any LCA provision for Part B drugs in current LCDs and not to implement LCA in any new LCDs. Drugs will now be paid by Medicare at the average sales price (ASP) plus 6 percent on or before the effective date of the retirement of the LCA.

The LCA limit on drug payments began in 1997 in South Carolina. By March 2006, LCA policies had been implemented in all states and some territories. In urology, the coverage determinations originally pertained to Medicare patients who were diagnosed with prostate cancer and received hormonal intervention in the form of LH-RH injections. Medicare deemed that some of the drugs used for the treatment of prostate cancer did not differ in effectiveness, and therefore, Medicare would not pay for the additional expense of the more costly drug unless it could be justified as medically necessary. A patient who preferred to continue his treatment with the higher priced drug could choose to do so, but would be responsible to pay the difference in cost with a signed Advanced Beneficiary Notice. With the retirement of the LCA policies, such differential payment will not be necessary.