US Hospital Payment Adjustments For Innovative Technology Lag Behind Those In Germany, France, And Japan

Medicare pioneered add-on payments to facilitate the adoption of innovative technologies under its hospital prospective payment system. US policy makers are now experimenting with broader value-based payment initiatives, but these have not been adjusted for innovation. This article examines the structure, processes, and experience with Medicare’s hospital new technology add-on payment program since its inception in 2001 and compares it with analogous payment systems in Germany, France, and Japan. Between 2001 and 2015 CMS approved nineteen of fifty-three applications for the new technology add-on payment program. We found that the program resulted in $201.7 million in Medicare payments in fiscal years 2002–13—less than half the level anticipated by Congress and only 34 percent of the amount projected by CMS. The US program approved considerably fewer innovative technologies, compared to analogous technology payment mechanisms in Germany, France and Japan. We conclude that it is important to adjust payment...