Medicare eliminates key pathways used by ‘breakthrough’ devices for extra payments

STAT News – Monday, August 3, 2026
By Katie Palmer

Medicare is removing flexibilities that have allowed medical devices designated as “breakthroughs” by the Food and Drug Administration to leapfrog qualifications for extra payments.

Until now, alternative pathways have allowed authorized breakthrough devices to qualify for supplemental payments without proving their novelty or substantial clinical improvement over alternatives. In its rule for inpatient hospital payments, the Centers for Medicare and Medicaid Services finalized a proposal to repeal those pathways for both inpatient and outpatient settings, starting in fiscal year 2028.

Such payments are meant to incentivize hospitals to use new, transformative technology while it’s still expensive, and give its makers time to prove their value. Requiring breakthrough devices to demonstrate substantial clinical improvement, the rule reads, “ensures that additional Medicare payments are used to support Medicare beneficiaries’ access to innovations that are demonstrated to improve outcomes compared to the currently available treatment.”

The repeal of the alternative pathways for new technology add-on and transitional pass-through payments removes one of the primary benefits of breakthrough designation for device manufacturers. The breakthrough label will still enable easier access to guidance from the FDA, which can help speed devices’ path to authorization. But it will no longer be as simple for device makers to garner the extra Medicare payment, which lasts for two or three years, soon after authorization.

“With time, as the breakthrough devices program expanded, the number of eligible devices for NTAP and TPT expanded, there was a substantial increase in the number of qualifying technologies and federal outlays,” said physician Vinay Rathi, a health policy researcher at Ohio State University. With the Trump administration’s focus on reducing waste or low-value spending, those expenses may have influenced the change, he said.

Shortly after proposing the elimination of the pathway in April, federal regulators announced a new coverage pathway for breakthrough devices: Regulatory Alignment for Predictable and Immediate Device coverage, or RAPID. The proposed pathway would allow companies to communicate with CMS before FDA authorization to help determine the necessary evidence to garner a national Medicare coverage determination. A proposed procedural notice describing the program in more detail is still to be issued, followed by a 60-day comment period.

“CMS is sort of centralizing their efforts to promote coverage and reimbursement for innovative devices, and in doing so, raising the bar,” said Rathi.

The device industry has long advocated for breakthrough status to be aligned with Medicare payment. Several iterations of legislation have been proposed that would allow breakthrough devices to immediately be covered by Medicare after FDA authorization. During the first Trump administration, the idea manifested in an executive order that led to the Medicare Coverage of Innovative Technologies rule, a fast track to four years of Medicare coverage for authorized breakthrough devices that was quickly repealed by the Biden administration.

Critics of those proposals have countered that breakthrough designations from the FDA are not guarantees of clinical performance. Breakthroughs can be granted early in the development process, before any clinical data exist. They’re issued on the FDA’s belief that a device could provide for more effective treatment or diagnosis. As the CMS final rule points out, though, “FDA market authorization does not provide a determination that this expectation was substantiated.”

To the contrary, research has shown that even after they reach the market, breakthrough devices can be backed by limited clinical evidence, especially for those cleared through the more limited 510(k) pathway by proving “substantial equivalence” to an existing authorized device.

“Since the beginning, there has been a tension between the concepts of ‘substantial equivalence’ and ‘substantial clinical improvement,’” said Kushal Kadakia, a resident at Massachusetts General Hospital who studies medical device regulation. “This rule change spotlights this tension, and the need for greater selectivity in breakthrough designations.”

The rule does not prevent breakthrough devices from getting supplementary payments from Medicare. But as of fiscal year 2028, it will require them to meet the same standards to receive those payments as devices that apply through the traditional pathway. They will need to meet three criteria: Their price must push the cost of inpatient services over standard reimbursement rates, they must be new compared to existing products, and they must offer a substantial clinical improvement.

The rule includes a grandfathering period. Devices that receive a breakthrough designation on or before Sept. 30, 2026 and are authorized by May 1, 2028 will still be able to apply for new technology add-on payments under the previous pathway for an additional two years, through fiscal year 2029. The same grandfathering period applies to devices applying for the equivalent pathway for outpatient devices.

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