Medicare is proposing to eliminate a special payment pathway for medical devices designated as breakthroughs by the Food and Drug Administration, and the timing is awkward: the agency created that pathway four years ago, has been paying out roughly $464 million a year through it, and never bothered to find out whether any of the devices actually helped patients. The proposed rule, published in the Federal Register this week as part of the annual hospital payment update, would eliminate the alternate pathway for FDA breakthrough devices starting in fiscal year 2028, forcing them to meet the same standard as everyone else: prove the device is new, that it represents a clinical improvement over existing options, and that it is expensive enough to qualify for extra payments.
The pathway in question is called NTAP, the New Technology Add-on Payment program, and it has existed in some form since 2001. The standard version requires device makers to demonstrate three things: their product is genuinely new and different from what hospitals already have, it delivers a measurable clinical improvement for patients, and it costs enough to justify a supplemental payment on top of the standard hospital reimbursement rate, according to STAT News. Breakthrough devices have been exempt from the clinical improvement requirement since 2021, when CMS created a separate pathway specifically for devices that received FDA's breakthrough designation. Under that alternate route, manufacturers only had to show their device was costly. Clinical benefit was assumed. The CMS fact sheet confirms this: "Since 2021, devices that receive breakthrough designation from FDA have gotten an even sweeter deal: they only have to demonstrate they are expensive."
CMS has not published any post-payment analysis asking whether the breakthrough devices that received NTAP funding actually delivered on that assumption. The agency does not appear to have tracked patient outcomes for any of them. When the proposed rule eliminating the alternate pathway was published this week, it did not cite a single internal review as justification for the change.
The proposal would also eliminate the equivalent alternate pathway under the Outpatient Prospective Payment System for breakthrough-designated devices in outpatient settings. The National Law Review summarizes the scope: CMS proposes to eliminate the alternate pathway for new technology add-on payments under IPPS and the transitional pass-through under the Outpatient Prospective Payment System, requiring medical devices with breakthrough device designation to meet the same eligibility criteria as non-BDD technologies. In both cases, CMS is proposing to return breakthrough devices to the same eligibility criteria that apply to every other device manufacturer: prove it works better than what is already available, not just that it costs more.
The $464 million figure represents CMS's own projection for total NTAP spending across all eligible devices in fiscal year 2027, which runs from October 2026 through September 2027. According to the CMS fact sheet, the agency estimates that additional payments for inpatient cases involving new medical technologies will increase by roughly $464 million in FY2027. The proposed update also includes a 2.4% increase in overall IPPS operating payment rates for the same period, reflecting a 3.2% hospital market basket increase reduced by an 0.8 percentage point productivity adjustment.
Industry groups have argued that FDA's breakthrough designation already represents a form of clinical scrutiny and that requiring NTAP applicants to independently demonstrate clinical improvement duplicates work the agency has already done. CMS acknowledges this comment in the proposed rule but says FDA and CMS have different evidentiary standards and different statutory mandates. Applied Policy notes that CMS is continuing existing NTAPs while proposing to eliminate the alternative pathways beginning in FY2028.
Public comments on the proposed rule are due by 5 pm Eastern on June 9, 2026, per the Federal Register. CMS has not indicated a timeline for publishing a final rule, but fiscal year 2027 begins October 1, 2026, meaning any finalization of the pathway elimination would take effect after that date if finalized as proposed.
What happens to devices currently in development that were counting on the alternate pathway remains unclear. CMS did not specify a grandfather clause for devices already designated or already receiving supplemental payments. Several device makers have breakthrough-designated products in late-stage development that have not yet reached the market. If the rule stands as proposed, they would enter a Medicare reimbursement landscape that requires them to prove clinical improvement from day one, without the shortcut their predecessors enjoyed since 2021.
