Health Care Innovation Act of 1986

Health Care Innovation Act of 1986 - Amends title XVIII (Medicare) of the Social Security Act to require the Secretary of Health and Human Services to pay hospitals for their use of a new medical device or procedure which causes hospital operating costs to exceed 110 percent of the price of the diagnosis-related group (DRG) to which the device or procedure is applied. Funds 60 percent of the amount by which the cost of the innovative treatment exceeds 110 percent of the DRG price. Terminates such funding when the decision is made to incorporate or exclude the treatment from the DRG price, but not later than two years after the provision of such funding.

Requires that new devices have premarket approval by the Food and Drug Administration and new procedures be suitable for inclusion in the DRG system before such funding is provided. Directs hospitals which receive funds pursuant to this Act to supply the financial and clinical data the Secretary needs to assess the usefulness of the treatment and establish an appropriate DRG rate for the innovative treatment.

Sets forth a formula based, in part, on the percentage of total Medicare hospital payments a hospital receives, limiting payments a hospital may receive for the application of innovative treatments. Limits the aggregate payments made pursuant to this Act to one percent of the total Medicare payments made for the operating costs of inpatient hospital services.

Directs the Secretary to report to the Congress within one year of enactment of this Act on methods of paying health maintenance organizations and competitive medical plans for their application of innovative treatments.

Requires the annual adjustment of DRG classifications and weighting factors. (Currently, adjustments are made every four years.)