Statement of Michael Hash, Deputy Administrator
Health Care Financing Administration

Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means

Hearing on the Medicare Coverage Decisions and Beneficiary Appeals

April 22, 1999

Chairman Thomas, Congressman Stark, distinguished Subcommittee members, thank you for inviting us to testify today about our revised procedures for establishing coverage policy and the appeals processes available to our beneficiaries and medical providers of payment and coverage determinations. We welcome the opportunity to discuss efforts to make our appeals and coverage processes more effective, efficient, and accessible.

Beneficiaries must have prompt recourse if they feel that they are denied needed care. President Clinton is committed to ensuring effective and efficient appeal rights for all Americans. Medicare beneficiaries' appeals rights are among the strongest in the nation, and allow for appeal of virtually any issue regarding provision or payment of services. Providers and suppliers also have appeal rights, and can appeal on behalf of beneficiaries if they become the beneficiary's appointed representative.

In the past year, we increased efforts to make sure beneficiaries are informed of their rights to appeal denials of coverage by Medicare claims processing contractors and Medicare+Choice plans. We are working to improve oversight of Medicare+Choice plan appeals. And we have worked with the Social Security Administration to improve the timeliness and consistency of its Administrative Law Judge rulings on Medicare appeals.

Also in the past year, we have worked to revise our process for establishing national coverage policy so that it is more open, accountable, and explicit in every respect, including the right of beneficiaries and other members of the public to request reconsideration of national coverage policy decisions. The new process will:

Medicare's New National Coverage Determination Process

Medicare is committed to having an open, understandable and predictable process for determining national policy on what specific services and supplies are covered. The law provides for coverage of "reasonable and necessary" medical services and supplies in broad categories, such as hospital, nursing home, and physician care. The Health and Human Services Secretary has legal authority to specify which services, procedures, and devices are covered and under what circumstances.

Medicare claims processing contractors are given discretion to set local coverage policy in areas where national policy has not yet been set. However, when Medicare issues national coverage decisions, they are binding on all Medicare contractors, Medicare+Choice plans, peer review organizations, and, in some cases, Administrative Law Judges.

In making these national coverage determinations, we must strike the appropriate balance between providing timely access to medical advances and ensuring that new technologies and treatments are effective and "reasonable and necessary." To do so, we rely on medical and scientific evidence, including medical literature and data, discussions with medical experts, and technology assessments.

We have been working diligently to improve our national coverage determination process.

The revised national coverage policy determination process will help ensure that beneficiaries, providers, manufacturers, and other interested public parties are fully informed and can track the status of any determination under consideration. As part of this new process, we will publish on the www.hcfa.gov web site:

We also will prepare and maintain a complete and indexed record of all issues that we review for each national coverage decision, including a list of all evidence reviewed, all the major steps taken in the coverage review, and the rationale for the decisions that were made. A summary of this record also will be provided on the www.hcfa.gov website.

Requesting Reconsideration

The new process makes clear that any member of the public may request a review of a national coverage policy determination at any time. Individuals requesting such a review need only submit the request in writing, along with new medical and scientific evidence that merits consideration, or an analysis of Medicare's decision demonstrating that a material misinterpretation was made in the evaluation of evidence. We will, of course, regularly review new medical and scientific information ourselves to modify national coverage policy on our own initiative when appropriate.

The new national coverage process generally requires us to issue a response to a request for a review of a national coverage determination within 90 days. The request can be referred either to:

Otherwise, we will generally notify the requester within those 90 days that:

Public input into national coverage policy determinations and reconsiderations is also fostered through the new Medicare Coverage Advisory Committee and its meetings that will be open to the public. The committee will have 120 members and include nationally recognized experts in a broad range of medical, scientific and professional disciplines, as well as consumer and industry representatives. They will be divided into small panels focused on particular issues to review and evaluate medical literature, technology assessments, and other data on the effectiveness and appropriateness of medical items and services. Based on the evidence reviewed, the committee will advise and make recommendations to Medicare. We have already received more than 400 nominations for advisory committee members, and expect it to begin meeting later this year.

APPEALS PROCESSES

Medicare beneficiaries, physicians, and suppliers have extensive rights to appeal individual coverage determinations made by Medicare fee-for-service claims processing contractors or Medicare+Choice health plans. Where there is no national policy, beneficiaries and providers may appeal local claims processing contractor and health plan policy. Where there is national policy, they may appeal how contractors and health plans apply that policy to individual cases. As mentioned above, we are working to make sure beneficiaries know about these rights, to improve oversight of Medicare+Choice plan appeals processes, and to improve the timeliness and consistency of Administrative Law Judge decisions.

Beneficiaries are notified of their appeal rights annually in the Medicare & You handbook, on Medicare Summary Notices and Explanations of Medicare Benefits, in the new standardized Summary of Benefits that we will require Medicare+Choice plans to issue this fall, and on every denial of service notice issued by a Medicare+Choice plan or claims processing contractor. The National Medicare Education Program we piloted last year also includes several ways for beneficiaries to obtain more detailed information about appeal rights, including a toll-free phone line and counselors at State Health Insurance Assistance Programs and many other organizations.

Medicare+Choice Appeals

Appeal rights are important in both managed care and fee-for-service. However, managed care appeals are perhaps more critical to beneficiaries because denials generally come before, rather than after, care is delivered. Beneficiaries must be confident that managed care incentives to reduce unnecessary care will not be allowed to deny them appropriate care.

The Clinton Administration has made appeal rights for Medicare+Choice beneficiaries among the strongest for any managed care enrollees in the country. Since June 1998, plans have been required to:

Since the federal government is the largest purchaser of managed care, our expedited appeals regulation for urgent care cases sets a new, higher standard for the entire managed care industry.

All appeals rejected by plans are automatically forwarded to our independent appeals contractor for independent review, with no monetary threshold or other barrier. This independent contractor, currently the Center for Health Dispute Resolution, is also required to act on expedited appeals within 72 hours, and within 14 days for all other service denials.

Beneficiaries have up to 60 days to appeal an independent review contractor's decision involving at least $100 to Social Security Administration Administrative Law Judges. There is no time limit on Social Security Administration Administrative Law Judge actions. Beneficiaries have up to 60 days to request a review of Social Security Administration Administrative Law Judge decisions by the Health and Human Services Departmental Appeals Board. Finally, beneficiaries have up to 60 days after a Departmental Appeals Board decision to request federal district court review for cases involving at least $1000.

Our beneficiary research tells us that the vast majority of beneficiaries are satisfied with the care Medicare+Choice plans provide and have never filed appeals. Until now we have not gathered statistics on appeals at the plan level. We do know now that in 1998, with more than six million beneficiaries in managed care plans, our independent appeals contractor reviewed 14,745 cases. Of these, 22 percent were decided in the beneficiary's favor. We recognize that the appeals process will become more important in the future when beneficiaries, under the Balanced Budget Act, are no longer allowed to disenroll from plans on a monthly basis.

We are now requiring plans to collect data and, as of January 1, 2000, report to beneficiaries upon request the number of appeals filed, the number decided in beneficiaries' favor, and the timeliness of the process. We will be collecting this and other appeals data ourselves, including:

This and the other information we will collect will help us:

We are surveying beneficiaries who have disenrolled from a Medicare+Choice plan to better understand the extent to which care denials and improper appeals procedures may be involved in decisions to disenroll from plans. We should have our first report of the findings by mid-2000. We also are testing a process whereby beneficiaries can request a disenrollment form via Medicare's toll-free help line, 1-800-MEDICARE (1-800-633-4227), and this will also allow us to ask beneficiaries directly why they are leaving a plan at the time they are leaving. This should provide another helpful way to monitor potential problems with plan appeals information.

We will sample denied claims for further review to ensure that plans are implementing their internal processes in the required manner. Our June 1998 Medicare+Choice regulation makes explicit that plans themselves are ultimately accountable for their appeals processes, regardless of whether they are handled by a subcontractor. And we are considering regulations to establish a standard procedure for handling grievances (complaints involving issues other than denials of service or payment) to ensure consistency among all Medicare+Choice plans. Other efforts to improve Medicare+Choice appeals protections include:

Fee-for-Service Appeals

Medicare beneficiaries enjoy strong appeal rights in the traditional, fee-for-service program, as well. Most fee-for-service appeals are filed by physicians and suppliers, rather than beneficiaries, over denial of payment after care has been rendered. Physicians and other Part B suppliers have the same right to appeal as beneficiaries if they accept what Medicare pays as payment in full without billing the beneficiary for more than the standard 20 percent coinsurance. Other Part B physicians and suppliers may appeal payment denials based on lack of medical necessity if they are required by statute to make a refund to the beneficiary. Hospitals and other Part A providers also can appeal denials based on medical necessity.

Beneficiaries can file an appeal within 60 days of receiving notice that payment for a claim is being denied. The law requires that our claims processing contractors complete 75 percent of such appeals within 60 days, and 90 percent within 90 days. The average contractor processing time in 1998 was 52.9 days.

Part A disputes can be appealed further to Social Security Administration Administrative Law Judges, where there are no time limits for decisions and where delays are occurring. These appeals must be requested within 60 days of receiving a contractor appeal decision, and must be for claims totaling at least $100. The average processing time for these requests in 1998 was 310 days. Social Security Administration Administrative Law Judge decisions can be appealed within 60 days to the Health and Human Services Departmental Appeals Board. The Departmental Appeals Board can turn down appeals requests, and it can also choose to review cases on its own without a beneficiary or provider request. Health and Human Services Appeals Council decisions involving at least $1000 can be appealed within 60 days in federal district court.

Also under Part A, Medicare beneficiaries have special appeal rights when a hospital discharges them from an inpatient stay against physicians' advise. Such cases are reviewed by Medicare's Peer Review Organizations to make sure incentives in the prospective payment system for shorter hospital stays do not result in beneficiaries being discharged too soon.

Part A providers can appeal reimbursement decisions based on cost reports to Medicare's Provider Reimbursement Review Board. The board's decisions can be appealed to the Health Care Financing Administrator, and those decisions can be appealed in court.

Beneficiaries and Part B physicians and suppliers can file appeals within six months of receiving notice that payment for a claim is being denied. The law requires that our claims processing contractors complete 95 percent of these initial reviews within 45 days. The average contractor processing time in 1998 was 33 days.

Part B disputes for claims totaling at least $100 can be appealed further within six months to claims processing contractors' in-house Hearing Officers, who must complete 90 percent of hearings within 120 days. These requests, on average, took 116 days in 1998. Part B disputes of at least $100 for home health claims and $500 for all other Part B claims can be appealed further within 60 days to Social Security Administration Administrative Law Judges, where there are no statutory time frames for decisions. It took these judges, on average 524 days to issue decisions for cases decided in 1998. Again, Social Security Administration Administrative Law Judge decisions can be appealed within 60 days to the Health and Human Services Departmental Appeals Board. The Departmental Appeals Board can turn down a case or take one on its own, and decisions involving at least $1000 can be appealed within 60 days in the courts.

Improving Administrative Law Judge Appeals

We have been working with our colleagues at the Social Security Administration to improve the timeliness and consistency of its Administrative Law Judge reviews of Medicare appeals. As mentioned above, Part A Administrative Law Judge appeals average 301 days and Part B appeals average 524 days. One reason for these lengthy time frames is that the judges tend to be far more expert in Social Security rules than in Medicare regulations. In fact, only about 5 percent of their caseload involves Medicare disputes. Furthermore, the judges are not bound by Medicare claims processing contractors' local coverage policy or local policy manuals, though they are bound by Medicare law, regulations, rulings, and national policy. Efforts to improve the process include:

We are also performing an analysis of the Administrative Law Judge process and will continue discussions with the Social Security Administration about future steps that may be taken.

Fiscal 2000 Budget Request

The Administration's highly successful efforts to crack down on Medicare fraud, waste, and abuse have increased the total number of fee-for-service payment denials, and thus increased the total number of payment denial appeals. Also, use of sophisticated statistical sampling in these efforts has lead to cases involving larger numbers of claims and more complex issues. That is why the President's fiscal 2000 budget increases funding for Medicare appeals by $10 million. We look forward to working with you to secure this necessary funding.

CONCLUSION

We are working diligently to ensure that our national coverage policy determination process is open, accountable, and explicit. We are also working to ensure that the appeals rights we provide are strong and the processes fair and efficient. Medicare beneficiaries' and providers' appeal rights are among the strongest in the nation, and we are committed to ensuring that they understand how to exercise these rights. We are also actively engaged with our Social Security Administration colleagues to improve the timeliness and consistency of the Administrative Law Judge level of our appeals processes. We appreciate your interest in these issues, and look forward to working with you as we monitor and continue to refine our coverage and appeals processes. I'd be happy to answer any questions you might have.