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Testimony on Medicare Appeals Processes by Michael M. Hash
Deputy Administrator, Health Care Financing Administration
U.S. Department of Health and Human Services

Before the House Committee on Ways and Means, Subcommittee on Health
April 23, 1998, 1998

Chairman Thomas, Subcommittee members, thank you for inviting HCFA to testify today about the appeals processes available to our beneficiaries. Effective and efficient systems for beneficiaries to appeal Medicare's coverage and payment decisions are essential. We appreciate any ideas or insights on improving these systems that you and your witnesses might share.

Clearly, Medicare beneficiaries must have the right to a speedy ruling in cases where time may be crucial. Beneficiaries must know that they have a prompt recourse if they feel that they are denied needed care. Most beneficiaries never file appeals, and in Fiscal 1997 less than 1 percent of claims were appealed, and less than 5 percent of beneficiaries report having ever filed appeals. But when there is a dispute, our objective is to have an appeal system that helps to assure that the rights of patients come first.

Beneficiaries can appeal virtually any issue regarding provision or payment of services, and beneficiaries are regularly reminded of their appeal rights. These rights are discussed in the Medicare handbook. They are listed on every Explanation of Medical Benefits and Medicare Summary Notice sent to beneficiaries. They are included on notices to patients when they are admitted to hospitals. And they are described on every denial made by a Medicare managed care plan. (A chart outlining the various appeal levels that are available is attached to this testimony.)

This hearing is timely because we are currently considering options for further improvements in our appeals process. Just last year the Clinton administration published final regulations guaranteeing appeal rights to Medicare managed care beneficiaries that are among the strongest available to any managed care enrollees in the country.

Managed Care Appeals

Appeal rights are important in both managed care and fee-for-service. We are strengthening regulations for managed care appeals because the incentives are so very different from fee-for- service Medicare. Beneficiaries must be assured that managed care incentives to reduce unnecessary care will not be allowed to limit appropriate care.

That is why we require plans to respond within 72 hours when Medicare beneficiaries appeal a denial-of-care decision by a managed care plan that could jeopardize life, health or ability to regain maximum function. The rule also covers termination of care, such as discharge from a skilled nursing facility.

In expedited appeals, health plans must notify Medicare enrollees within 72 hours of receiving an enrollee's request for services that they are denying the services. The plan at that time must state the reasons for the denial, inform the beneficiary of their appeal rights, use denial notice forms that describe the expedited appeal right, accept oral requests for appeals, follow up verbal notifications in writing within two working days, automatically grant all physician requests, and maintain logs and periodically report on requests for expedited appeals. The beneficiary has 60 days to file an appeal, and the plan generally has 72 hours to rule on expedited cases, and 60 days on standard cases.

If a plan upholds its original decision to deny the service, the case must automatically be forwarded to our independent reviewer. This contractor runs what we call the Center for Health Dispute Resolution, also known by the acronym CHDR. The CHDR contractor generally acts on expedited appeals within 10 working days, and managed care plans have up to three days from the date an expedited appeal request is made to the CHDR to submit additional information. For appeals that are not medically urgent, the CHDR generally has 30 working days to make a ruling.

Beneficiaries have up to 60 days to appeal decisions of the CHDR independent review process to Administrative Law Judges. ALJ appeals must involve at least $100, and there is no time limit on ALJ action.

Beneficiaries have up to 60 days to request a review of ALJ rulings in cases involving at least $100 by an Appeals Council. After that, beneficiaries have up to 60 days to request a review by the U.S. Department of Health and Human Services Appeals Council. After that level of appeal, beneficiaries have up to 60 days to request a federal district court review of any decision involving at least $1000.

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

As I mentioned, we are now considering additional improvements to the regulations to address continuation of care during the managed care appeals process, notification of beneficiaries when services are reduced or terminated, and tighter standards for appeals involving situations that are not urgent. We believe the turnaround time for non-urgent appeals should be reduced from the current 60 days, and welcome comments from your Committee and other interested parties on what the standards should be.

As we did with our expedited appeals regulation last year, we are consulting with beneficiary advocates, provider groups and the managed care industry in developing these further improvements.

FY 1997 Managed Care Appeals Statistics

In Fiscal Year 1997 there were 5,458,109 Medicare beneficiaries enrolled in managed care plans. We do not currently receive information on the number of appeals filed with managed care plans, which is the first level of appeal for managed care disputes.

Cases not resolved by plans are automatically forwarded to our independent CHDR appeals contractor, and 9,024 appeals were sent to CHDR in FY 1997. About 24 percent of CHDR rulings are in favor of the beneficiary. About 6 percent of CHDR ruling are appealed on for Administrative Law Judge review.

Fee-For-Service Appeals

In fee-for-service Medicare, the appeals process works somewhat differently because incentives are different. Payment denials generally come after care is delivered, and there is not the potential medical urgency that could occur because of a managed care denial before care is delivered.

Part A Appeals

Because of incentives in the Medicare payment system for hospitals, expedited appeals are guaranteed for cases in which a hospital wants to discharge a Medicare beneficiary and the beneficiary's physician considers discharge to be inappropriate. Providing expedited appeal rights for inpatients facing hospital discharge against their physician's advice is an essential check to make sure incentives for hospitals to be efficient do not result in denial of appropriate care.

For Part A disputes other than hospital discharges that concern hospital, skilled nursing and home health claims, appellants must request review within 60 days of receiving notice -- called the "initial determination" that the claim is being denied. Our contractors must complete 75 percent of appeals within 60 days, and 90 percent within 90 days.

Part A disputes not resolved at the contractor level can be taken to Administrative Law Judges (ALJs), where there are no time limits for decisions that can be enforced, and where backlogs and delays are occurring. Appeals to ALJs must be requested within 60 days of receiving a decision on the appeal from the contractor level. Issues for ALJ appeals must be for claims of at least $100, and claims can be added together to meet the $100 requirement.

Part A disputes can be appealed beyond the ALJ level to an Appeals Council. These appeals must be requested within 60 days of the ALJ decision, and unlike other prior appeal levels, the Appeals Council can turn down the request. The Appeals Council can also choose to review an ALJ decision on its own, without a request from a beneficiary or provider.

Part A disputes can be appealed past the Appeals Council to judicial review. These requests must be made within 60 days of the Appeals Council decision, and must involve matters of at least $1000.

Part B Appeals

For disputes about Part B physician, equipment, and lab service claims, beneficiaries must request an appeal within six months of receiving notice that the claim is being denied. Our contractor must complete 95 percent of reviews within 45 days.

Part B disputes can be appealed past the contractor review level to contractor Hearing Officers, who must complete 90 percent of hearings within 120 days. Requests for hearing officer hearings must be made within six months of the initial contractor review decision, and must be for disputes of at least $100. Claims can be added together to meet the $100 requirement.

Part B disputes can be appealed beyond the Hearing Officers to Administrative Law Judges (ALJs). These appeals must be requested within 60 days of the Hearing Officer decision, and must involve disputes of at least $100 for home health claims and $500 for all other Part B claims. Again, claims can be added together to meet the dollar amount threshold.

Part B disputes can be appealed beyond the ALJs to the Appeals Council. The request must be made within 60 days of receipt of an ALJ decision. And, as with Part A disputes, the Appeals Council can decide to turn down a case, and it can decide to take up an ALJ case on its own, without a request from a beneficiary or provider.

And again, as with Part A disputes, Part B disputes can be appealed beyond the Appeals Council level to the courts. These requests must be made within 60 days of the Appeals Council decision, and must involve matters of at least $1000.

FY 1997 Fee-for-service Appeals Statistics

In Fiscal Year 1997, we processed 843,859,934 claims. Appeals were filed involving 6,091,313, or 0.72 percent.

Part A appeals:

• Our contractors received 58,030 Part A cases in fiscal 1997. They completed 59,689 cases involving 81,432 claims, and ruled in favor of the appellant in 30 percent of cases.
  
  
• The ALJs were sent 15,937 Part A appeal requests involving 25,422 claims. They completed 12,465 and ruled in favor of the appellant in 72 percent of cases.

Part B appeals related to services such as hospital outpatient and home health care:

• Our contractors received 152,251 cases. They completed 160,082 cases involving 198,141 claims, and ruled in favor of the appellant in 44 percent of cases.
  
  
• Hearing Officers received 20,514 cases completed 14,988 involving 21,694 claims, and ruled in favor of the appellant in 40 percent of cases.
  
  
• ALJs were sent 3,120 cases involving 4,685 claims. They completed 1,321 cases, and ruled in favor of the appellant in 59 percent of cases.

For Part B appeals related to Physicians and other services:

• Our contractors received 3,868,160 cases. They completed 3,337,592 cases involving 5,811,740 claims, and ruled in favor of the appellant in 70 percent of cases.
  
  
• Hearing Officers received 86,746 cases. They completed 86,898 cases involving 539,040 claims, and ruled in favor of the appellant in 45 percent of cases.
  
  
• ALJs were sent 8,412 cases involving 123,791 claims. They completed 4,701 cases, and ruled in favor of the appellant in 51 percent of cases.

Provider, Physician and Supplier Appeal Rights

Providers, physicians and suppliers, as well as beneficiaries have appeal rights, and all can appeal on behalf of beneficiaries if they become the beneficiary's appointed representative.

Under Part A, providers can only appeal denials based on medical necessity. Under Part B, physicians and suppliers have the same right to appeal as beneficiaries if they accept "assignment" on a claim. Assignment, in Medicare jargon, means that they accept what Medicare pays as payment in full without billing the beneficiary for more than the standard 20 percent copayment.

Physicians and other Part B suppliers who do not accept assignment do not have the same appeal rights as the beneficiary. They may, however, appeal medical necessity denials where they are required by statute to make a refund to the beneficiary.

Administrative Law Judge Appeals

One area where we would like to make improvements is in the Administrative Law Judge appeals system, and in the coming year, we will work with our partners in the Social Security Administration on this.

As I explained earlier, the Administrative Law Judge level is where delays can occur in our appeals process. On average, ALJs process Part A appeals in 301 days and Part B appeals in 664 days. Also, since the vast majority of the judges' workload is Social Security cases, the judges, as a whole, tend to be far more expert in Social Security rules than in Medicare regulations. Furthermore, ALJs are not bound by HCFA local policy or manuals, though they are bound by Medicare law and regulation.

These issues point to a need for some improvement. HCFA is performing an analysis of the ALJ process and will be in discussions with officials of the Social Security Administration about future steps that may be taken.

For now, we are adding new requirements for our contractors to ensure that case files that go to ALJs are complete and comprehensive. Also, about 30 ALJs are being dedicated as Medicare-only specialist who will handle the most complicated Medicare cases. Finally, we are working to educate ALJs about how Medicare local policy is created and the underlying reasons for the policy.

CONCLUSION

There is room for improvement in our appeals process, especially at the Administrative Law Judge level.

We have the strongest appeals rights in the country for our managed care beneficiaries where appeals rights are so essential because of the incentives that exist in managed care. We are currently working to bolster these managed care appeals rights further for non-urgent cases, and will keep you abreast of our progress.

We also have sufficient appeal rights for our fee-for-service beneficiaries and providers, with prompt turnaround on cases up until they reach the ALJ level, where Medicare has no control.