Lawsuits Challenge Medicare Appeals Process

The Center for Medicare Advocacy (CMA), which helps Medicare beneficiaries who have been denied coverage or payment, has brought two lawsuits against the HHS Secretary challenging the appeals  process for beneficiaries’ Medicare claims. In the first, Hull v Sebelius  (No. 3:14-cv-00801, D. Conn., filed June 4, 2014)  CMA claims that the first two levels of review has become, in effect, rigged against beneficiaries. The  second, (Lessler v Burwell, No. 3:14-CV-1230, D. Conn) was brought as a nationwide class action and asks the court to order federal officials to hear and decide appeals to administrative law judges (ALJs) within the 90 day deadline provided in Soc. Sec. Act sec. 1869.

The Review Process

When beneficiaries of traditional Medicare, i.e., Part A and Part B, are denied coverage of a service, they may seek redetermination by the Medicare contractor that denied the coverage. The contractor reviews the file, including the medical records and other information submitted by the beneficiary, and decides whether it was correct. The next step is reconsideration by a qualified independent contractor (QIC), a separate entity that also performs a “paper review.”

If the beneficiary is dissatisfied with the reconsideration decision, the next step is to submit a request for a hearing by an administrative law judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA). The law requires that the ALJ decide the case within 90 days of receiving it. The ALJ level of review is the first opportunity that a beneficiary has to appear before the decision maker, present  evidence, and raise questions about the decisions of the contractors. According to CMA’s complaint in Lessler, denials were frequently overturned at this level. Beyond the ALJ level, there is another paper review by the Medicare Appeals Council, followed by judicial review in federal court.

Redetermination and Reconsideration

The Hull complaint does not raise issues of undue delay with regard to these two phases of the review process. Rather, the beneficiaries’ objection is that the paper review process is unfair. The issues before the contractor at redetermination and reconsideration are not limited to the original reasons for the denial. The person performing the review may raise and resolve other issues. So, for example, when a patient’s medical records show that necessary nursing services were furnished during home health care, the reviewer might decide that the beneficiary is “chronic and stable” or “only receiving custodial services” and uphold the denial. Sometimes, the reviewer might apply a misunderstanding of a rule. For example, a reviewer concluded that a beneficiary was not homebound because she left her home to receive wound care, even though the Medicare Benefit Policy Manual (Pub. 100-02), Ch. 7, sec. 30.1.1, provides that a person  leaves the home to receive medical care is still considered homebound if she or he meets the other criteria.

CMA has helped beneficiaries with redetermination and reconsideration decisions for more than twenty years; the complaint outlines a drop in the percentage of partially or fully favorable decisions from an average of 23 percent under the “old” system of review to an average of 2 percent. A 2013 report of the HHS Inspector General found a 148 percent increase in the number of redeterminations and reconsiderations requested between 2008 and 2012. Requests for review of home health services rose 703 percent during that period. The OIG also noted a drop in the percentage of redeterminations and reconsiderations that were partially or fully favorable to the appellants. The OIG attributed the drop to the dramatic increase in appeals of the determinations of recovery audit contractors (RACs).

Review by an ALJ

The issue in the Lessler lawsuit is the timeliness of the review. The OMHA has been flooded with appeals since the RAC program became permanent.  RACs look for fraud as well as erroneous payments; home health and durable medical equipment services are scrutinized more closely because CMS believes that there is more fraud. The OMHA’s workload grew 184 percent between 2010 and 2013. Nearly all of the growth in the OMHA’s workload between 2008 and 2013 appears to have been appeals of RAC determinations. According to the OMHA, in January 2012, its central office received 1,250 appeals per week. By December 2013, it was receiving 15,000 requests per week. In a December 2013 letter to the public, the Chief ALJ announced that as of July 2013, 357,000 cases had been assigned to the 65 ALJs. Assignments have been suspended for at least two years.  The announcement states that beneficiaries’ appeals will continue to be processed, but the complaint alleges that  the OMHA did not acknowledge receipt of some beneficiaries’ appeals for more than a year.

A small percentage of claims appeals are brought by beneficiaries; most are brought by providers. The American Hospital Association and three hospitals also have sued the HHS Secretary demanding that the OMHA fulfill its statutory duty. Hospitals have been denied payment or have received demands for repayment of millions of dollars. Many of them are cash-strapped; one plaintiff had to patch the roof instead of replacing it because of the cash flow problem, the complaint alleges. One can only imagine the number of appeals that must have piled up since the OMHA stopped processing them more than a year ago. A motion for summary judgment is pending.