GAO Report Highlights Certain Problems with Medicare Appeals

On June 9, 2016, the Government Accountability Office (GAO) publicly released a report (dated May 2016) titled “Medicare Fee-For-Service: Opportunities Remain to Improve Appeals Process”.[1]   Among other things, the report analyzes the increased number of appeals in the system and the resulting backlog at the third level (Administrative Law Judge, or ALJ) and fourth level (Departmental Appeals Board, or DAB) of Medicare’s five-level administrative review process.  The report also assesses the Department of Health and Human Services’ (HHS) monitoring of appeals and its efforts to reduce the backlog. The report recommends several steps to improve HHS’ oversight of the appeals process, in part, through enhanced data collection and more efficient methods to adjudicate certain repetitive claims.

As noted in a Kaiser Health News article, “[t]he GAO report said HHS attributed the increases in appeals to a greater interest by hospitals and doctors to file appeals and to enhanced efforts on the government’s behalf to check for inappropriate payments, including a controversial program known as recovery audits, in which contractors inspect hospital payment records to find any errors.”[2]

The report was requested by the Senate Finance Committee, which last year held a hearing on Medicare appeals and marked up a bill called the Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015 (S. 2368).[3]  Similar to proposed appeals changes offered in the most recent President’s Budget, the AFIRM Act primarily focuses on changes to the Office of Medicare Hearings and Appeals (OMHA), which administers ALJ hearings.  The Center for Medicare Advocacy has expressed concern with some of these proposed changes.[4]

Analysis  

The Center has had long-standing concerns about both the growing appeals backlog and quality of review by contractors at the lower levels.[5]  The creation of an appeals process in the Medicare program was primarily intended for beneficiaries, however audits and resulting provider appeals, mostly related to CMS’ hospital observation policies, are clogging the system.  The high – and apparently growing – rate of coverage denials upheld at the first two levels of appeal (particularly for Part A claims)[6] amounts to rubberstamp denials that needlessly add to the ALJ hearing backlog. In the Center’s experience these rubberstamp denials are caused by inadequate medical review and misapplication of Medicare rules.  Beneficiaries shouldn’t lose access to ALJ hearings and legitimate reviews of their coverage denials due to unfair early appeal levels and huge numbers of provider appeals, both of which are out of their control.

While the ALJ hearing backlog is an undeniable barrier to obtaining meaningful review of claims, OMHA has taken steps to facilitate more timely reviews of beneficiary-initiated claims, an effort which has been reinforced by a preliminarily approved settlement reached by the Center and HHS.[7]  More attention must be paid to assessing the quality of review at the lower levels of appeal, including studying whether one of the first two levels should be removed altogether.  Investing new resources at each level of appeal, as suggested by the GAO report, may just amount to more resources spent on denying meritorious claims.

June 22, 2016 – D. Lipschutz