Issue Brief 80 | May 2023 – Final Part C & D Rule, and Other Issues

I. FINAL PART C & D RULE

On April 12, 2023, the Centers for Medicare and Medicaid Services (CMS) published a final rule for 2024 regarding Medicare Advantage (MA) and Part D.  The final rule is available in the Federal Register at 88 Fed Reg 22120 (April 12, 2023) here, and is summarized in a CMS Fact Sheet available here.    The Center for Medicare Advocacy has drafted a summary of many of the provisions of the rule, focusing on improvements to the MA prior authorization process, as well as additional consumer protections applicable to MA and Part D marketing. The Special Report is available at https://medicareadvocacy.org/wp-content/uploads/2023/05/2023-C-D-Rule-Report.pdf.  The following text includes excerpts from this report.

Medicare Advantage Prior Authorization  

The final rule includes a number of significant improvements to the rules surrounding Medicare Advantage plans’ use of prior authorization to restrict access to services.  The rule indicates a clear intent by CMS to limit plans’ ability to inappropriately deny care to enrollees.  As with most consumer protections, however, the efficacy of these new rules will depend on plan compliance and CMS oversight and enforcement. 

In summary, the new rules include the following requirements:

• Prior authorization may only be used for one or more the following purposes:
  • To confirm the presence of diagnoses or other medical criteria that are the basis for coverage determinations for the specific item or service; or
  •  For basic benefits, to ensure an item or service is medically necessary based on standards specified in § 422.101(c)(1), or
  • For supplemental benefits, to ensure that the furnishing of a service or benefit is clinically appropriate.

• When Medicare coverage rules are clearly established, plans cannot deny coverage of the item or service on the basis of internal, proprietary, or external clinical criteria that are not found in traditional Medicare coverage policies.
• Continuity of care and course of treatment guidelines: Approval granted through prior authorization processes must be valid for as long as medically necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient’s medical history, and the treating provider’s recommendation. Further, plans must provide a minimum 90-day transition period when an enrollee who is currently undergoing an active course of treatment switches to a new MA plan.  
• Plans must disclose internal criteria they rely upon to make decisions.

Coverage Criteria for Basic Benefits

CMS distinguishes scenarios in which Medicare coverage criteria is “fully established and “not fully established.”  With the former, plans cannot deny coverage based on an any “internal, proprietary, or external clinical criteria that are not found in Traditional Medicare coverage policies.”  With the latter, however, plans can rely on “widely used treatment guidelines or clinical literature” external to Medicare rules.

NOTE: The new regulatory language at §422.101(b)(2) removes reference to sub-regulatory guidance, including the Manuals, as authority that MA plans must rely upon.  In discussing this revision, however, CMS notes in the preamble (at p. 22196) that:

“we are not diminishing the content and value that these manuals and instructions provide in interpreting and defining the scope of Part A and Part B benefits.  These manuals contain significant explanations and interpretations of Traditional Medicare laws governing Part A and Part B benefits, most of it longstanding, to provide instructions and procedures for day-to-day operations for those responsible for administering the Medicare program and making coverage decisions on individual claims, so we expect that MA plans will consult the Medicare Benefit Policy Manual, Medicare Program Integrity Manual, and similar CMS guidance materials” [emphasis added].

Need to monitor: potential diminishing reliance on CMS Manuals and other sub-regulatory guidance.

            When Coverage Criteria “Not Fully Established”

CMS states that when coverage criteria are not fully established in Medicare statute, regulation, NCD, or LCD, “MA organizations may create publicly accessible internal coverage criteria that are based on current evidence in widely used treatment guidelines or clinical literature. We are also clarifying that coverage criteria are not fully established when additional, unspecified criteria are needed to interpret or supplement general provisions in order to determine medical necessity consistently; NCDs or LCDs include flexibility that explicitly allows for coverage in circumstances beyond the specific indications that are listed in an NCD or LCD, or there is an absence of any applicable Medicare statutes, regulations, NCDs or LCDs setting forth coverage criteria.” (p. 22122).

New language at §422.101(b)(6)(i)(A) states: “The MA organization must demonstrate that the additional criteria provide clinical benefits that are highly likely to outweigh any clinical harms, including from delayed or decreased access to items or services.”

Need to monitor: how restrictive “widely used treatment guidelines or clinical literature” might be.

            Appropriate Use of Prior Authorization – Medical Necessity Determinations

CMS is finalizing that “prior authorization policies for coordinated care plans may only be used to confirm the presence of diagnoses or other medical criteria and/or ensure that an item or service is medically necessary based on standards specified in this rule.” (p. 22121-2)

At revised §422.101(c)(1), CMS is also codifying that a plan’s medical necessity determination must be based on “The enrollee’s medical history (for example, diagnoses, conditions, functional status), physician recommendations, and clinical notes.” As noted in the preamble, “physician recommendations are required to be considered when making medical necessity determinations about the specific enrollee and requested services. This will apply in all contexts, not only when an enrollee is being transferred from one level of care to another or being admitted on an inpatient basis.” (p. 22198)

            Continuity of Care

CMS notes that through revisions to §422.112(b)(8)(i), it is “finalizing that an approval granted through prior authorization processes must be valid for as long as medically necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient’s medical history, and the treating provider’s recommendation, and that plans provide a minimum 90-day transition period when an enrollee who is currently undergoing an active course of treatment switches to a new MA plan.” (p. 22122)

At §422.112(b)(8)(ii), CMS offers the following definitions: 

(A) Course of treatment means is a prescribed order or ordered course of treatment for a specific individual with a specific condition as outlined and decided upon ahead of time with the patient and provider. A course of treatment may but is not required to be part of a treatment plan.

(B) Active course of treatment means a course of treatment in which a patient is actively seeing the provider and following the course of treatment.

CMS states that an MA plan may, however, deviate from care ordered by the treating provider: “An MA plan may approve and authorize treatment for a different period of time than the treating provider’s ordered course of treatment if the plan has determined that what was ordered or prescribed by the treating provider was not medically necessary or appropriate based on the enrollee’s condition or diagnosis.” (p. 22208) 

CMS further explains that MA plan discretion to deviate from ordered care is limited: “However, MA plans should not shorten authorization periods that are outlined in Traditional Medicare coverage criteria. The only instances where an MA plan may use a shorter (or different) periodicity or frequency of evaluation or other such review would be if the change were consistent with the relevant coverage criteria, and supported by the evidence in the patient’s medical record, and by treatment guidelines or clinical literature that is widely available. This must be clearly documented and referenced by the MA plan in the prior authorization decision. Moreover, in all instances, we expect the MA plan and its contracted provider to coordinate care to ensure that the prior authorization is approved for a period that ensures that care is delivered for as long as is medically necessary and that minimizes disruptions in care for the enrollee. In other words, the MA plan may not establish blanket rules for the duration of an authorization associated with course of treatment decisions for purposes of convenience or simplicity; the duration of a prior authorization must be valid for as long as medically necessary to avoid disruptions in care and not in conflict with applicable coverage criteria.” (p. 22208) (Emphasis added.)

Need to monitor: to what extent plans continue to substitute their own clinical judgment for that of treating clinicians in making medical necessity determinations.

Marketing Rules

The final rule makes a number of important changes to Medicare Advantage (MA) and Part D Communications and Marketing requirements.  As noted in the preamble to the final rule, these provisions are “applicable for all contract year 2024 marketing and communications beginning September 30, 2023.” (p. 22120) Some, but not all, of these provisions are summarized below.

There are a number of rules that apply to how plans and downstream entities, such as third-party marketing organizations (TPMOs) market and describe plans. Such rules include:

• Prohibiting the use of the Medicare name, CMS logo, and products or information issued by the Federal Government;
• Simplifying plan comparisons by requiring medical benefits be in a specific order and listed at the top of a plan’s Summary of Benefits (SB).
• Requiring TPMO disclaimers to add SHIPs as an option to obtain additional help
• Prohibiting marketing of benefits in a service area where those benefits are not available, unless unavoidable because of use of local or regional media that covers the service area(s).

There are also a number of rules that apply to agent/broker conduct.  Such rules include:

• Clarifying that the prohibition on door-to-door contact without a prior appointment still applies after collection of a business reply card (BRC) or scope of appointment (SOA).
• Prohibiting a marketing event from occurring within 12 hours of an educational event at the same location (reinstating policy in effect prior to 2018)
• Prohibiting the collection of Scope of Appointment cards at educational events (but agents can still collect business reply cards).
• Requiring 48 hours between a Scope of Appointment (SOA) and an agent meeting with a beneficiary, with exceptions for beneficiary-initiated walk-ins and the end of a valid enrollment period.
• Limiting the time that a sales agent can call a potential enrollee to no more than 12 months following the date that the enrollee first asked for information.
• Requiring agents to explain the effect of an enrollee’s enrollment choice on their current coverage whenever the enrollee makes an enrollment decision.
  • CMS is adding “effect on current coverage” to the list of information plans must provide to prospective enrollees in the Pre-Enrollment Checklist (PECL), which must be provided along with hard-copy enrollment forms and must be reviewed during telephonic enrollments.
• CMS list of required elements agents and brokers must discuss with beneficiaries prior to enrollment in an MA or Part D plan.
  • CMS is requiring that “certain required topics are addressed, prior to the enrollment, specifically topics about providers and whether a beneficiary’s current or preferred providers or pharmacies are in-network, costs and premiums for prescription drug coverage and health care coverage, benefits, and the beneficiary’s specific health care needs and current medications.” (p. 22254) CMS will provide, in sub-regulatory guidance, more detailed questions and areas to covered. Note that this requirement is separate from the Pre-Enrollment Checklist (PECL, discussed above), because the latter “does not contain the level of detail required to ensure an agent receives all of the information necessary to assist a beneficiary in making a decision that is best for their health care needs.” (p. 2225

Other Provisions  

In addition to Medicare Advantage prior authorization and marketing provisions, the final rule includes a number of other important provisions impacting beneficiaries.  These provisions include implementing certain provisions of the Consolidated Appropriations Act (CAA) of 2021 and the Inflation Reduction Act (IRA) of 2022.  Below is a summary of some, but not all, such provisions; see the CMA Special Report for more detail.

• Health Equity – CMS is: amending the list of populations to whom MA plans must provide services in a culturally competent manner; codifying best practices in developing provider directories, including cultural and linguistic capabilities; and finalizing policies that require MA plans to develop and maintain procedures to identify and offer digital health education to enrollees with low digital health literacy to assist with accessing medically necessary covered telehealth benefits
• Translation and Accessible Format Requirements – CMS is finalizing a requirement that plans “must provide materials to enrollees on a standing basis in any non-English language that is the primary language of at least 5 percent of the individuals in a plan benefit package service area or accessible format upon receiving a request for the materials or otherwise learning of the enrollee’s primary language and/or need for an accessible format” – more stringent requirements apply to certain integrated plans (p. 22123)
• Behavioral Health in MA – CMS is: finalizing network adequacy requirements including adding Clinical Psychology and Licensed Clinical Social Work as specialty types that will be evaluated as part of the network adequacy reviews; codifying standards for wait times that apply to both primary care and behavioral health services; and clarifying that some behavioral health services may qualify as emergency services and, therefore, must not be subject to prior authorization
• MA Network Adequacy – CMS is clarifying that “in the event an in-network provider or service is unavailable or inadequate to meet an enrollee’s medical needs, the MA organization must arrange for any medically necessary covered benefit [not just specialty care] outside of the plan provider network at in-network cost sharing for the enrollee.” (p. 22175)
• Notification Requirements for MA Provider Contract Terminations – CMS is establishing specific enrollee notification requirements for no-cause and for-cause provider contract terminations and adding specific and more stringent enrollee notification requirements when primary care and behavioral health provider contract terminations occur.

II. NURSING FACILITY UPDATE

First, the good news.

CMS: Visitation in nursing homes “is allowed for all residents at all times.”

On May 8, 2023, CMS revised its September 2020 in order to align with the ending of the COVID-19 Public Health Emergency and confirm that “Visitation is allowed for all residents at all times.” CMS, “Nursing Home Visitation – COVID-19 (REVISED), QSO-20-39-NH (revised 05/08/2023),

https://www.cms.gov/files/document/qso-20-39-nh-revised.pdf. Visitors may share a meal with or feed the resident they are visiting (Question 3 in Frequently Asked Questions). CMS reiterates its expectation that  nursing facilities “adhere to infection prevention and control recommendations in accordance with accepted national standards.”

Of concern: the very mixed signals about COVID-19 reporting and testing requirements after the  public health emergency ends.

In CMS, “Guidance for the Expiration of the COVID-19 Public Health Emergency (PHE),” QSO-23-13-ALL (May 1, 2023), https://www.cms.gov/files/document/qso-23-13-all.pdf,

Requirements for Reporting related to COVID-19: The requirement for long-term care facilities to report COVID-19 information to the Centers for Disease Control and Prevention’s National Healthcare Safety Network (NHSN) was extended through a final rule, CMS-1747-F (86 Fed. Reg. 62240 (Nov. 9, 2021),

https://www.govinfo.gov/content/pkg/FR-2021-11-09/pdf/2021-23993.pdf, and is set to terminate on December 31, 2024.

One exception is the requirement at §483.80(g)(1)(viii), requiring facilities to report COVID-19 information to residents, their representatives, and families. This provision “will continue to be in effect as a requirement to support national efforts to control the spread of COVID-19.” However, believing that this information is not useful to families and noting that the information is available on a publicly available cite, COVID-19 Nursing Home Data Website, “CMS is exercising enforcement discretion and will not expect providers to meet the requirements at 42 CFR 483.80(g)(3) at this time.”

The requirement for facilities to report the COVID-19 vaccination status of residents and staff through NHSN remains in effect, as required by CMS-1747-F.

Requirements for Educating about and Offering Residents and Staff the COVID-19 Vaccine: As required by an Interim Final Rule with Comment Period, CMS-3414-IFC (86 Fed. Reg. 26306 (May 13, 2021), https://www.govinfo.gov/content/pkg/FR-2021-05-13/pdf/2021-10122.pdf), these requirements will remain in effect until May 21, 2024.

Requirements for COVID-19 Testing: The requirement for routine testing of residents and staff for COVID-19, CMS-3401-IFC (85 Fed. Reg. 54820 (Sep. 2, 2020),

https://www.govinfo.gov/content/pkg/FR-2020-09-02/pdf/2020-19150.pdf), expires May 11. However, recognizing testing as “an important action and . . . a nationally recognized standard to help identify and prevent the spread of COVID-19,” CMS explains expectations after May 11:

Therefore, while this specific regulatory requirement will end with the PHE, CMS still expects facilities to conduct COVID-19 testing in accordance with accepted national standards, such as CDC recommendations. Noncompliance with this expectation will be cited at F-880 for failure to implement an effective Infection Prevention and Control Program in accordance with accepted national standards.

In addition, Focused Infection Control (FIC) Surveys: QSO-20-31-ALL,

https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/QSO-20-31-All-Rescind_0.pdf, requires states to conduct FIC surveys in 20% of their nursing homes in FY 2023; the requirement does not continue in FY 2024.

Concerns. Advocates for residents are concerned that residents are vulnerable to COVID-19 and other infections and that CMS should continue requiring testing and vaccinations of residents and staff.

Nurse staffing standards

            Promised by President Biden’s nursing home reform agenda (Feb. 2022), https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes /  

            The proposed staffing standard was expected in the Notice of Proposed Rulemaking for the annual update to Medicare Part A reimbursement for skilled nursing facilities, but CMS did not publish the proposed staffing standard there. A proposed rule is expected this Spring/Summer.

Ongoing evidence supports the need for nurse staffing ratios:

• Nurse staffing levels matter. Study (Apr. 17, 2023) in Journal of the American Medical Directors Association, “Staffing Shortages, Staffing Hours, and Resident Deaths in U.S. Nursing Homes During the COVID-19 Pandemic,” https://www.jamda.com/article/S1525-8610(23)00411-5/pdf, finds that nursing facilities that self-reported nurse staffing shortages in fact had fewer registered nurses, licensed practical nurses, and certified nursing assistants providing care to residents and the result of these nursing shortages was a 10.5% increase in resident deaths, from both COVID-19 and non-COVID-19 causes, during the coronavirus pandemic. The study was based on national data reported between May 31, 2020 and May 15, 2022. It concludes, “Policies aimed at improving access and quality of care in NHs, especially in times of major health crises such as the COVID-19 pandemic, must consider ways to increase staffing, either through interventions aimed at retaining the existing staff or by attracting additional staff.”

• Immigration will not solve the nurse staffing crisis. National nursing home trade associations call for increased immigration as key to solving their shortages in nursing staff. See LeadingAge’s recommendations to the Senate here; American Health Care Association’s letter to CMS Administrator here, and Center Alert here. Not true.

An article in Health Affairs (May 4, 2023), “Why International Recruitment Won’t Solve The Nursing Home Staffing Crisis,” https://www.healthaffairs.org/content/forefront/why-international-recruitment-won-t-solve-us-nursing-staffing-crisis, recognizes that recruiting internationally educated nurses (IENs) “will not, . . . , solve the underlying problem of poor management practices that result in high nurse turnover rates and contribute to the current staffing crisis” in the United States. It suggests that to believe IENs “would accept the same subpar working conditions that are causing US-trained nurses to leave clinical practice in US health systems is offensive . . . [and] has deep roots in racism, xenophobia, and sexism.” Moreover, the potential pool of IENs is about 8,663, a small fraction of the estimated 203,200 nursing vacancies nationwide.

• There is money in existing reimbursement to pay for additional nurses in nursing homes. A 2023 report by the National Consumer Voice for Quality Long-Term care, “Where Do the Billions of Dollars Go? A Look at Nursing Home Related Party Transactions,”

https://theconsumervoice.org/uploads/files/issues/2023-Related-Party-Report.pdf, reports on the limited federal scrutiny of how nursing facilities spend the billions of dollars they receive in reimbursement from the Medicare and Medicaid programs and on facilities’ hiding profits and making  themselves look unprofitable by paying inflated prices to related parties (companies that they own or control). The report includes two videos, with Texas attorney Ernest Tosh explaining cost reports and related parties, and case studies of three chains: Life Care Centers of America, Pruitt Health, and Brius.

Consumer Voice makes four recommendations to CMS: audit cost reports, require consolidated cost reports (including information about related parties), implement a minimum nurse staffing standard, and enact a medical loss ratio (profit cap).

“Medicaid and Nursing Homes: Don’t Believe Owners and Operators That All Medicaid Rates Are Too Low” (CMA Alert, Apr. 6, 2023), https://medicareadvocacy.org/snf-reimbursement-myths/, describes the implausibility of claims by nursing home owners and operators that Medicaid rates are too low. If facilities were “underfunded for 15 years,” or lost $25, or $30, or $38, or $65.36 per day for years (various state claims), they would not continue to be in business. The Alert cites reports (by the Empire Center (New York), the Medicaid and CHIP Payment and Access Commission, MACPAC, and others), articles, and litigation by the New York State Attorney General, showing that reimbursement is diverted to excessive provider profits.

• Multiple studies document that higher staffing levels mean better care for residents. Best compilation is the Comment Letter (and Appendix listing 110 studies (1977-2022)), submitted by Charlene Harrington and 79 additional geriatric nursing experts (individuals and organizations), https://www.regulations.gov/comment/CMS-2022-0069-4108, in response to CMS’s Request for Information about staffing (2022).

There is broad public support for staffing ratios.

• AARP Poll (May 2023): “Requiring minimum staffing standards in nursing homes so residents receive quality care is supported by 89% of Democrats and 74% of Republicans.” AARP, “New AARP Poll: Majority of Voters Want More Support for Family Caregivers” (Press Release, May 5, 2023), https://press.aarp.org/2023-05-05-New-AARP-Poll-Majority-of-Voters-Want-More-Support-for-Family-Caregivers

Nursing home trade associations are aggressively fighting staffing standards. We anticipated their arguments: no staffing standard until the staffing shortage is “over,” count non-nurses in staffing ratios, increase reimbursement.

Zahida Siddiqi, “AHCA’s CEO: Nursing Homes Must Prepare for ‘Massive’ Staffing Mandate Battle, Adapt to Managed Care ‘Mega-Trend,” Skilled Nursing News (May 9, 2023), https://skillednursingnews.com/2023/05/ahcas-parkinson-snfs-must-prepare-for-massive-staffing-mandate-battle-adapt-to-managed-care-mega-trend/

“We’ve given them specific turnkey solutions on all of this stuff,” [AHCA CEO Mark] Parkinson said. “So the fight won’t be over. We’re going to have to run this massive campaign after the rule comes out.”

And it’s very possible that the number will be 4.1,” Parkinson said, of what the staffing mandate in that proposed rule could be. However, several factors could succeed in blocking the minimum staffing proposal from being implemented, with legal challenges also potentially on the table.

And so, Parkinson said, it’s also important for the industry to focus on strategies such as making a staffing minimum be contingent upon the labor shortage being over, whether non-nursing staff is counted in the minimum limit, and funding for the endeavor. Parkinson has long argued that it will cost the industry an arm and a leg to fund the staffing mandate, with the estimated costs being $750,000 for every nursing home, according to AHCA estimates.

“We need them to make this reasonable enough … this is so critical to the sector, that unlike most rules, we’re fighting it before it comes out,” said Parkinson. “I really think that if we stay together and fight hard on this, we will eventually win this minimum staffing fight. So that’s where we stand.”

Senate Special Committee on Aging will hold a hearing on May 18, 9:30 am, “Residents at Risk: The Strained Nursing Home Inspection System and the Need to Improve Oversight, Transparency, and Accountability,” in Dirksen Senate Office Building, Room 366. Witnesses:

• Ms. Erin Bliss, Assistant Inspector General for Evaluation and Inspections, Department of Health and Human Services Office of Inspector General, Washington, DC  
• Ms. Leah McMahon, M.A., Director, Colorado State Long-Term Care Ombudsman Program, Denver, CO  
• Ms. Shelly Williamson, President of the Board of Directors for the Association of Health Facility Survey Agencies (AHFSA), Administrator for the Section for Long Term Care Regulation with the Missouri Department of Health and Senior Services, Jefferson City, MO  
• Dr. Susan Lu, Ph.D., M.A., Gerald Lyles Rising Star Professor of Management, Mitchell E. Daniels, Jr. School of Business, Purdue University, West Lafayette, IN

III. GUEST SPEAKER: HEATHER FERGUSON, LYMPHEDEMA ADVOCACY GROUP    

See accompanying materials about the Lymphedema Treatment Act (part of the Consolidated Appropriations Act, 2023).

IV. LITIGATION UPDATE  

Johnson v. Becerra, — F. Supp. 3d –, 2023 WL 2784874 (D.D.C. Apr. 5, 2023). The court found that all plaintiffs had adequately presented their claims to the Secretary, and it waived the requirement of exhaustion of administrative remedies. However, the court held that the plaintiffs lack standing to challenge the Secretary’s policies because they failed to plausibly allege redressability. Assuming that plaintiffs’ injuries were caused by the Secretary, the court found that it is “purely speculative” that their injuries would be redressed by a favorable court decision. It emphasized that Medicare-certified home health agencies are “third parties,” and doubted that the requested policy changes would alter the home health agencies’ behavior with regard to provision of aide services. Plaintiffs’ counsel is considering options for next steps.

UPDATE: The government’s motion to dismiss was fully briefed as of February 15, 2023, and plaintiffs’ motion for class certification was fully briefed as of March 31, 2023. Oral argument on the government’s motion to dismiss was held on March 15, 2023. The government argued that the plaintiffs lack standing, had not exhausted administrative remedies, and that they did not state valid claims for violations of the Medicare or Rehabilitation Acts. Plaintiffs argued that they plausibly alleged standing, that all plaintiffs presented claims to the Secretary and that exhaustion of Medicare’s administrative remedies should be waived. Plaintiffs also explained that they stated valid claims under the Medicare Act and Section 504 of the Rehabilitation Act.

On April 5, 2023, the court granted the government’s motion to dismiss and denied the class certification motion as moot.

Barrows v. Becerra, 24 F.4^th 116 (2d Cir. 2022). (Beneficiary Appeals of Observation Status). In November 2011, the Center for Medicare Advocacy and Justice in Aging filed a class action lawsuit on behalf of individuals who have been denied Medicare Part A coverage of hospital and nursing home stays because their care in the hospital was considered “outpatient observation” rather than an inpatient admission. When hospital patients are placed on observation status, they are labeled “outpatients,” even though they are often on a regular hospital floor for many days, receiving the same care as inpatients. Because patients must be hospitalized as inpatients for three consecutive days to receive Medicare Part A coverage of post-hospital nursing home care, people on observation status do not have access to nursing home coverage. They must either privately pay the high cost of nursing care or forgo that skilled care. The number of people placed on observation status has greatly increased as CMS has strictly enforced its definition of which services hospitals should bill as inpatient/Part A and which services they should bill as observation/Part B. However, CMS has not allowed beneficiaries to appeal the issue of whether their hospitalizations should be classified as observation or as inpatient for Medicare coverage purposes.

After a dismissal by the district court, a remand by the Second Circuit, substantial motion practice and discovery, a bench trial on the merits of the due process claim was held in August 2019. In March 2020, the trial court issued a decision, Alexander v. Azar, 613 F. Supp. 3d 559 (D. Conn. 2020). It held that the Secretary of Health and Human Services violates the Fifth Amendment Due Process Clause by not allowing certain patients to appeal their placement on observation status. Thus, as matter of constitutional due process, patients who are admitted as inpatients by a physician, but whose status is changed to observation by their hospital, have the right to appeal to Medicare and argue for coverage as hospital inpatients. In this ruling, the court held that there is a protected property interest in Medicare Part A coverage. The court did not, however, find a due process violation for patients whose doctors never order inpatient status, or whose status is switched only from observation to inpatient. It drew a distinction between the actions of doctors and the actions of hospital utilization review staff. The court modified the existing class definition accordingly.

The court ordered that the agency establish an appeals process for class members, under which they can argue that their inpatient admission satisfied the relevant criteria for Part A coverage—for example, that the medical record supported a reasonable expectation of a medically necessary two-midnight stay at the time of the physician’s inpatient order. Certain patients will be able to pursue these appeals in an expedited manner while still hospitalized. The court also ordered the agency to provide notice of these procedural rights.

In May 2020, the government appealed the district court’s trial decision to the Second Circuit. On January 25, 2022 the Second Circuit affirmed the trial court’s decision in full.

The court found that one of the named plaintiffs who paid over $10,000 for nursing home care after an observation stay had standing to sue. It found that decisions by hospital personnel to reclassify a patient from inpatient to an outpatient receiving observation services constituted state action. Finally, it conducted an analysis under Mathews v. Eldridge to agree with the trial court that the Secretary violates Due Process by offering no procedural protections for beneficiaries whose status is changed from inpatient to observation through the hospital utilization review process.

The parties have conferred regarding implementation, and the district court has ordered the filing of status reports and held status conferences. The government is implementing the court’s injunction via a Notice of Proposed Rulemaking. In September 2022, the government estimated that the Notice of Proposed Rulemaking will be issued in May 2023, with the public comment period ending July 2023.

In October 2022, the parties jointly requested a clarification of the judgment in the interest of facilitating and streamlining certain retrospective appeals and reducing administrative burden. The parties asked the court to clarify that if a class member who was enrolled in Part B at the time of their hospitalization prevails in appealing a retrospective claim, Medicare is not required to “unwind” and readjust the hospital claim, but may make Part A payment for the covered nursing home services without adjusting the underlying claim. On December 9, 2022, after a class notification process, the court issued an order clarifying the judgment as the parties had requested.  Information about the clarification can be found here.

For answers to frequently asked questions from people who think they may be class members, please see the Center’s website here.

Hough v. Becerra, No. 3:22-cv-06687-ZNQ-LHG (D.N.J.) (Off-label Part D Coverage). On November 18, 2022, the Center for Medicare Advocacy and pro bono firm Murphy Orlando LLC filed suit on behalf of a retired public-school teacher in New Jersey who seeks coverage of her “off-label” (non-FDA-approved) use of a critically needed medication. Medicare denied coverage of the only medication that the beneficiary and her doctor have found to control her debilitating symptoms related to gastroparesis, a disease of the digestive system. However, the denial was based on an overly restrictive interpretation of what counts as a “medically accepted indication” under the law. After exhausting Medicare’s appeal system, the plaintiff is now requesting review in federal court to receive coverage of the medically necessary treatment.

The case is very similar to Dobson v. Secretary of Health and Human Services, 2022 WL 424813 (11^th Cir. Feb. 11, 2022), in which the Center won coverage of the same drug for a Florida beneficiary. The Dobson court held that “support” for an off-label use means that an approved medical compendium that discusses the drug in question must tend to show or help prove the efficacy and safety of the beneficiary’s prescribed use. Support does not mean that a compendium must “hyperspecifically identify” the prescribed off-label use of the beneficiary, as Medicare is requiring. The same reasoning should apply in this case.

UPDATE: The government’s response to the complaint is currently due May 18, 2023.

Chinatown Service Center v. U.S. Dep’t of Health & Human Servs., No. 1:21-cv-00331 (D.D.C.) (LEP Protections Under Section 1557 of the ACA). Justice in Aging and the Center for Medicare Advocacy, along with pro bono firm Stinson LLP, filed this case on February 5, 2021 on behalf of two community-based organizations that provide social services to Limited English Proficient (LEP) older adults. In the waning days of the Trump Administration, the federal government eliminated protections for LEP individuals in health care by rolling back regulations that were put in place as part of Section 1557 of the Affordable Care Act. The protections were intended to target health disparities by requiring health plans and other entities to inform patients both of their right to interpretation, and their right to legally challenge discrimination based on language ability. But, in 2020, the Trump Administration issued a rule that eliminated these language access protections (as well as many others affecting LGBTQ people, immigrants, and women). The plaintiffs are asking the court to vacate the 2020 rule and enjoin its implementation.

On October 13, 2021, the court issued an order staying the case until further notice while the Department of Health and Human Services revises the current Section 1557 rule. The court decided to follow the same approach it had followed in a related case, Whitman-Walker Clinic, Inc. v. HHS, No. 20-1630, 2021 WL 4033072 (D.D.C. Sept. 3, 2021), which challenges several aspects of the 2020 rule, and in which the court had found that a stay was appropriate. The court also ordered HHS to provide bi-monthly updates on its proposed rulemaking. On July 25, 2022, HHS publicly released a proposed rule implementing Section 1557 of the Affordable Care Act. The proposed regulation was published in the Federal Register on August 4, 2022. On November 20, 2022, the government filed a status report noting that the public comment period on the proposed regulation closed on October 3, 2022, and that HHS had received more than 85,000 comments.

UPDATE: On March 31, 2023, the government submitted a status report stating that HHS’s Office for Civil Rights is considering public comments on the proposed regulation.

V. Jimmo UPDATE

Court Mandated Statement from Centers for Medicare & Medicaid Services, CMS.gov (https://www.cms.gov/center/special-topic/jimmo-center; Last visited 5/15/2023)

Jimmo Settlement

“Important Message About the Jimmo Settlement

The Centers for Medicare & Medicaid Services (CMS) reminds the Medicare community of the Jimmo Settlement Agreement (January 2013), which clarified that the Medicare program covers skilled nursing care and skilled therapy services under Medicare’s skilled nursing facility, home health, and outpatient therapy benefits when a beneficiary needs skilled care in order to maintain function or to prevent or slow decline or deterioration (provided all other coverage criteria are met).  Specifically, the Jimmo Settlement Agreement required manual revisions to restate a “maintenance coverage standard” for both skilled nursing and therapy services under these benefits:

Skilled nursing services would be covered where such skilled nursing services are necessary to maintain the patient’s current condition or prevent or slow further deterioration so long as the beneficiary requires skilled care for the services to be safely and effectively provided.

Skilled therapy services are covered when an individualized assessment of the patient’s clinical condition demonstrates that the specialized judgment, knowledge, and skills of a qualified therapist (“skilled care”) are necessary for the performance of a safe and effective maintenance program.  Such a maintenance program to maintain the patient’s current condition or to prevent or slow further deterioration is covered so long as the beneficiary requires skilled care for the safe and effective performance of the program. 

The Jimmo Settlement Agreement may reflect a change in practice for those providers, adjudicators, and contractors who may have erroneously believed that the Medicare program covers nursing and therapy services under these benefits only when a beneficiary is expected to improve.  The Jimmo Settlement Agreement is consistent with the Medicare program’s regulations governing maintenance nursing and therapy in skilled nursing facilities, home health services, and outpatient therapy (physical, occupational, and speech) and nursing and therapy in inpatient rehabilitation hospitals for beneficiaries who need the level of care that such hospitals provide.” 

[Emphasis added]