Two Federal Courts Reject "Improvement Standard" for Denying Medicare Coverage

Within a month of each other, two federal district courts have rejected the Center for Medicare & Medicaid Services’ (CMS) beleaguered Medicare “Improvement Standard,” thereby adding to the chorus of federal judges who have found the standard unsupportable under the Medicare statute and regulations.[1] Although CMS continues to claim formally that there exists no such policy as the “Improvement Standard” (by whatever term it is known),[2] the courts have repeatedly and consistently repudiated it and CMS’s reliance on it. With two more adverse decisions on the issue, CMS is becoming hard-pressed to perpetuate the myth that it is not employing an illegal rule of thumb or condition of coverage.[3]

In the first of the two cases, Papciak, a federal magistrate judge sitting as the district court reversed the decision terminating coverage to an 81-year-old woman who had been receiving skilled therapy after hip surgery. The agency’s view was that she had “met her maximum potential for her physical and occupational therapy.”[4] Analyzing the beneficiary’s two arguments, that the Secretary had failed to apply the correct legal standard and that she had ignored evidence in the record to conclude that the beneficiary needed only custodial care, the court ruled favorably for the beneficiary on both grounds.[5]

On the first point, the court pointed to a provision of a Medicare manual that bases coverage for skilled care on whether “‘the condition of the patient will improve materially in a reasonable and generally predictable period of time, or the services must be necessary for the establishment of a safe and effective maintenance program.'”[6] The court noted that the Secretary had never considered the alternative basis for coverage in the need for a rehabilitative maintenance program. The court also relied on the regulation stating that “‘a patient may need skilled services to prevent further deterioration or preserve current capabilities.'”[7] On this basis alone, the denial of coverage could not be affirmed.

In the second part of the decision, the court held that the agency had ignored evidence indicating that she was, in fact, improving.[8] The court therefore remanded for an award of benefits.[9]

The second case, Anderson, had an unusual history leading to the district judge’s repudiation of the Improvement Standard (which the court referred to as the “stability presumption”). The magistrate judge had issued a report and recommendation granting the beneficiary’s motion to reverse the decision denying further coverage for physical and occupational therapy, but solely on the ground that the Secretary’s analysis was not supported by substantial evidence. The magistrate judge had specifically rejected the beneficiary’s contention that the Secretary was applying an improper presumption. The Secretary did not file objections, but the beneficiary did, and the district judge largely agreed with the beneficiary.[10]

Relying on the Medicare Benefit Policy Manual (MBPM), CMS Pub. 100-02, the district judge began her analysis by stating that “[t]he touchstone for determining whether skilled services are ‘reasonable and necessary’ is from the forward-looking vantage point of the physician” and “[a] patient’s chronic or stable condition does not provide a basis for automatically denying coverage for skilled services.”[11] The magistrate judge’s mistake, the court observed, was in misinterpreting the language of 42 C.F.R. § 409.33(a)(2)(i):

Pursuant to the regulation, “stabilization” determines the duration of skilled services. It does not, however, negate the possibility that “skilled care may, depending on the unique condition of the patient, continue to be necessary for patients whose condition is stable.” MB[P]M § 40.1.1. Accordingly, … [the magistrate judge] is incorrect in concluding that skilled services are not covered “when a patient’s condition is stable and unlikely to change.”[12]

The district judge also accused the ALJ of applying “retrospective stability presumption.” This was impermissible, the court noted, because the Vermont federal court “has previously rejected both the use of hindsight and a stability presumption in denying coverage for services.”[13] The court quoted approvingly from one of the prior decisions:

“The services must, therefore, be viewed from the perspective of the condition of the patient when the services were ordered and what was, at that time, reasonably expected to be appropriate treatment for the illness or injury throughout the certification period … The fact that skilled care has stabilized a claimant’s health does not render the level of care unnecessary. An elderly claimant need not risk a deterioration of her fragile health to validate the continuing requirement for skilled care.”[14]

The court therefore concluded that the need for services must be examined “free from any presumption that if hindsight reveals [the beneficiary’s] condition was stable throughout the covered period, coverage for skilled services should be denied.”[15]

These two decisions follow a host of decisions over the last 25 years repudiating the Improvement Standard. Nevertheless, CMS has taken little or no action to alter the policy. As part of its effort to change this culture, the Center for Medicare Advocacy has met on several occasions with CMS officials, but no substantive change has come of those meetings. The Center is now considering what other steps may be appropriate, including possible litigation, and is interested in hearing of beneficiaries who are being harmed by this policy. If you or someone you know has been affected by this unfair standard, send a brief description of the experience to the Center at improvement@medicareadvocacy.org.