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Senators Push Overhaul of Medicare Appeals as Backlog Worsens

By Erin Mershon, CQ Roll Call

Senate Finance Committee leaders are renewing a push for bipartisan legislation that would revamp the Medicare appeals process, in the wake of a new Government Accountability Office report detailing a skyrocketing nine-fold increase in high-level appeals.

Chairman Orrin G. Hatch (R-Utah), ranking member Ron Wyden (D-Ore.) and Sen. Richard M. Burr (R-N.C.) highlighted a bill (S 2368) that would establish a separate appeals process and keep lower-cost cases out of court, among other changes. The Finance Committee advanced that bill last June, but it has not been scheduled for floor consideration.

Their appropriations counterparts also are working to address the issue. The Senate Appropriations Committee on Thursday approved a $5 million increase to the $112.4 million budget for the Office of Medicare Hearings and Appeals, which handles the process, in a fiscal 2017 Labor-HHS-Education spending bill, although a tight budget cap makes it difficult to find extra funds.

The report and the Senate action highlight an issue that has long plagued providers who have seen billions of reimbursement dollars tied up in the appeals process. Just 2.4 percent of claims come from beneficiaries, who can get priority review for their appeals. Providers, meanwhile, often wait months for a decision.

The report “underscores the need to cut the red tape ensnarling the process,” Hatch said in a statement, calling his bill “a win for taxpayers, patients and health providers.”

“Today’s news is a clear reminder of the ongoing dysfunction plaguing the appeals process, which comes at the expense of those stuck in the system,” Wyden echoed, calling on Congress to “end this bureaucratic water torture.”

Medicare claims appeals at the third level, which are heard by administrative law judges after a case has gone through two prior reviews, skyrocketed by 936 percent between 2010 and 2014, GAO found. Many of those appeals came from appeals of hospital and other inpatient stays, which went up by 2,000 percent. Hospitals groups often attribute the increases to the so-called two-midnight rule, which determines when a hospital stay is paid under inpatient or outpatient reimbursements. That had been an area of intense scrutiny for contractors who audit Medicare claims.

GAO also found that appeals are not being finalized within the 90-day timeframe required by current law — and emphasized that CMS won’t be able to keep up with the skyrocketing rates. GAO also said HHS could do a better job establishing procedures for repetitious claims to ensure that near-duplicate appeals need not go through the process over and over again.

The watchdog group criticized the data systems CMS relies on to monitor the process, saying better information could help identify policies in need of clarification or additional guidance.

More recent HHS data shows that at the end of fiscal year 2015, some 884,000 third-level appeals were waiting to be adjudicated and another 14,874 were in limbo at the fourth level, the highest level of appeal. The agency can process about 75,000 third-level appeals and about 2,300 fourth level appeals in one year.

It would take 11 years to process the backlog of third-level appeals and six years to process the fourth-level appeals, an HHS primer estimated.

The administration supports the Finance Committee legislation and is quick to acknowledge the problem.

In the last year, CMS reduced the power of the so-called recovery audit contractors (RACs)that file many of the appeals, and it has also updated rules surrounding its so-called “two midnights” policy. Such decisions are no longer policed by the contractors, but instead by quality improvement organizations.

In 2014, the agency also agreed to pay hospitals a portion of the funds they were denied for claims stuck in the backlog, provided that hospitals waive their rights to future appeals of those claims.

The agency is also exploring administrative actions like settlement processes for certain claims and prior authorization programs.