[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
MEDICARE COVERAGE DECISIONS AND BENEFICIARY APPEALS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
APRIL 22, 1999
__________
Serial 106-23
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
59-614 CC WASHINGTON : 2000
------------------------------------------------------------------------------
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Health
BILL THOMAS, California, Chairman
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
JIM McCRERY, Louisiana GERALD D. KLECZKA, Wisconsin
PHILIP M. CRANE, Illinois JOHN LEWIS, Georgia
SAM JOHNSON, Texas JIM McDERMOTT, Washington
DAVE CAMP, Michigan KAREN L. THURMAN, Florida
JIM RAMSTAD, Minnesota
PHILIP S. ENGLISH, Pennsylvania
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
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C O N T E N T S
__________
Page
Advisory of April 12, 1999, announcing the hearing............... 2
WITNESSES
Health Care Financing Administration, Michael Hash, Deputy
Administrator; accompanied by Jeff Kang, M.D., Director, Office
of Clinical Standards and Quality.............................. 21
______
American Medical Association, William G. Plested III, M.D........ 90
Coleman, Terry, Fox, Bennett & Turner............................ 56
Health Industry Manufacturers Association and Hill-Rom Company,
Walter M. Rosebrough, Jr....................................... 79
Kinney, Eleanor D., Indiana University School of Law, and Center
for Law and Health............................................. 46
National Senior Citizens Law Center, Vicki Gottlich.............. 64
Oncotech, Incorporated, Frank J. Kiesner......................... 86
SUBMISSIONS FOR THE RECORD
American Academy of Audiology, McLean, VA, Angela Loavenbruck,
statement...................................................... 106
American College of Physicians-American Society of Internal
Medicine, statement............................................ 107
American Gastroenterological Association, Bethesda, MD, statement 111
American Occupational Therapy Association, Inc., Bethesda, MD,
statement...................................................... 113
Home Care Association of America, Jacksonville, FL, Dwight S.
Cenac, statement............................................... 115
Medical Device Manufacturers Association, statement.............. 118
National Association for Home Care, statement.................... 120
Pharmaceutical Research and Manufacturers of America, statement.. 122
Society of Critical Care Medicine, Anaheim, CA, George A. Sample,
M.D., statement................................................ 126
SunDance Rehabilitation Corporation, Dallas, TX, David Kniess,
letter......................................................... 129
Transamerica Occidental Life Insurance Company, Los Angeles, CA,
George E. Garcia, letter....................................... 130
MEDICARE COVERAGE DECISIONS AND BENEFICIARY APPEALS
----------
THURSDAY, APRIL 22, 1999
House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:11 p.m., in
room 1100, Longworth House Office Building, Hon. Bill Thomas
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
FOR IMMEDIATE RELEASE CONTACT: (202) 225-3943
April 12, 1999
No. HL-4
Thomas Announces Hearing on
Medicare Coverage Decisions and
Beneficiary Appeals
Congressman Bill Thomas (R-CA), Chairman, Subcommittee on Health of
the Committee on Ways and Means, today announced that the Subcommittee
will hold a hearing on how the Health Care Financing Administration
(HCFA) makes decisions regarding Medicare covered services and what
opportunities exist for seniors to appeal those decisions. The hearing
will take place on Thursday, April 22, 1999, in the main committee
hearing room, 1100 Longworth House Office Building, beginning at 1:00
p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
Coverage is an important concept in understanding Medicare
benefits: the Social Security Act requires that all medical services be
``reasonable and necessary'' for the treatment of an illness or injury.
HCFA and its private-sector contractors (known as fiscal intermediaries
and carriers) have broad discretion to make Medicare coverage
decisions. In some cases, the agency makes sweeping National Coverage
Determinations (NCD). Under current law, beneficiaries can appeal many
Medicare decisions but they are largely foreclosed from appealing NCDs.
The current Medicare appeals system can best be characterized as a
patch-work--a large number of independent appeal processes addressing a
multitude of diverse issues. Medicare appeals are divided into three
distinct parts: Medicare Part A (generally hospital inpatient stays),
Medicare Part B (generally physician services), and Medicare managed
care. Each of these three parts is, in turn, broken into distinct sub-
parts, one for beneficiaries seeking covered services and others for
medical providers seeking reimbursement for services. HCFA uses a
number of levels of review, including governmental contractors (fiscal
intermediaries and carriers), review panels (Provider Reimbursement
Review Board, Peer Review Organizations, Departmental Appeals Board)
and judicial officers (Administrative Law Judges and Federal U.S.
District Courts).
The current appeals processes stem from the Omnibus Budget
Reconciliation Act of 1986 (OBRA86) in which Congress made several
important reforms to the Medicare appeals system. Since then, the
appeals process has become increasingly complex and time-consuming. An
increase in the number and complexity of appeals calls into question
the adequacy of the current system. Many Supreme Court and Federal
court decisions concerning the Medicare appeals system have raised
basic questions about its fundamental fairness to beneficiaries and
providers.
In announcing the hearing, Chairman Thomas stated: ``At a time when
the Administration is seeking swifter appeals in private health plans,
it is only fitting that we consider how various appeals are handled in
governmental programs like Medicare. There are too many people,
including Federal bureaucrats and governmental contractors, making
coverage decisions without being held accountable. America's seniors
deserve a meaningful opportunity to question these decisions.''
FOCUS OF THE HEARING:
This hearing will analyze the processes available for seniors and
medical providers to appeal payment and coverage determinations under
Parts A and B of the Medicare program.
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Any person or organization wishing to submit a written statement
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hearing date noted on a label, by the close of business, Thursday, May
6, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways and
Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
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Chairman Thomas. The Subcommittee will come to order.
As we begin this hearing on Medicare coverage, I am pleased
to announce that the Health Care Financing Administration has
finally been able to publish, very coincidentally today, a
regulation which sets forth the administrative process for
Medicare coverage. I really do not think it is mere coincidence
that HCFA published this on the same day as this Subcommittee's
hearing. If I had known that was the operating procedure, I
would have scheduled this hearing a month earlier.
One year ago this week, the Ways and Means Subcommittee on
Health convened a hearing to examine the rights of patients to
appeal benefit decisions in both the private and the public
health programs. Since that time, appeals decisions have been
monitored by Members of this Subcommittee, and we have drafted
various pieces of legislation to improve the way patients'
appeals are heard in both the fee-for-service and the managed
care area.
One legislative proposal, H.R. 4250, the Patient Protection
Act, was passed by the House in July of last year. My
colleagues on the other side the aisle declined to support that
bill based in part, I believe, on arguments that they presented
that the bill did not provide speedy enough access to judicial
review. And yet if I have learned anything over the last year
it is that private health insurance even under current law
allows for quicker access to judicial review than does the
Medicare Program.
Today, we are going to examine the patient appeals process
within the Medicare Program, and I will direct your attention--
you may or may not be able to see it; my assumption is that we
have copies available to you--on the Medicare appeals process,
and what this schematic chart basically shows you is that
Medicare requires an individual to run a gauntlet of
administrative appeals, first, to a government contractor, then
to an agency advisory board, then to an administrative law
judge, then to the Department Appeals Board, and then only
after a ``final decision'' by the Secretary is there a limited
court or judicial review.
As I said a year ago at our first patient appeals hearing,
due process means many things. To legal scholars, it is term of
art meaning the technical process by which legal rights are
enforced, but in a larger sense, when we use the term ``due
process,'' it means simply the opportunity to be heard; the
chance to air grievances objectively, get on the record so that
you can let people see what has been happening.
Today, we will examine the opportunity seniors have to
challenge decisions made in the Medicare Program. I would like
to note that the administration has had, in my opinion,
difficulty in wrestling with this decision. The best example of
this is the administration's handling of a Federal circuit
decision known as the Grijalva case. The 9th circuit decided
that the rights of seniors were not being given sufficient
weight in Medicare HMOs. The administration, I think, to say
the least, was split as evidenced by an article in the New York
Times on January 22 over whether the administration should
challenge the court's decision to improve rights for seniors.
One internal administration memo, quoted in the paper, said,
``The Department's position, challenging the court order, could
be seen as inconsistent with the administration's stated policy
of expanding consumer protections.''
Today, we will also be examining the Medicare coverage
process. Appeal rights within Medicare are inextricably
intertwined with the Medicare coverage process. Coverage is an
important concept in understanding Medicare benefits. The
Social Security Act, section 1862 says that Medicare covers
only medical services that are ``reasonable and necessary'' for
the treatment of an illness or an injury, and yet the
definition of reasonable and necessary is left largely to the
Health Care Financing Administration and its private sector
contractors, known as fiscal intermediaries and carriers.
Together, they have broad discretion to make Medicare coverage
decisions. It has been indicated to me that the vast majority
of the decisions, upward of 90 percent, are made locally by
contractors. In all other cases, the Health Care Financing
Administration makes national coverage determinations usually
involving access to very expensive high-tech medicine. Under
current law, beneficiaries may appeal local Medicare decisions,
but they cannot generally appeal HCFA's national coverage
decisions, and I am interested, if at all possible today, in
learning why that is the case.
As many of you know, Members of this Subcommittee have
played a leading role in prodding the Health Care Financing
Administration to develop a more deliberative coverage process.
In 1997, this Subcommittee learned, as a result of a
congressional investigation, that HCFA's Technology Advisory
Committee, or TAC, was meeting in closed-door sessions in
violation of Federal statute. Since then, HCFA has dumped TAC
and revamped its advisory committee process, and yet the
current HCFA coverage decisionmaking process is still made with
little input from seniors, physicians, medical technology
manufacturers; in short, those directly affected by those
decisions.
I understand that the private sector is, in many instances,
such as pharmaceuticals, becoming much more efficient in
Medicare in approving access to the most advanced care. While
HCFA's proposal for a new coverage process is, in effect, a
good system, the new proposal will still not address the local
coverage process. Instead, the new proposal focuses exclusively
in improving the national coverage process, and I am interested
in learning more about this new coverage regulation which we
just received. I tried to read briefly through it, and I did
note that on page 10, it was reinforcement of the carrier or
the intermediary making local decisions.
As we prepared for this hearing, I have heard a great deal
of frustrations from constituents about the current Medicare
appeals and coverage process. I continue to believe that this
is an overly muddled process. I do hope that we can look at
fundamental reforms. Medicare commission, premium support
model, and others would be the best way to free ourselves from
this hopelessly muddled structure, but, until then, we will
work to improve the current process.
Let me end--before I hand off to my colleague from
California, my friend, Mr. Stark--a concern that he and I share
since we both signed the letter that was addressed to the
Administrator on February 2, 1999 in which we were concerned
about the fact that contractors have the authority to enforce
coverage policy and that they are also being given the
authority to establish the very policy that they enforce and
that, at the very least, establishing and enforcing coverage
policy should be separate. In a letter in answer to that
February 2 letter, received April 20--2 days ago--the
administrator, in responding to our letter, said ``In the long
run, I believe the best way to administer local coverage is to
separate the development of the coverage decisions or
policies.'' I guess they are for agreeing with the concern that
the Ranking Member and the Chairman showed but that I don't see
any evidence of that reflected in the proposal or the notice
that has been submitted, and I would also look forward to some
indication, then, about what the Administrator may have meant,
to the best of anyone's ability to interpret, what ``in the
long run'' means.
[The opening statement follows:]
Opening Statement of Hon. Bill Thomas, a Representative in Congress
from the State of California
As we begin this hearing on Medicare coverage, I am happy
to announce that the Health Care Financing Administration
(HCFA) has finally been able to publish today a regulation
which sets forth the administrative process for Medicare
coverage. I do not think it is mere coincidence that HCFA
published this on the same day as this Subcommittee's hearing.
If I had known that a hearing was all it would take to get this
regulation published, I would have scheduled the hearing a
month ago.
One year ago this week, the Ways & Means Subcommittee on
Health convened a hearing to examine the rights of patients to
appeal benefits decisions in both private and public health
programs. Since that time, Members of this subcommittee have
been vigorously drafting various pieces of legislation to
improve the ways patient appeals are heard in both fee-for-
service and managed care.
One legislative proposal, H.R. 4250, the Patient Protection
Act was narrowly passed by the House in July 1998. My
colleagues on the aisle opposite declined to support that bill,
based largely on the belief that the bill did not provide
speedy enough access to judicial review. And yet, what I have
learned in the past year is that private health insurance, even
under current law, allows for quicker access to judicial review
than does the Medicare program. Today, we are going to examine
the patient appeals process within the Medicare program.
I direct your attention to this enlarged schematic which
shows the current Medical appeals processes.
As you can see, Medicare requires an individual to run an
entire gauntlet of administrative appeals, first to a
government contractor, then to an agency advisory board, then
to an Administrative Law Judge, then to the Departmental
Appeals Board, and then--only after a ``final decision'' by the
Secretary--is there limited judicial review.
As I said one year ago, at our first patient appeals
hearing, ``due process means many things.'' To legal scholars,
it is a term of art meaning the technical process by which
legal rights are enforced. In a larger sense, due process means
simply the opportunity to be heard, the chance to air
grievances, objectively and on-the-record.
Today, we will examine the opportunities seniors have to
challenge decisions made in the Medicare program. I would like
to note that the Administration has had great difficulty
wrestling with this issue.
The best example of this is the Administration's handling
of a Federal Circuit Court decision known as Grivalja
(pronounced: GRA-val-ha). The Ninth Circuit decided that the
rights of seniors were not being given sufficient weight in
Medicare HMOs. The Administration was bitterly split--as
evidenced by an article in the New York Times on January 22--
over whether the Administration should challenge the Court's
decision to improve rights for seniors. One internal
Administration memo quoted in the paper said, ``The
Department's position [challenging the Court order] could be
seen as inconsistent with the Administration's stated policy of
expanding consumer protections....''
Today, we will also be examining the Medicare coverage
process. Appeal rights within Medicare are inextricably
intertwined with the Medicare coverage process. Coverage is an
important concept in understanding Medicare benefits. Social
Security Act section 1862 says that Medicare covers only
medical services that are ``reasonable and necessary'' for the
treatment of an illness or injury.
[GRAPHIC] [TIFF OMITTED] T9614.012
And yet, the definition of ``reasonable and necessary'' is
left largely to the Health Care Financing Administration (HCFA)
and its private-sector contractors (known as ``fiscal
intermediaries'' and ``carriers''). Together, they have broad
discretion to make Medicare coverage decisions. Most
decisions--90%--are made locally by contractors. In all other
cases, the Health Care Financing Administration (HCFA) makes
``National Coverage Determinations''--usually involving access
to high-tech medicine.
Under current law, beneficiaries may appeal local Medicare
decisions but they cannot generally appeal HCFA's ``National
Coverage Decisions.'' I am interested in learning why that is
the case.
As many of you know, Members of this Subcommittee have
played a leading role in prodding the Health Care Financing
Administration (HCFA) to develop a more deliberate coverage
process. In 1997, this Subcommittee learned, as a result of a
congressional investigation, that HCFA's Technology Advisory
Committee (TAC) was meeting in closed-door sessions, in
violation of Federal statute. Since then, HCFA has revamped its
advisory committee process.
While HCFA's proposal for a new coverage process is an
improvement over the current system, the new proposal--from
what I understand from initial reports--will still not address
the local coverage process. Instead, the new proposal focuses
exclusively on improving the national coverage process. I am
interested in learning more about this new coverage regulation
published by HCFA today.
In preparing for this hearing, I have a heard a great deal
of frustration from constituents about the current Medicare
appeals and coverage process. I continue to believe that a
premium support model offers the best means of being freed from
this hopelessly muddled situation. However, until then, we
shall do our best to improve the current system.
Chairman Thomas. And, with that, I would turn it over to my
colleague from California.
Mr. Stark. Thank you, Mr. Chairman. Thank you for holding
this hearing. We would like to work with you to reform the
coverage and appeals procedures. I understand they are a mess.
My written statement, which I would like to submit in its
entirety----
Chairman Thomas. Without objection.
Mr. Stark. Thank you. My written statement brings up these
problems with local coverage and national coverage. I don't
think we should set up an appeals system that would force
Medicare to pay whatever the providers want for a newly covered
service; that would bankrupt us soon. Fee-for-service coverage
and appeals are extremely confusing and should be simplified,
but so should HMO appeals. In other words, I don't know if we
should do fee-for-service changes without doing managed care.
It is my understanding that national coverage policies are
not appealable, and that they tend to deal with a particular
service, mammography, let us say. I am not sure that we should
appeal that. We don't allow appeals of FDA decisions. Those
are--or I hope they are--scientific decisions that are made
with the best scientific knowledge available as to whether or
not a particular procedure is useful. So, local decisions, it
seems to me, are more based on whether the service which has
been approved nationally is used appropriately, if it is used
too frequently or if it is not used for the proper diagnosis.
That makes more sense, although, as you point out, it is
terribly confusing.
So, I am glad you are willing to enter into this
discussion. I hate to remind you that if we move to premium
support, you won't have to do this anymore. Under premium
support none of the providers will ever be able to appeal
anything. But, I don't know as I have to put any red meat out
in front of them; somebody who is bound and determined to be
the junkyard dog in this fight. So, with that, I will assume
that we have not reached a conclusion quite yet in premium
support and that this hearing today will be somewhat useful for
at least the near future. Thank you, Mr. Chairman.
[The opening statement and attachments follow:]
Opening Statement of Hon. Fortney Pete Stark, a Representative in
Congress from the State of California
Mr. Chairman:
Today, the Committee is examining two of the functions
performed by Medicare contractors--establishing coverage
policies and hearing appeals. This hearing will help us to
understand the need for broader contracting reform in Medicare
as we consider the functions that contractors perform.
Coverage
More than 100 Medicare contractors are engaged in
establishing Medicare coverage policies, and the result is
inconsistency in those policies. Carriers determine local Part
B coverage policies, PROs determine hospital coverage policies,
and Fiscal Intermediaries determine coverage policies for SNFs
and home health agencies. We need to restructure and simplify
this process and reduce the number of contractors involved in
establishing local Medicare coverage policies.
Beginning in 1987, HCFA has tried several times to publish
rules governing the process used in establishing national
coverage policies, and they are now trying once again. I
applaud their efforts and urge them on. HCFA is also moving
toward scientific, evidenced-based Medicare coverage policy
making, and I also agree with that change.
We also need published guidelines governing local coverage
policies. For example, if local coverage of a technology is
needed to gain experience with it, then we should also ensure
that Medicare beneficiaries are protected and that we obtain
the valid and reliable data to evaluate the safety and
effectiveness of the technology. We should not grant general
authority to experiment on Medicare beneficiaries.
HCFA plays little role in coordinating and overseeing local
coverage policies, and does not publish them. And national
Medicare coverage policies should be consolidated and published
in a single Medicare coverage manual, rather than the many
manuals in which they are now published.
Managed care plans that contract with Medicare are required
to comply with local coverage policies, but they find it
difficult to learn what the local policies are. In the age of
the internet, Medicare coverage policies should be published
and readily available for all to see on the internet.
Mr. Chairman, on February 2, you and I wrote to the HCFA
Administrator asking that HCFA management of local Medicare
coverage processes be transferred from the HCFA office that
oversees the Medicare fraud and abuse programs to the office
that determines national Medicare coverage policies. On
Tuesday, we received a response to our letter. In that
response, HCFA Administrator, Nancy-Ann Min DeParle, said, ``In
the long run, I believe the best way to administer local
coverage policy is to separate the development of the coverage
decisions or policies, (which focus on whether a given service
should be covered), from the development of local medical
review policies, (which focus on the appropriate utilization of
a service in that locality and program integrity issues).''
Mr. Chairman, that is precisely the position that you and I
took in our letter to the Administrator. We also said that
these two functions should be separated. Coverage policy should
be a function of quality-of-care, and medical review is a
function of program integrity.
The HCFA Administrator goes on to say, ``I want to move in
this direction as Medicare program management resources
permit.'' So the issue seems to be funding. I would ask what
additional funding HCFA needs to separate these two functions
now, and I would like to work with you, Mr. Chairman, to ensure
that HCFA receives the funds needed to make this change now.
Coverage vs. Payment
Mr. Chairman, let me be clear--Medicare coverage policy and
Medicare payment policy are two distinctly different things.
Once Medicare decides to cover a new product, it must decide
what to pay for the product. Medicare should not simply accept
the ``sticker price'' that manufacturers set for new products.
Instead, Medicare should be a prudent purchaser, setting
reasonable payment amounts for products. Then, manufacturers
can make business decisions whether they want to sell their
products to Medicare or not. I believe that they will want to
sell their products for reasonable prices to Medicare.
Indeed, last year, several local Medicare carriers
implemented a ``least costly alternative'' payment policy
concerning two Medicare covered prescription drugs--Lupron and
Zoladex--used in the treatment of prostate cancer. One of these
drugs (Lupron) was much more expensive than the other
(Zoladex). Since medical experts concluded that these drugs
were equally suitable alternatives, Medicare carriers decided
to cover both drugs, but to pay only at the price of the lower-
priced drug. HCFA then found that the price of the higher-
priced drug suddenly dropped, because the company would rather
sell its product at a more reasonable price than not sell it at
all.
A similar thing happened for the drug, TPA, used in the
treatment for heart attacks. The manufacturer originally tried
to pressure HCFA into increasing the hospital DRG payment
amount to reflect the ``sticker-price'' that the manufacturer
set for the drug, but HCFA refused. Over time, hospital lengths
of stay were reduced, and other lower-priced drugs were
introduced of equivalent medical value; so HCFA has never had
to increase the DRG payment for TPA. This situation taught us
the lesson that HCFA should not be too quick to accept
manufacturer ``sticker-prices.''
Using comparisons of costs and effectiveness of
technologies in determining Medicare payment amounts is one way
to incorporate ``cost-effectiveness'' into Medicare coverage
policy making. Rather than using ``cost-effectiveness'' in
establishing the coverage policy, it is used in setting the
payment amount.
Appeals
Similarly, Medicare appeals processes need updating.
Appeals processes in traditional, fee-for-service Medicare are
complex and confusing, and are quite different from those
mandated for managed care. Indeed, it can be argued that
Medicare beneficiaries have fewer rights and protections in
traditional, fee-for-service Medicare than in managed care.
In managed care, beneficiaries have a right to know in
advance of any service whether the service will be covered by
Medicare or must be paid for by the beneficiary. That right
does not exist in traditional Medicare, where contractors
decide whether a service is covered only after a claim is
submitted. Often, beneficiaries are then required to pay for
services that they thought would be covered by Medicare.
Similarly, in managed care, beneficiaries have a right to
an external appeal if Medicare coverage is denied; but not in
traditional Medicare, where the Medicare contractor that
establishes the coverage policy also hears the appeals on it.
We also need to reduce the number of contractors involved in
the appeals process in traditional Medicare, and consider the
need for an external appeals process.
In traditional Medicare, minimum dollar thresholds are
required before appeals are permitted--for example, $100 for
appeals of Part B services to carriers. No such minimum
thresholds apply for managed care, and beneficiaries are
permitted to appeal all denials of care. Denials of services,
even for ``only'' $50 mean a lot to many Medicare
beneficiaries. Similarly, a minimum dollar threshold of $500
must be reached to appeal Part B claims to Administrative Law
Judges (ALJs), but only $100 for Medicare+Choice.
Another problem concerning traditional Medicare appeals
processes is HCFA's lack of requirements for providers to give
beneficiaries ``notices of noncoverage'' and ``advance
beneficiary notices (ABNs).'' Medicare beneficiaries must be
adequately informed both of their appeal rights and of services
that are not covered. On January 25, I wrote to the Secretary
asking her to ensure that beneficiaries in traditional Medicare
are given these protections. I have not yet received a response
to my letter.
I do not mean to imply that Medicare managed care appeals
processes are without problems. Last week, the GAO released two
studies describing problems involving beneficiary information
and appeals processes in Medicare+Choice plans. GAO found that
beneficiaries are often given inaccurate and incomplete
information by the plans--both about services that are covered
and about their appeal rights--and that their ability to appeal
is limited by the incorrect information provided to them. This
situation is unacceptable must be corrected.
Medicare law has never permitted appeals of national
coverage determinations, and I question the wisdom in
permitting such appeals now. Just as the FDA has no appeals
mechanism for its scientific determinations, I question whether
Medicare should have an appeals mechanism for its national
coverage policies. A governmental entity with scientific
expertise must be responsible for establishing policies that
affect Medicare spending--often large increases in spending.
Currently, that responsibility is shared by the Congress and
HCFA. On a practical level, I question what body would be
technically qualified to consider such appeals.
Mr. Chairman, we all want Medicare to be well administered,
and I would like to work with you on the improvements needed in
administering the coverage and appeals processes in Medicare.
Thank you, Mr. Chairman.
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Chairman Thomas. I thank the gentleman very much, and now,
if we could, the Deputy Administrator of the Health Care
Financing Administration, Michael Hash, is back with us again,
and for a quick return visit, Dr. Kang, who is the Director of
the Office of Clinical Standards and Quality. It is nice to
have you with us, and any written statements you may have will
be made a part of the record, and you can address us in any way
you see fit in the time you have available.
[The opening statement of Mr. Ramstad follows:]
Opening Statement of Hon. Jim Ramstad, a Representative in Congress
from the State of Minnesota
Mr. Chairman, thank you for calling this important hearing
on the Medicare Coverage decision-making process and appeals.
As Co-Chair of the House Medical Technology Caucus, I have
been very closely monitoring the Health Care Financing
Administration's (HCFA) progress on establishing a formal
process for making important coverage decisions. The Caucus has
held two important meetings on this topic, one in July of 1998
to review HCFA's draft outline of its proposal and one last
February to check on HCFA's progress on the issue.
As we all know, while Medicare law provides for the
coverage of various categories of benefits, it does not specify
a list of covered technologies and services. That's where HCFA,
and this coverage process, come in to play.
Medical technology and innovation play an important role in
this critical health care program for America's seniors. As new
life-enhancing and life-saving technologies are developed, and
more Americans learn about them, the process for making these
coverage decisions becomes increasingly important.
As expected, beneficiaries and manufacturers continue to
contact Members of Congress on this topic, and a number of
positive things have been said about Dr. Kang's efforts, under
the leadership of Administrator Min DeParle, to improve the
process. Some concerns, however, about specific aspects of the
proposal have also been raised. Certainly, the issue of appeals
is one of the most frequently discussed concerns.
Thank you again, Mr. Chairman, for calling this important
hearing. I look forward to hearing from today's witnesses on
how we can further improve the decision-making and appeals
processes in the Medicare program.
Chairman Thomas. Michael.
STATEMENT OF MICHAEL HASH, DEPUTY ADMINISTRATOR, HEALTH CARE
FINANCING ADMINISTRATION; ACCOMPANIED BY JEFF KANG, M.D.,
DIRECTOR, OFFICE OF CLINICAL STANDARDS AND QUALITY
Mr. Hash. Thank you, Chairman Thomas and Congressman Stark,
and other distinguished Members of the Health Subcommittee. We
want to express our appreciation for the invitation to come
here today and to discuss our revised procedures for
establishing coverage policy and appeals processes that are
available to beneficiaries and to providers.
Medicare beneficiary appeal rights are among the strongest
anywhere in this country. Providers and suppliers also have
appeal rights under the program and can appeal on behalf of
beneficiaries if they become the beneficiary's appointed
representative.
In the past year, we have increased efforts to make sure
beneficiaries know about their appeal rights. We are working to
improve the oversight also of the private plans that contract
with Medicare under the Medicare+Choice Program, and we have
worked with the Social Security Administration to improve the
timeliness and consistency of its administrative law judge
rulings on Medicare appeals.
As you know, the average administrative law judge appeal
takes over a year now. In order to improve that process, we
have undertaken the training of 30 additional administrative
law judges that are dedicated solely to Medicare cases, and we
are working with our contractors in Medicare to make sure that
the materials they provide for ALJ review are sent in a
complete and comprehensive manner. Meanwhile, because of our
successful crackdown on fraud, waste, and abuse in the Medicare
Program, the total number of appeals is in fact up. To handle
the increased workload, the President's fiscal year 2000 budget
increases funding for Medicare appeals by $10 million, and we
look forward to working with you and other Members of the
Congress to secure this necessary increase in funding support
for the appeals process.
Also in the past year, we have revised our procedures for
establishing national coverage policy. The revised policy is,
in our view, more open, accountable, and explicit in every
respect, including the right of beneficiaries and other members
of the public to request reconsideration of coverage policy
decisions. A notice, as you pointed out, Mr. Chairman,
describing this new process is on display in today's Federal
Register and will be published in the Register next Tuesday.
The new process establishes clear procedures for how
national coverage policy decisions are made. It allows anyone--
and I emphasize anyone--to request a decision or a
reconsideration of existing coverage policy. Individuals need
only submit in writing a request along with new medical and
scientific evidence that merits consideration or an analysis of
Medicare's decision that demonstrates that we have made a
material misinterpretation or have misunderstood or overlooked
credible evidence in the evaluation of the coverage decision.
We will, of course, regularly review new medical and scientific
information ourselves to modify national coverage policy on our
own initiative when appropriate.
Our revised process also institutes important timeliness
standards, and it keeps interested public parties fully
informed through the Internet where we will publish a list of
coverage issues that are currently under review; the stage of
review that they are in; the major scientific questions that
need to be resolved, and an estimate of when the next phase of
the process will occur. Most importantly, the new processes
guarantee beneficiary input through a new Medicare Coverage
Advisory Committee that will hold open meetings and include
consumer as well as industry members. Later this year, we will
publish, in a proposed rule, the criteria for defining under
Medicare when a service or a supply is reasonable and
necessary, the statutory standards for coverage under Medicare,
and we will invite public comment on our proposed criteria
before we finalize them.
We very much appreciate your continuing attention to this
important part of the Medicare Program. We look forward to
working with you and other Members as we continue to refine our
coverage and appeals processes, and Dr. Kang and I would be
happy to answer, at this point, any questions that you or other
Members of the Subcommittee may have.
Thank you.
[The prepared statement follows:]
Statement of Michael Hash, Deputy Administrator, Health Care Financing
Administration
Chairman Thomas, Congressman Stark, distinguished
Subcommittee members, thank you for inviting us to testify
today about our revised procedures for establishing coverage
policy and the appeals processes available to our beneficiaries
and medical providers of payment and coverage determinations.
We welcome the opportunity to discuss efforts to make our
appeals and coverage processes more effective, efficient, and
accessible.
Beneficiaries must have prompt recourse if they feel that
they are denied needed care. President Clinton is committed to
ensuring effective and efficient appeal rights for all
Americans. Medicare beneficiaries' appeals rights are among the
strongest in the nation, and allow for appeal of virtually any
issue regarding provision or payment of services. Providers and
suppliers also have appeal rights, and can appeal on behalf of
beneficiaries if they become the beneficiary's appointed
representative.
In the past year, we increased efforts to make sure
beneficiaries are informed of their rights to appeal denials of
coverage by Medicare claims processing contractors and
Medicare+Choice plans. We are working to improve oversight of
Medicare+Choice plan appeals. And we have worked with the
Social Security Administration to improve the timeliness and
consistency of its Administrative Law Judge rulings on Medicare
appeals.
Also in the past year, we have worked to revise our process
for establishing national coverage policy so that it is more
open, accountable, and explicit in every respect, including the
right of beneficiaries and other members of the public to
request reconsideration of national coverage policy decisions.
The new process will:
establish clear procedures for how national
coverage policy decisions are made;
allow any individual to submit a formal request
for a national coverage decision or reconsideration;
institute timeliness standards and mechanisms for
keeping the public informed about the status of national
coverage issues; and
guarantee beneficiary input through a new Medicare
Coverage Advisory Committee that will hold open meetings and
include consumer as well as industry members.
Medicare's New National Coverage Determination Process
Medicare is committed to having an open, understandable and
predictable process for determining national policy on what
specific services and supplies are covered. The law provides
for coverage of ``reasonable and necessary'' medical services
and supplies in broad categories, such as hospital, nursing
home, and physician care. The Health and Human Services
Secretary has legal authority to specify which services,
procedures, and devices are covered and under what
circumstances.
Medicare claims processing contractors are given discretion
to set local coverage policy in areas where national policy has
not yet been set. However, when Medicare issues national
coverage decisions, they are binding on all Medicare
contractors, Medicare+Choice plans, peer review organizations,
and, in some cases, Administrative Law Judges.
In making these national coverage determinations, we must
strike the appropriate balance between providing timely access
to medical advances and ensuring that new technologies and
treatments are effective and ``reasonable and necessary.'' To
do so, we rely on medical and scientific evidence, including
medical literature and data, discussions with medical experts,
and technology assessments.
We have been working diligently to improve our national
coverage determination process.
Last September, we held a town meeting to hear a
broad spectrum of views on how to improve the Medicare process.
Last December, we published the charter for a new
Medicare Coverage Advisory Committee in accordance with the
Federal Advisory Committee Act.
This month, we are publishing a description of our
new national coverage policy-making process in a Federal
Register notice.
And, later this year, we will publish proposed
criteria for defining when a service or supply is ``reasonable
and necessary'' in a Federal Register Notice of Proposed Rule
Making. We will invite public comment on these proposed
criteria before issuing final criteria.
The revised national coverage policy determination process
will help ensure that beneficiaries, providers, manufacturers,
and other interested public parties are fully informed and can
track the status of any determination under consideration. As
part of this new process, we will publish on the www.hcfa.gov
web site:
a list of coverage issues under review;
the stage of review each issue is in;
the major scientific questions that need to be
resolved prior to a coverage decision; and
an estimate of when the next action will occur.
We also will prepare and maintain a complete and indexed
record of all issues that we review for each national coverage
decision, including a list of all evidence reviewed, all the
major steps taken in the coverage review, and the rationale for
the decisions that were made. A summary of this record also
will be provided on the www.hcfa.gov website.
Requesting Reconsideration
The new process makes clear that any member of the public
may request a review of a national coverage policy
determination at any time. Individuals requesting such a review
need only submit the request in writing, along with new medical
and scientific evidence that merits consideration, or an
analysis of Medicare's decision demonstrating that a material
misinterpretation was made in the evaluation of evidence. We
will, of course, regularly review new medical and scientific
information ourselves to modify national coverage policy on our
own initiative when appropriate.
The new national coverage process generally requires us to
issue a response to a request for a review of a national
coverage determination within 90 days. The request can be
referred either to:
the new Medicare Coverage Advisory Committee; or
an independent technology assessment body, such as
those that contract with the Agency for Health Care Policy and
Research.
Otherwise, we will generally notify the requester within
those 90 days that:
national coverage is warranted and will be
granted;
national coverage is not warranted and will not be
granted;
national coverage is warranted, but only under
certain limitations;
coverage will be left to local contractor
discretion;
the request duplicates and will therefore be
combined with another pending request; or
the request duplicates an earlier request for
which a decision has already been rendered and available
evidence does not warrant reconsideration.
Public input into national coverage policy determinations
and reconsiderations is also fostered through the new Medicare
Coverage Advisory Committee and its meetings that will be open
to the public. The committee will have 120 members and include
nationally recognized experts in a broad range of medical,
scientific and professional disciplines, as well as consumer
and industry representatives. They will be divided into small
panels focused on particular issues to review and evaluate
medical literature, technology assessments, and other data on
the effectiveness and appropriateness of medical items and
services. Based on the evidence reviewed, the committee will
advise and make recommendations to Medicare. We have already
received more than 400 nominations for advisory committee
members, and expect it to begin meeting later this year.
APPEALS PROCESSES
Medicare beneficiaries, physicians, and suppliers have extensive
rights to appeal individual coverage determinations made by Medicare
fee-for-service claims processing contractors or Medicare+Choice health
plans. Where there is no national policy, beneficiaries and providers
may appeal local claims processing contractor and health plan policy.
Where there is national policy, they may appeal how contractors and
health plans apply that policy to individual cases. As mentioned above,
we are working to make sure beneficiaries know about these rights, to
improve oversight of Medicare+Choice plan appeals processes, and to
improve the timeliness and consistency of Administrative Law Judge
decisions.
Beneficiaries are notified of their appeal rights annually in the
Medicare & You handbook, on Medicare Summary Notices and Explanations
of Medicare Benefits, in the new standardized Summary of Benefits that
we will require Medicare+Choice plans to issue this fall, and on every
denial of service notice issued by a Medicare+Choice plan or claims
processing contractor. The National Medicare Education Program we
piloted last year also includes several ways for beneficiaries to
obtain more detailed information about appeal rights, including a toll-
free phone line and counselors at State Health Insurance Assistance
Programs and many other organizations.
Medicare+Choice Appeals
Appeal rights are important in both managed care and fee-
for-service. However, managed care appeals are perhaps more
critical to beneficiaries because denials generally come
before, rather than after, care is delivered. Beneficiaries
must be confident that managed care incentives to reduce
unnecessary care will not be allowed to deny them appropriate
care.
The Clinton Administration has made appeal rights for
Medicare+Choice beneficiaries among the strongest for any
managed care enrollees in the country. Since June 1998, plans
have been required to:
respond within 72 hours on appeals of care denials
that could jeopardize life, health, or ability to regain
maximum function;
respond within 14 days for initial decisions on
all other appeals of service denials, and within 30 days for
reconsiderations of appeals;
state the reasons for a denial in writing;
use denial notice forms that describe beneficiary
appeal rights;
accept oral requests for expedited appeals;
follow up verbal notifications in writing within
two working days;
grant automatically all physician requests for
expedited appeals; and
maintain logs and periodically report on requests
for expedited appeals.
Since the federal government is the largest purchaser of
managed care, our expedited appeals regulation for urgent care
cases sets a new, higher standard for the entire managed care
industry.
All appeals rejected by plans are automatically forwarded
to our independent appeals contractor for independent review,
with no monetary threshold or other barrier. This independent
contractor, currently the Center for Health Dispute Resolution,
is also required to act on expedited appeals within 72 hours,
and within 14 days for all other service denials.
Beneficiaries have up to 60 days to appeal an independent
review contractor's decision involving at least $100 to Social
Security Administration Administrative Law Judges. There is no
time limit on Social Security Administration Administrative Law
Judge actions. Beneficiaries have up to 60 days to request a
review of Social Security Administration Administrative Law
Judge decisions by the Health and Human Services Departmental
Appeals Board. Finally, beneficiaries have up to 60 days after
a Departmental Appeals Board decision to request federal
district court review for cases involving at least $1000.
Our beneficiary research tells us that the vast majority of
beneficiaries are satisfied with the care Medicare+Choice plans
provide and have never filed appeals. Until now we have not
gathered statistics on appeals at the plan level. We do know
now that in 1998, with more than six million beneficiaries in
managed care plans, our independent appeals contractor reviewed
14,745 cases. Of these, 22 percent were decided in the
beneficiary's favor. We recognize that the appeals process will
become more important in the future when beneficiaries, under
the Balanced Budget Act, are no longer allowed to disenroll
from plans on a monthly basis.
We are now requiring plans to collect data and, as of
January 1, 2000, report to beneficiaries upon request the
number of appeals filed, the number decided in beneficiaries'
favor, and the timeliness of the process. We will be collecting
this and other appeals data ourselves, including:
how many cases are resolved at the plan level;
the average and maximum length of time each plan
takes to resolve appeals;
the percentage of plan rulings that occur within
the mandated time frames.
This and the other information we will collect will help
us:
better monitor plan performance;
motivate plans to improve responsiveness;
determine whether any changes might be needed to
improve the system;
understand the types of services being appealed;
ensure that beneficiaries have full access to and
understanding of their appeal rights; and
target specific groups who may need additional
assistance in understanding appeal rights.
We are surveying beneficiaries who have disenrolled from a
Medicare+Choice plan to better understand the extent to which
care denials and improper appeals procedures may be involved in
decisions to disenroll from plans. We should have our first
report of the findings by mid-2000. We also are testing a
process whereby beneficiaries can request a disenrollment form
via Medicare's toll-free help line, 1-800-MEDICARE (1-800-633-
4227), and this will also allow us to ask beneficiaries
directly why they are leaving a plan at the time they are
leaving. This should provide another helpful way to monitor
potential problems with plan appeals information.
We will sample denied claims for further review to ensure
that plans are implementing their internal processes in the
required manner. Our June 1998 Medicare+Choice regulation makes
explicit that plans themselves are ultimately accountable for
their appeals processes, regardless of whether they are handled
by a subcontractor. And we are considering regulations to
establish a standard procedure for handling grievances
(complaints involving issues other than denials of service or
payment) to ensure consistency among all Medicare+Choice plans.
Other efforts to improve Medicare+Choice appeals protections
include:
consumer testing model language for appeals and
care denial forms that we will require Medicare+Choice plans to
use once we are sure it is clear and helpful to beneficiaries;
and
revising our protocol for monitoring plans to
specifically address whether a plan and its provider groups
handle appeals as required.
Fee-for-Service Appeals
Medicare beneficiaries enjoy strong appeal rights in the
traditional, fee-for-service program, as well. Most fee-for-
service appeals are filed by physicians and suppliers, rather
than beneficiaries, over denial of payment after care has been
rendered. Physicians and other Part B suppliers have the same
right to appeal as beneficiaries if they accept what Medicare
pays as payment in full without billing the beneficiary for
more than the standard 20 percent coinsurance. Other Part B
physicians and suppliers may appeal payment denials based on
lack of medical necessity if they are required by statute to
make a refund to the beneficiary. Hospitals and other Part A
providers also can appeal denials based on medical necessity.
Beneficiaries can file an appeal within 60 days of
receiving notice that payment for a claim is being denied. The
law requires that our claims processing contractors complete 75
percent of such appeals within 60 days, and 90 percent within
90 days. The average contractor processing time in 1998 was
52.9 days.
Part A disputes can be appealed further to Social Security
Administration Administrative Law Judges, where there are no
time limits for decisions and where delays are occurring. These
appeals must be requested within 60 days of receiving a
contractor appeal decision, and must be for claims totaling at
least $100. The average processing time for these requests in
1998 was 310 days. Social Security Administration
Administrative Law Judge decisions can be appealed within 60
days to the Health and Human Services Departmental Appeals
Board. The Departmental Appeals Board can turn down appeals
requests, and it can also choose to review cases on its own
without a beneficiary or provider request. Health and Human
Services Appeals Council decisions involving at least $1000 can
be appealed within 60 days in federal district court.
Also under Part A, Medicare beneficiaries have special
appeal rights when a hospital discharges them from an inpatient
stay against physicians' advise. Such cases are reviewed by
Medicare's Peer Review Organizations to make sure incentives in
the prospective payment system for shorter hospital stays do
not result in beneficiaries being discharged too soon.
Part A providers can appeal reimbursement decisions based
on cost reports to Medicare's Provider Reimbursement Review
Board. The board's decisions can be appealed to the Health Care
Financing Administrator, and those decisions can be appealed in
court.
Beneficiaries and Part B physicians and suppliers can file
appeals within six months of receiving notice that payment for
a claim is being denied. The law requires that our claims
processing contractors complete 95 percent of these initial
reviews within 45 days. The average contractor processing time
in 1998 was 33 days.
Part B disputes for claims totaling at least $100 can be
appealed further within six months to claims processing
contractors' in-house Hearing Officers, who must complete 90
percent of hearings within 120 days. These requests, on
average, took 116 days in 1998. Part B disputes of at least
$100 for home health claims and $500 for all other Part B
claims can be appealed further within 60 days to Social
Security Administration Administrative Law Judges, where there
are no statutory time frames for decisions. It took these
judges, on average 524 days to issue decisions for cases
decided in 1998. Again, Social Security Administration
Administrative Law Judge decisions can be appealed within 60
days to the Health and Human Services Departmental Appeals
Board. The Departmental Appeals Board can turn down a case or
take one on its own, and decisions involving at least $1000 can
be appealed within 60 days in the courts.
Improving Administrative Law Judge Appeals
We have been working with our colleagues at the Social
Security Administration to improve the timeliness and
consistency of its Administrative Law Judge reviews of Medicare
appeals. As mentioned above, Part A Administrative Law Judge
appeals average 301 days and Part B appeals average 524 days.
One reason for these lengthy time frames is that the judges
tend to be far more expert in Social Security rules than in
Medicare regulations. In fact, only about 5 percent of their
caseload involves Medicare disputes. Furthermore, the judges
are not bound by Medicare claims processing contractors' local
coverage policy or local policy manuals, though they are bound
by Medicare law, regulations, rulings, and national policy.
Efforts to improve the process include:
working with the Social Security Administration to
provide special training to 30 judges who will handle the most
complicated Medicare Part B cases;
working to educate judges about how Medicare local
policy is created and the underlying reasons for the policy;
and
working with our contractors to make sure that
case files forwarded to Social Security Administration
Administrative Law Judges are complete and comprehensive.
We are also performing an analysis of the Administrative
Law Judge process and will continue discussions with the Social
Security Administration about future steps that may be taken.
Fiscal 2000 Budget Request
The Administration's highly successful efforts to crack
down on Medicare fraud, waste, and abuse have increased the
total number of fee-for-service payment denials, and thus
increased the total number of payment denial appeals. Also, use
of sophisticated statistical sampling in these efforts has lead
to cases involving larger numbers of claims and more complex
issues. That is why the President's fiscal 2000 budget
increases funding for Medicare appeals by $10 million. We look
forward to working with you to secure this necessary funding.
CONCLUSION
We are working diligently to ensure that our national
coverage policy determination process is open, accountable, and
explicit. We are also working to ensure that the appeals rights
we provide are strong and the processes fair and efficient.
Medicare beneficiaries' and providers' appeal rights are among
the strongest in the nation, and we are committed to ensuring
that they understand how to exercise these rights. We are also
actively engaged with our Social Security Administration
colleagues to improve the timeliness and consistency of the
Administrative Law Judge level of our appeals processes. We
appreciate your interest in these issues, and look forward to
working with you as we monitor and continue to refine our
coverage and appeals processes. I'd be happy to answer any
questions you might have.
Chairman Thomas. Thank you very much. I am tempted to ask
you if the scheduling of this hearing was useful for HCFA to
get the notice out of the Office of Management and Budget, but
that probably would not be fair to you. So, was this hearing
useful? [Laughter.]
Mr. Hash. I am definitely used to that kind of question,
Mr. Chairman. As we wrote to you in January, Administrator
DeParle indicated that we would be publishing this process, our
administrative procedures, in early spring, and we are happy to
have met that self-imposed deadline.
Chairman Thomas. Then I guess--I just wish--I should have
scheduled it in March and could have asked you the same
question.
One of the questions that I need to ask you even with this
revised model is that the current way we do this, obviously,
under both A and B is kind of premised on the model that you
get a service and then you seek reimbursement, and then if you
get turned down, it is after the fact. One, the ideal model
would be able to get an answer in advance or at least shorten
the timeline, and in the Medicare+Choice plans you have an
expedited appeal process, and in your rethinking of the
coverage in appeals process, did you move the fee-for-service
closer to the expedited process for managed care? If you did,
is it the same? And if you didn't, what was the rationale for
retaining do first, seek reinforcement second?
Mr. Hash. In the context of the fee-for-service side of
Medicare, Mr. Chairman, we process, on average, about 800
million claims a year. So, I know you appreciate that it
wouldn't be feasible for us in each and every claim to give an
answer in advance of the provision of the service whether or
not a particular service for a particular beneficiary will be
covered. What we do, however, is provide timely notice of the
timeframe in which we must pay our claims in accordance with
statutory ceilings that ensure providers are paid on a timely
basis. If we don't pay a claim, we have to give a decision that
we are not covering it and give the provider or beneficiary an
opportunity to appeal that.
With respect to your specific question about have we
adjusted any timeframes in the fee-for-service appeals process,
those are for the most part, as I understand, Mr. Chairman, are
prescribed in statute, and we have not adjusted them. In the
case of Medicare+Choice, the statutory provisions on appeals
were implemented by regulation June 26, 1998.
Chairman Thomas. Notwithstanding their being in statute,
there are a number of things that the administrator and
Secretary have suggested to me that need to be changed in
statute. Was there a consideration of presenting to this
Subcommittee some concern about those timeliness whether they
are in statute or not since if we are going to have be doing
some legislative changes in a number of areas, we can do those
just as easily; the May 1 date on the Medicare+Choice being an
example. If we are going to have to legislate, we can legislate
timelines.
Mr. Hash. On the first part, Mr. Chairman, the fee-for-
service side of the appeals process, what we have been
concentrating on is increasing the timeliness of the
administrative law judge review of the appeals. They are too
long, and that is why we have put additional resources into the
administrative law judge group; that we have begun dedicating
30 of them to Medicare appeals, and we have requested
additional money in order to speed the process of the appeals
on that side. We would be happy to work with you with regard to
further consideration of legislative changes on the appeals
side, but we wanted to take the first steps in those areas in
which we had discretion.
Chairman Thomas. Dr. Kang, I made a statement in my opening
statement, and I want to see if you either support it or would
make an adjustment that would reflect the reality more closely.
In terms of the number of the decisions made between national
and local--and I have been given the figure of about 90 percent
are made locally? Is that accurate or close enough?
Dr. Kang. It is close enough.
Chairman Thomas. Close enough for government work. Is it,
therefore, the quality of the decisions, the scope of the
decisions? You, obviously, in rethinking the whole appeals
procedure--because your previous procedure was in violation of
Federal statute--had an opportunity to review whether or not we
wanted to involve local decisions, and my assumption is, based
on what I have read in the note, is that you have declined to
create a structure fundamentally different than the one that
was there. What was the rationale?
Dr. Kang. Mr. Chairman, the concept of the Medicare Program
when it was created some 30-odd years ago was to recognize that
the practice of medicine is local and that there is tremendous
local variation about practice parameters and styles. I
actually think that is a very important part of the program to
preserve. So, we chose to try to improve the national process
first and make it open, accessible, and understandable. I do
think that you ask a very important question about what are the
implications for the local process, and that will be something
that we will be considering and glad to work with you on.
Chairman Thomas. So, I guess, then, that you probably
disagree with Jack Wennberg at Dartmouth University in terms of
the variation in regional medical practice is almost always
based on undesirable aspects of the practice of medicine
instead of quality medicine delivered in different ways. My
concern is that the statement that you just made is probably
the single strongest reinforcement of overutilization or poor
practice of medicine being perpetuated, because we can't move
toward a degree of commonality. I can't believe that the
variety of differences define ``good medicine'' automatically.
Mr. McDermott. Mr. Chairman, could you ask the witnesses to
give us an example of what is made at a national level and what
is made at a local level--maybe everybody knows, but I am not
really sure--so, we get a feeling for what 10 percent and 90
percent really means?
Chairman Thomas. I will do that. Would you answer my
question, because my friend from California wants to get in on
this one as well? So, I will go north geographically.
Dr. Kang. I actually agree very much with what Dr. Wennberg
has to say. It is not by accident that the coverage policies
are in the Office of Clinical Standards and Quality. I think
that there are places, in fact, where local variation is not
correct, and it represents either under or overutilization.
That is where we, quite frankly, should be nationalizing our
policies, and that is the purpose of the process that we are
creating.
Chairman Thomas. Can you give us, then, an example, as in
part answer to my friend from Washington, what it was that was
national and local and what you have now decided to change?
Dr. Kang. As an example, let us take prostate surgery.
There is no doubt that prostate surgery should be covered, and
so that would be a national decision as a matter of policy.
Chairman Thomas. ``Should be'' means that it is not now or
it is?
Dr. Kang. No, I am just saying it is now----
Chairman Thomas. OK, it is. If we are going to get
clarification, ``should'' would be a term that wouldn't be real
clear.
Dr. Kang. It is covered.
Chairman Thomas. It is covered.
Dr. Kang. The question is----
Chairman Thomas. Procedures.
Dr. Kang [continuing]. The procedures. The question, then,
would be what stage of disease would be the appropriate place
where you should do prostate surgery versus chemotherapy versus
whatever? To the extent that science does not agree, that is
left up to local discretion, and there is variation. Some of
that variation is healthy variation, because this is how
medical technology can change and diffuse and advance.
Chairman Thomas. But over time, usually, there develops a
consensus position.
Dr. Kang. And, at which point, then, we would end up with,
for example, a noncoverage decision for prostate surgery for
stage 4 disease, and so that would be--and that is when----
Chairman Thomas. And that would be a national policy?
Dr. Kang. And that would be a national policy.
Chairman Thomas. And that is not appealable?
Dr. Kang. And that would be not appealable, because the
variation would not be acceptable, because the medical science
has agreed that that should not be.
Chairman Thomas. Well, and that will lead us to another
direction in terms of the nonappealability of that national
decision, because if you are going to lay your evidence out,
there are ways that you need to lay it. That is not enough of
an example for you in terms of national versus local? Give us
an example today of another area if you will; jump to some area
in which there is local decision--the 90/10. Give us a
representative example of the 90-, and a representative example
of the 10-percent decisionmaking structure.
Dr. Kang. I am not sure I understand the question.
Chairman Thomas. If 90 percent are made local, give me
three examples of the most often made local decisions which
would, therefore, be appealable?
Dr. Kang. Many of the local decisions regard the uses of
devices and durable medical equipment as such, and this is
particularly important because there is actually very little
evidence that supports the reasonable and necessary criteria
for national decisions.
Chairman Thomas. But could you wind up with that local
decision being yes in one area and no in another.
Dr. Kang. That is true, and then when presumably when it is
yes in one area at some point evidence is being gathered that
this actually is a very good thing to be covering which then
allows us to move toward a national coverage.
Chairman Thomas. And let us say someone appeals and then
when they go all the way up through the structure and the
administrative law judge says ``No, you are right,'' and they
go back to the local level and they still can't get approval,
which will be a testimony coming up on a later panel. How do
you get the carrier to follow the appeals process decision if
it is different than the decision that they made? What do you
do? The carrier choose not to follow it.
Mr. Hash. The carrier, I believe, would be, Mr. Chairman,
required to comply if an administrative law judge made a
decision on a case that was adjudicated before it. The decision
of that case would be binding on the carrier.
Chairman Thomas. OK. So, legally, you believe it is
binding. OK.
Mr. Hash. Now, I might say, Mr. Chairman, if I may, you
indicated that if we made a national coverage decision, it
would not be appealable. I just want to underscore the fact
that the process that is on display today at the Federal
Register is a process that accounts for an opportunity for
reconsideration of any national coverage decision by any party
who wants to move it on the basis of new evidence or a material
misinterpretation of the evidence on which the coverage
decision was made.
Chairman Thomas. And if it was a decision on the Medicare
Coverage Advisory Commission, MCAC--what are you going to be
calling this?
Dr. Kang. Medicare Coverage Advisory Committee.
Chairman Thomas. Well, you are going to shorten at some
point so no one will know what you are talking about unless
they know the jargon. What is it going to be?
Mr. Hash. We are interested in clarifying our
communications, and I think in this case, it doesn't lend
itself to an acronym.
Chairman Thomas. Good, because I heard some earlier ones,
and it just wasn't attractive. Can you appeal from the decision
there?
Mr. Hash. That is an advisory body. It does not make final
decisions; it recommends to the Health Care Financing
Administration based on the evidence and judgment that expert
clinicians bring to bear and consumer input.
Chairman Thomas. And if the decision is disagreed by, say,
consumers and or practitioners?
Mr. Hash. Then if we make a decision that is contrary to
the advice of the advisory committee, then someone could move
to reconsider----
Chairman Thomas. What happens if someone disagrees with the
advice of the advisory committee?
Mr. Hash. I am saying we can make a decision that does not
agree with the recommendation of the advisory committee,
because it is advisory. The advisory committee does not make
Medicare coverage policy.
Chairman Thomas. And what happens if you accept that
decision----
Mr. Hash. If we accept this----
Chairman Thomas [continuing]. And people want to----
Mr. Hash [continuing]. And people want to disagree with it
and ask us to reconsider it, there is a procedure for doing
that.
Chairman Thomas. And they have been there once already, and
you have decided to make your decision. I guess it is not real
comforting to say that you get to run it back through the
process again. There used to be a joke about apple juice and
people would look at it and say it needs to be run through
again. I am just wondering if that isn't similar in terms of--
--
Mr. Hash. No, I think what we are trying to make here, Mr.
Chairman, is a very good faith effort that says that if there
is new evidence that we have not considered; if there was a
mistake and an omission in our review of the existing evidence,
then we are bound to review it and reconsider it.
Chairman Thomas. Yes, I will let my friend get in on this,
but I will tell you one of the more frustrating things is that
in a number of areas, what I find is that people believe that
the data, the information, the resources that you utilize to
make a decision are either incomplete, both in terms of a full
picture, or the methodology for collecting the data was flawed,
and I have now seen enough reversals in enough areas that I am
beginning to believe that there are some real problems there,
and I am just not as comfortable--although I have been through
it only once; I am going to go through it a couple of more
times--that we have resolved that problem with the structure
that you have offered. Do you want to get into this, Mr. Stark?
Mr. Stark. I am concerned by a couple of things that have
been said. Dr. Kang suggested we have to preserve local
autonomy or differences. My sense is, Doctor, that we would be
better off the sooner we can collect enough outcomes research
to know with some scientific measure. Do you agree with that?
Mr. Hash. I do, we do.
Mr. Stark. OK, so then you would like to--then local
traditions and customs could go the way--OK. Second, you guys
have got 30 or 40 people to do all of these coverage policy
decisions, and the FDA maybe has 4,000. Why not let FDA decide
these things?
Mr. Hash. Mr. Chairman--I mean, Mr. Stark, that is----
Mr. Stark. Say that again, I like to hear that. [Laughter.]
Mr. Hash [continuing]. That is an excellent question----
Chairman Thomas. I don't mind how often you say it.
[Laughter.]
Mr. Hash [continuing]. That is an excellent question. I
think it is important to draw a distinction between what the
role of the FDA is and what the role of a payer or an insurer
like Medicare is. In the case of the former, the FDA, they are
making decisions about safety and efficacy of products or
procedures as to whether they can be available at all in the
American marketplace. That is a very different set of
responsibilities than what we have. Once something has been
determined to be safe and efficacious by the FDA, then it is a
question for us to determine that it is reasonable and
necessary for a given Medicare patient that such a device or
such a service should be covered.
Mr. Stark. But--stop right there.
Mr. Hash. Yes.
Mr. Stark. But I presume that function has two facets: one,
will it make them feel better or get well, and, two, at some
kind of cost that we can afford.
Mr. Hash. The first question----
Mr. Stark. Is that correct?
Mr. Hash. Yes, it would be.
Mr. Stark. Then it seems to me that the staff or the
structure of the FDA is eminently qualified to make that first
decision. They have already decided that it is safe or that it
ain't going to kill you or make you grow a third thumb. One
would suppose that the same people with the scientific and
medical training to make that decision would be able to take
the next step and say ``We know it is safe, and, further, we
know from our tests that--at least in the short run unless the
tests have been very long--that it improves the quality of
life, or it improves recovery, or whatever it improves. Why
HCFA should have to reinvent that or rehash that escapes me,
and such cooperation simplifies the process. Then you get down
to the question of cost which is a much simpler determination.
That is made by CPAs and MBAs, and you let those people who
have the skills and the training in the medical side do it.
I am not trying to just build a case for the FDA, but it
seems that we may be reinventing the wheel here. I am going to
go up and testify in a little while--and I think I may be the
only one there at appropriations asking to get some more money
for HCFA--but I don't think you are going to get any. I have
been advised that by some of my distinguished colleagues from
the other side of the aisle. So, I am going to go up and go
through the motions, but don't bet the farm on how much money I
am going to bring back for you.
Mr. Hash. We wish you well, Mr. Stark.
Mr. Stark. Yes, thanks. I am concerned that you may be
building an unnecessary bureaucracy here in making medical
decisions when really I look at Medicare as a bill-paying
operation and not as a determinant factor in what kind of
medical procedures are useful. That is my worry. We could do it
faster, and, besides which, you don't have the people to do it
anyway, it seems to me.
Dr. Kang. If I may, first of all, I just want to say at the
outset, we are not interested in duplicating what FDA does and
to the extent that information is generated in their processes
that help us make our coverage decisions, we will use every
single piece of information. There is an important difference,
though, in terms from a medical science standpoint of what FDA
does versus what we need to do as an insurer. FDA looks at the
safety, we do care about that. If they judge it safe, we will
say it is safe. They care also about what is called efficacy,
which means does the product or device do what it says it does?
What we care about as a payer, though, is whether it is going
to improve the ultimate outcome for the beneficiary, that is
one issue. The second is does it do a better job than what we
are currently covering? As a steward of the Medicare Program,
if it does not do a better job of things than what we are
currently covering, I think I would be back here next year
explaining why. That is an issue that the FDA, in its trials,
does not really look at. It only looks at the device or
technology from its individual perspective.
Mr. Stark. All right, but, on a marginal cost basis,
Doctor, isn't it easier for FDA to expand their tests? They
have already got the personnel with the scientific and
technical training to make that next step. Why not ask them,
contract out to them--you guys contract out 90 percent of what
you do anyway--why not contract out to FDA and say, ``Hey, next
time you do this, go the next step, and give us a comparison,''
which is often done by the New England Journal of Medicine? I
suppose you could take them, but they are not a governmental
agency. Or, you could even choose the specialty groups. I have
no quarrel with that, if the American college of whatever they
are decide that they, in their wisdom, make this decision,
maybe HCFA could take that.
I am just saying that I don't think you have got nearly the
personnel to do it, and I don't think there is much realistic
chance that we are going to give you the money to do it.
Therefore, how about using resources that might be available?
Mr. Hash. Well, let me just respond quickly, Mr. Stark, by
saying I think we would be open to discussing ways of getting
the job done. I do want to go back to a point that you made
which was you kind of look at us as a bill-paying organization.
We actually see ourselves as having a much broader role. In
addition to our fiduciary responsibilities, we are responsible,
under the statute, for many standards of quality in the health
care delivery system on behalf of our beneficiaries. So, our
responsibilities encompass much more than just paying
correctly. It is making sure that we are paying providers who
meet appropriate standards; that, in fact, we are meeting our
responsibilities as a quality purchaser as well as a----
Mr. Stark. Well, now wait a minute. Mike, you mean, deeming
JCAHO is discharging a responsibility? To let Columbia Hospital
who is on the JCAHO Board decide whether Columbia Hospital is
providing quality care. You are going to look at me with a
straight face and say you are doing anything to protect the
health of the beneficiaries? You subcontract that out to very
suspect people, I might add, in many cases. So----
Mr. Hash. Under the statute, as you know, Mr. Stark, we are
required to utilize the services of those agencies. But where
we have discretion, we have been imposing our standards
directly.
Chairman Thomas. Thank the gentleman; that was from a
friend. [Laughter.]
Does the gentlewoman from Connecticut, also a friend, wish
to inquire?
Mrs. Johnson of Connecticut. Breathtaking. [Laughter.]
Breathtaking hypocrisy. I am simply--I am also speechless
but not quite. [Laughter.]
I don't know whether to cry in frustration or demonstrate
in rage, but I can tell you if I were a senior citizen in this
country, I would be out there demonstrating, and I don't know
why people aren't. The Department of Labor just issued a
proposed regulation: all private plans, fee-for-service or
managed care, 15-days appeals process.
The administration, with much fanfare, much fanfare--I
mean, that is probably what galls me here is the hypocrisy--
much fanfare announced that the recommendation of their Quality
Commission had been implemented in every Federal program, and
the Congresswomens' Caucus held a hearing, and I was one of the
Chairs, and we heard testimony from everybody saying, ``Oh,
yes, we have implemented all those appeals processes.'' And
then in preparation for this hearing, to learn that under part
A administrative law judge appeals average 301 days; part B
appeals average 425 days. This is not justice; it doesn't
reflect what has been said, I know not by you guys, and it is
hard, because I know you are out there trying to fix things,
and you are slugging through the details.
What do you think the private sector is doing? Don't you
think the private sector is struggling with how to improve
outcomes? Whether something should be covered because it is
quality or not quality? Of course they are. They are struggling
with costs and quality too, but the shear, breathtaking
hypocrisy of what this administration has said in the last few
years about the appeals process and they are providing under
Medicare and then what we learn in preparation for this hearing
blows my mind. And I hope everybody here hears it, because, by
gum, Medicare has got to change.
But my question to you goes to the overturn rate. Now, one
of the big discussions we had in the patient bill of rights and
one of the things I accomplished in the Republican proposal was
that the overturn rate of appeals ought to be right out there
on the first page--big, bold--any plan ought to be accountable
for its overturn rate.
Last year, the administrative law judge reversed 50 percent
of the part B decisions and 72 percent of the part A decisions,
the fiscal intermediary decisions. I mean, that is appalling;
that is really appalling. Any private plan out there would be
so blasted, they wouldn't have anyone sign up for 100 years. I
really think, with all due respect, and I understand that you
are working on this, and I am glad you are making progress, but
I think everybody on the other side of the government who has
gotten out there and pretended that Medicare recipients are
well protected; that they have any voice at all, actually, in
challenging whether a care decision is fair or not fair or
appropriate or not appropriate--I will tell you, preparing for
this hearing has blown away any belief I ever had that seniors
had any voice or any protection when they think that they have
been disadvantaged.
So, I would just like you to direct your attention--you
can't satisfy all my outrage, because it goes back to
statements made by the President, by the Secretary of Health
and Human Services, by other leading people taking
responsibility for accomplishing things they clearly did not
accomplish and castigating people like me for not being tough
enough. I thought 60 days wasn't tough enough, and you guys are
up there in the hundreds and hundreds and hundreds of days. So,
I want you to address yourself not to my rage about the fact
that there has been no system there and that seniors have had
no voice but to how you explain the overturn rate and what you
are going to do about it?
Mr. Hash. I would be happy to, Mrs. Johnson. The overturn
rate, I think, is largely a function--it goes back to what we
were talking about earlier--of local medical review policies
being about 90 percent of coverage and 10 percent national
coverage policy under Medicare. The administrative law judges--
and this is not well understood--are not bound by local medical
review policies. So, they may, in effect, establish Medicare
policy, not make a judgment about whether existing policy has
been applied appropriately. That means they have the discretion
that other reviewers do not have who are bound by local and
national Medicare coverage policies. The decisions that are
made by our contractors before cases go to administrative law
judges are limited to the local review policies. When they get
to the administrative law judge level, there is no such
limitation.
And, last, in terms of the backlog, which is outrageous--
and I share your concern about it, and it does not give people
timely results in the appeals process; no argument about that--
that is why in our testimony today we have been talking about
the steps we have been taking with the Social Security
Administration to make sure that we have an adequate cadre of
administrative law judges which are at SSA and that they have
been trained in the Medicare Program and understand our
policies, and we have asked for additional money in order to
support a larger ALJ process. That it is, I think----
Mrs. Johnson of Connecticut. I will just say, given the
statistics, I don't think your recommendations are adequate.
This is a system that doesn't communicate with itself, and,
therefore, cannot deliver on timely or fair decisions and makes
decisions that are apparently being made at the local level
look like fraud. So, there was a lot of analogies throughout
this system, but either your policies are real or they aren't,
and they either have standing or they don't. So, I think you
have to go a lot further if you are going to end up with some
statistics that are decent, that are respectful, and that give
our seniors confidence in the system. Thank you. Thank you, Mr.
Chairman.
Chairman Thomas. Thank the gentlewoman. Does the gentleman
from Washington wish to inquire?
Mr. McDermott. Mr. Chairman, I sometimes have been critical
of the process here, but I really think your having this
hearing on one of the toughest issues--is really very
important, and I think that----
Chairman Thomas. Well, just let me tell the gentleman that
I am pleased that at least the notice came out the same day of
the hearing so that we have in front of us what HCFA proposes
instead of speculation on what it is. So, in that sense, it
might be even more useful than I had anticipated, because I was
trying--so at least we have real product, and that will be
useful.
Mr. McDermott. I think that, with all due respect to some
of the criticism here, I was a claims examiner for three or
four health and welfare trusts for a labor union, so I have sat
and struggled with the problems, so I have a little bit more
hands on experience, perhaps, than some, and I think that
before we get too hard on the people sitting out here, I think
we have to look at the budget which freezes HCFA's
administrative budget for the next 10 years. I think if we are
going to deal with these, we have to at least put that in the
mix.
But let me just give you an example, because I would like
to hear how you deal with this. I had a colleague who retired
from the Foreign Service and went into the Blue Cross Blue
Shield of Washington, DC. His wife had uterine cancer and, long
story short, a stem cell transplant was recommended, and they
denied it. So, he called me and he was an oncologist and so
knew what was what. I made calls, got put on hold, finally had
to use my congressional title to get to somebody who would tell
me that there was a committee, that they couldn't tell me when
it met, of professionals from all over the country who made
this kind of decision. I discovered that when he left
Washington, DC, if he had transferred to Blue Cross Blue Shield
of Washington in Alaska, the treatment would have been covered.
So, even in the BlueCross system there are these problems.
So, what I would like to understand is when one of these
issues comes, how does it get dealt with so that you don't
have--I mean, maybe the local issues are always going to be
there--but how does the national policy get set? How do you
take--I don't know what it is, stem cell transplant, because it
is sort of cutting edge with bone marrow transplant these days;
you are getting it everywhere. You had a big case in
California, and these cases are all over the place. How does
that get dealt with inside?
Dr. Kang. I think that and this takes us back to the
regional premise of the Medicare Program--many new technologies
develop locally. So, for example, with stem cell transplant,
there may be a great center in California.
Mr. McDermott. Or in Seattle.
Dr. Kang. Or in Seattle. So, the local carriers, based on
the local practice of medicine, decide to cover it there. That
then allows some clinical information to be derived which then,
at some point, could lead to a national coverage decision for
the entire country. And this is the balancing act that we are
trying to preserve. That there are places where we do need
national decisions; where the variation is unacceptable, either
under or overutilization. There are places where we want local
flexibility for technologies to be created, developed, and
diffused.
Mr. McDermott. Does the problem, then, develop because
there is a report in the press or something about the use of a
particular treatment that then gets somebody to come in another
area of the country saying, ``Why aren't you doing this?'' And
then it is brought and it is denied, because it is not in local
practice? Is that what----
Dr. Kang. If it comes to our attention and the evidence
exists, we will then cover it at the national level.
Mr. McDermott. But the first denial will occur at the local
level. There will be a whole bunch of denials in some areas if
they are not doing that.
Dr. Kang. The one other thing I should note is that the
beneficiary is covered in the area that the service is
delivered not where the beneficiary lives. So, I should say
that there is some relief here to the extent that if some
beneficiary in New York is really interested, they could go
over to Seattle to get it. That is in the Medicare Program.
Mr. McDermott. And the denials at the local level are of
things that have not filtered--is there a process by which you
say ``We have had enough complaints on this issue; we received
5,000 complaints on X. Let us take it to the national level and
make a decision?'' How do you sort through that at the local
level? It seems to me you could sort through a lot of those
local decisions by having a trigger that would suddenly send it
up to the top where you said ``This is what we are going to
do.''
Dr. Kang. And we are looking into that. That is an issue in
our relationship to the administrative law judges, and I think
there should be a trigger. We are pursuing a kind of a warning
signal where we really need to revisit this at the national
level.
Mr. McDermott. It seems to me you can weed out a lot of
those whatever how many thousand complaints there were that
Mrs. Johnson is worried about, which I worry about. If you have
something pressing and you have got a pain or an ache or
whatever and it takes 301 days to find out whether you can have
the treatment of not, it sounds like the British system of
waiting in line to me.
Mr. Hash. If I may, Mr. McDermott----
Chairman Thomas. Sounds like national health care to me.
Mr. Hash. If I may----
Mr. McDermott. That happens in insurance companies, though,
so let us not throw rocks at each other. Go ahead.
Chairman Thomas. That wasn't a rock.
Mr. Hash. In many cases, in the traditional fee-for-service
Medicare Program, as we have been talking about here, a service
will be, in fact, provided, and then the issue about whether it
is going to be paid for is adjudicated through this process
that may involve an ALJ. But the important issue is that in
many cases the service has already been rendered.
Mr. McDermott. And then who gets stuck with--is it the
provider who gets stuck or the beneficiary who gets stuck?
Mr. Hash. It depends, because in the statute there is a
provision called the limitation on liability and it sets forth
the rules for determining whether or not a provider or a
beneficiary should be held liable for something that turns out
not to be covered. If the provider and the beneficiary did not
have reason to know that something would not be covered, they
are not held liable financially for that. In the case of the
provider, they can be paid, and in the case of the beneficiary,
if they have already paid, they are due a refund.
Mr. McDermott. So, if they have--but if it is denied at--
what happens to the denial? The denial is just wiped out by the
fact they had no reason to know? Or there would be no denial, I
guess.
Mr. Hash. The service has--in the case I was giving you--
already been provided. If there is a denial of payment for it,
there is a limitation on the liability under those
circumstances. That is also the vehicle through which people
are put on notice that a given procedure or service is not
covered, because now there has been notice given that it isn't,
and that is the reason for the limitation on liability
provisions in the statute.
Mr. McDermott. Thank you, Mr. Chairman, for giving me that
extra time.
Chairman Thomas. Thank you. The gentleman from Washington,
as part of our aside, said that ``Well, those kinds of delays
and so on occur in insurance companies as well.'' If an
insurance company--just pick one--say, AETNA consults with the
Advisory Commission, and they come to the conclusion that
something shouldn't be covered, can that decision of
noncoverage be contested in court?
Mr. Hash. I would assume it could be pursued under State
law----
Chairman Thomas. Well, they just got hit with a $120
million judgment because they didn't cover a procedure, and yet
seniors aren't able to appeal or sue HCFA if they disagree with
a national coverage decision. So, I find it somewhat
interesting that someone can wind up going to court, being sued
and lose if they deny a coverage but that process that you are
advocating that we adopt does not even allow a senior to
disagree with a national coverage decision and have a remedy in
terms of going to court.
Mr. Hash. It would, actually, Mr. Chairman. The procedure
that outlined in today's notice does, in fact, provide that any
party, including a beneficiary, would have the opportunity to
ask for reconsideration of the national coverage policy.
Chairman Thomas. I believe I said go to court. Can they go
to court, ultimately?
Mr. Hash. A Medicare beneficiary?
Chairman Thomas. On a decision of the Medicare Advisory
Commission.
Mr. Hash. The Medicare Advisory Commission, Mr. Chairman,
is not a decisionmaking body.
Chairman Thomas. Right, and if HCFA denies it--and if HCFA
denies it?
Mr. Hash. They can request a reconsideration. If that
reconsideration is denied, they also can appeal any denied
claims through the appeals process. The last step in that
process is judicial review.
Chairman Thomas. Does the gentleman from Louisiana wish to
inquire?
Mr. McCrery. Yes. In fact, I want to follow up on the
Chairman's questioning. It is true that if a beneficiary
appeals a decision by a fiscal intermediary and the PRO and so
forth, but then he goes to the ALJ and still doesn't like it,
he can appeal it to HHS, and then if he still doesn't like it,
he can go to district court.
Mr. Hash. Correct.
Mr. McCrery. The U.S. District Court. And what is his
remedy if he wins in district court?
Mr. Hash. Well, the remedy, presumably, would be to restore
the coverage that they had sought and would be awarded to them
as a result of the court order, the court decision.
Mr. McCrery. So, his remedy, if he wins in district court,
after expending all this time and energy going through the
appeals process, is that he gets the benefit. That is the
extent of his remedy?
Mr. Hash. The remedy would be--of course, presumably, the
individual would have already gotten the service--that any
liability they might have would be satisfied by the court
judgment.
Mr. McCrery. What do you mean by a liability?
Mr. Hash. The cost of the care that they sought and
received.
Mr. McCrery. So, the extent of a liability in district
court is the cost of covering the benefit?
Mr. Hash. I understand your question, and I am not really
sure I have the correct answer. I would be happy to answer it
for the record. I am not an attorney and I am not sufficiently
familiar with what the scope of remedies that the U.S. District
Court might----
Mr. McCrery. Well, let me ask it another way. If the
beneficiary prevails in the U.S. District Court, can he receive
in a judgment collateral damages--pain and suffering, mental
anguish, general damages--associated with denial of the
benefit?
Mr. Hash. I would like to answer for the record; I just do
not know, Mr. McCrery.
Mr. McCrery. Is there anyone here from HCFA that knows the
answer to that?
Mr. Hash. I don't think so. I would like to consult with
our general counsel, and I would be happy to provide an answer
for the record.
[The following was subsequently received:]
A beneficiary or a provider is only entitled to payment for
the item or service in question if they receive a favorable
decision at the U.S. District Court level. There is no
statutory provision that authorizes payment for pain and
suffering, general damages, or interest on the amount in
question. In certain circumstances, a beneficiary may be
entitled to reimbursement for certain legal fees under the
Equal Access to Justice Act. The beneficiary would have to meet
the requirements of that statute to qualify.
Chairman Thomas. Will the gentleman yield?
Mr. McCrery. Well, being a lawyer, I can give you my
opinion. My opinion is that you cannot in district court
recover anything other than the cost of the benefit that was
denied which is the current law also for ERISA plans that are
the subject of so-called patient protection bills floating
through the Congress and endorsed by the administration. So,
since the administration seems to want to impose on the private
sector the ability to be sued in not only the U.S. District
Court but in State courts and receive judgments that would
provide damages other than the cost of the benefit. Is the
administration endorsing a change in public policy to allow
Medicare beneficiaries to sue in State or U.S. district courts
for damages as well?
Mr. Hash. Mr. McCrery, the administration's recommendations
are, in so far as I know, consistent with what is in the
statute now for the remedies that Medicare beneficiaries. We
have not proposed a change in remedies for Medicare
beneficiaries that are currently either in regulation or in the
statute.
Mr. McCrery. OK.
Chairman Thomas. On that point, would the gentleman,
without any penalty on his time, yield to me?
Mr. McCrery. Sure.
Chairman Thomas. I am looking at a section of the law which
was put in in OBRA 1986, the Omnibus Budget and Reconciliation
Act of 1986. Mr. Hash, were you up on the Hill in 1986?
Mr. Hash. I was not, Mr. Chairman.
Chairman Thomas. You were not. What I am looking at is a
statement of review of any national coverage determination
under section 1862(a)(1) respecting whether or not a particular
type or class of item or services is covered under this title
shall be subjected to the following limitations: a, such a
determination shall not be reviewed by the administrative law
judge, right?
Mr. Hash. That is a noncovered service, excluded service?
Chairman Thomas. Yes.
Mr. Hash. Right.
Chairman Thomas. Such a determination shall not be held
unlawful or set aside on the grounds that a requirement in
section 553 of title V of the U.S. Code to section 1871 be
relating to publication in the Federal Register notification,
and sort of thing or, c, in any case in which a court
determines that the record is incomplete or otherwise lacks
adequate information to support the validity of the
determination, it shall remand the matter to the Secretary for
additional proceedings to supplement the record, and the court
may not determine that an item or service is covered except
upon the review of the supplemented record.
Do you have any indication of how many cases the court
determines that the record is incomplete or otherwise lacks
adequate information? My assumption is that may even be the
majority of them. Is it rare?
Dr. Kang. I am aware of only one.
Chairman Thomas. Of only one.
Dr. Kang. And we are actively reconsidering it on the basis
of scientific information.
Chairman Thomas. And what year are you into the
reconsideration? This is the second or the third year?
Dr. Kang. This would be--I think we are in the first year.
I can get back a more specific time for the record, but I am
only aware of one.
[The following was subsequently received:]
Approximately 2 years ago, a district court remanded a case
involving electrical stimulation for wound care for further
development of the record. We are examining additional
materials and will supplement the record with our findings.
Chairman Thomas. OK. The gentleman from Louisiana.
Mr. McCrery. Thank you, Mr. Chairman. I only have one other
observation to make and that the gentleman from Washington
pointed out that because of budget constraints, HCFA may not be
able to do as much as they would like to in the area of appeals
and expediting those appeals, and it is good to know the
gentleman recognizes that such processes cost money, and when
we impose those processes on the private sector, we should
recognize that we are passing on a cost to those private sector
entities that they must then pass through to beneficiaries,
their policyholders. So, I thought that was also a good point.
Mrs. Johnson of Connecticut. May I?
Chairman Thomas. It is your option. Your Mr. Nice Guy
record would be at stake, though. The gentlewoman from
Connecticut--I am holding for the gentlewoman from Florida, and
she said she was going to come right back, so----
Mr. McDermott. Mr. Chairman, if I could respond, because I
think this is an issue where we have--this is a public policy
issue that is a very tough one, how you give patients the right
to look at and appeal what has been decided, whether it be by
the Federal Government or by the private industry. And I think
that it is probably equally confusing on both sides and costly
on both sides, but I think that maybe we would do the country a
service if we decided on a universal policy on how you could
appeal applying both to the Federal Government and to the
private sector. I mean, a patient whether they are covered by a
private sector HMO ought to have the same rights as the person
who is covered by the fee-for-service under HCFA, in my view.
Chairman Thomas. Tell the gentleman that was part of my
opening statement in which I found it ironic that you folks
were criticizing our H.R. 4250 in terms of the failure to move
judiciously to the judicial review, and when I began looking at
HCFA, I found out that the morass there was far worse and that
this may be an area that you and I can agree on; I will
reexamine it carefully. [Laughter.]
Mr. McDermott. If I agree with you, you know you must have
missed something.
Chairman Thomas. In which--no, no, because I do not
understand the logic, and, frankly, I apply it to the payment
of bills, late fees, and everything else how government gets to
follow rules that the private sector doesn't get to follow when
it is the individuals desire to make a change. I think if, in
fact, based upon the statement that the gentlewoman from
Connecticut indicated, if we want to impose a 15-day review
process on HCFA, I am all for that, but I don't think that is
what the gentleman meant.
Mr. McDermott. I think the problem or at least what I heard
when you were asking before about the FDA, it is like around
Congress where we have the authorizers who authorize stuff and
then the appropriator has got to find the money to do it. We
authorize a whole bunch of stuff around here that we never do,
and these guys, in my view, are like the appropriators in the
sense that the FDA can authorize something which may have only
minimal value or whatever, but then HCFA has to decide where do
we get the money to pay for it? And that is where we control
how much they can do of all that.
Chairman Thomas. I will tell the gentleman from Washington,
I am even now more concerned, because, as I recall, it was my
colleague from California, Mr. Stark, who was making the FDA
inquiries rather than this gentleman from California.
Mr. McDermott. I am sorry. We would never do that.
Chairman Thomas. Any additional comments? The gentlewoman
from Connecticut.
Mrs. Johnson of Connecticut. Yes, thank you, and I would
like nothing more than to have a consistent, comprehensive
policy for public and private patients. I think the source of
my absolute outrage and my passion of anger is the injustice of
the current system and the shear hypocrisy with which the
political process is dealing with it, and I think we have got
to get beyond that and be honest. There are good reasons why we
don't want to allow your national decisions to be appealed, but
those might be the same good reasons why private sector plans
who also struggle with cost and delivery of service want some
similar protections. We just have to be honest and consistent,
and we aren't, and the politics around Medicare have really
driven the debate to where it is hardly recognizable as related
to reality, and I think this claims process hearing that we are
having now demonstrates that.
But, I just want to ask you one thing: Do your new
regulations make it absolutely clear that HCFA is bound by
administrative law judge decisions?
Mr. Hash. No, ma'am, they do not, because administrative
law judge decisions actually apply to the case that they have
decided and reviewed. They are not applicable to the program at
large. That would be like establishing coverage policy
decisionmaking by administrative law judges.
Mrs. Johnson of Connecticut. Wait a minute, wait a minute
now. We are an agency that took a whole year, but, finally,
they got an administrative law judge decision that HCFA should
allow them to resubmit complaints. We have not been able to get
compliance with that decision. When you go at an agency at
their own expense, goes all that way and time. This is an
agency, as home health agencies are, sinking in the mud of
bankruptcy. We finally get a decision from the administrative
law judge, and there is no requirement in the law for them to
comply by it or else that is the way they act. Now, in your
regulations, does it make it clear that if a HCFA decision is
appealed to an administrative law judge in accordance with your
regulation, that just as the contractor has to comply, HCFA has
to comply?
Mr. Hash. I believe that if a case is decided, a specific
case, when it is decided in favor of the plaintiff by an
administrative law judge, for that plaintiff the decision is
binding.
Mrs. Johnson of Connecticut. Well, we need to have that
very clear in the regulations, because that isn't what is
happening in real life.
Mr. Hash. We need to--I would like to talk to you----
Mrs. Johnson of Connecticut. And I will give you this case,
so that you will see it, because we cannot have citizens going
through this lengthy, costly process and then agencies simply
saying ``No, we are not going to do it,'' and that is what they
said.
Mr. Hash. We need to--I need to look into it. I would be
happy to----
Mrs. Johnson of Connecticut. Thank you. We will contact
you, Mr. Hash. I appreciate that you are trying to reform the
system, thank you.
Mr. Hash. Thank you.
Chairman Thomas. I want to thank you folks very much. I do
appreciate the effort that you have made to correct the fact
you weren't in compliance with the law, and we will review your
offering. Obviously, a number of people will begin reading the
notice, and we will get back to you; I appreciate it. Thank you
very much.
Mr. Hash. Thank you, Mr. Chairman.
[The following questions were submitted by Mr. Ramstad. The
responses of Mr. Hash and Dr. Kang follow:]
1. I greatly appreciate your recognition for the need for
timeframes by including them in the recently published Notice.
Can you tell me, however, what you consider the starting points
for these time frames and approximately how often you expect to
meet them?
A formal request for a national coverage decision must be
in writing and include supporting documentation as spelled out
in the April 27, 1999 Federal Register notice. Acceptance of a
formal request will begin a 90 calendar day clock for us to
respond to the requestor in writing. Our response will also be
posted to the Health Care Financing Administration's (HCFA)
home page on the world wide web. Our written response to a
formal request will include, at a minimum, one of the
following:
A request for supporting documentation if
additional information is needed. We will identify, in writing,
the information that we require to enable us to review the
request. A resubmission of the revised formal request triggers
a new 90 day calendar response clock.
A decision that the request duplicates another
pending request and we will combine the requests and respond
with a single decision.
A decision that the request duplicates an earlier
request for which we have already made a national coverage
decisions (and that there is insufficient new evidence to being
the process again).
A referral for a technology assessment. We will
make every effort to assure that we obtain timely assessments.
A referral to the Medicare Coverage Advisory
Committee for consideration. We will make every effort to
assure that we obtain timely consideration.
A national noncoverage decision (which precludes
contractors from making Medicare payment).
No national coverage decision (which allows for
local contractor discretion).
A national coverage decision with limitations on
coverage.
A national coverage decision without limitations
on coverage.
In general, we expect to meet our self-imposed timeframes.
However, certain circumstances may prevent us from meeting the
timeframes such as the submission of additional information by
the requestor or materially significant information submitted
by others. Any related changes will be formally communicated to
the requestor in writing and posted to the HCFA home page on
the world wide web.
2. Minnesota's Medical Alley has talked to you a great deal
about early collaborative meetings between industry and HCFA at
which a written, mutual agreement may be reached on the
specific information HCFA requires to make a coverage
determination. I noticed they are not included in the Notice,
and I must tell you I am disappointed about the absence of this
reasonable and sensible request.
Currently, stakeholders act upon advice given to them in the
informal early meetings, but HCFA often dismisses the studies
later as falling short of providing the necessary data. For
some coverage decisions, this has led to a continuous circle of
studies and ``not yet'' decisions. I know of a few Minnesota
companies that have experienced this ``run around'' for years.
Is there any assurance this will not continue under the new
process?
We do not believe this will occur. The April 27, 1999
Federal Register notice makes our coverage determination
process open, understandable and predictable. The notice is
explicit on the types of information that must be included in a
formal request for coverage determination. Later this year, we
will complete this process by publishing a proposed rule for
comment on the criteria we use to evaluate whether an item or
service meets the statutory requirement that items or services
be ``reasonable'' and ``necessary.''
Individuals and organizations, however, may still contact
us informally. Informal discussions can include assistance to
the requestor to clarify the amount and kind of information
necessary for a coverage determination. We are drawing a
distinction between the formal and informal requests and, while
we will be as helpful as possible through informal discussions,
only formal requests will generate an official response in the
timeframes established in the April notice.
I have been told that someone at HCFA said the Agency ``doesn't
have the expertise to design the studies.'' If HCFA doesn't
have the expertise to say what studies could or couldn't
provide enough information and to make the final decision, then
does HCFA make the final coverage decisions?
In making national coverage decisions, HCFA decides whether
items and services are reasonable and necessary for the
diagnosis and treatment of illness or injury or to improve the
functioning of a malformed body member. These decisions are
usually based on medical and scientific research and data that
demonstrate whether the item or service is useful for a
particular condition. Currently, many companies hire
consultants who design these scientific studies and HCFA is
often provided a copy of the results of the study. We would be
concerned about any proposal that would give HCFA a role in
designing a scientific study that would appear to guarantee a
particular coverage result without considering intervening
changes in health care science and technology. Further,
participation in a study's design does not guarantee that the
study results will adequately demonstrate that a treatment is
reasonable and necessary.
We do, however, utilize biostaticians and clinical experts
on an as needed basis to help us review medical and clinical
information that is submitted to us to determine whether it
demonstrates that a therapy is reasonable and necessary. In
addition, we will refer formal requests, as needed, to the
Medicare Coverage Advisory Committee to make recommendations to
us about whether services can be considered reasonable and
necessary. The members of the advisory committee will be
selected from among authorities in clinical and administrative
medicine; biologic and physical sciences; public health
administration; health care data and information, management,
and analysis; health care economics; medical ethics; and other
related professions.
The only sensible reason I can understand for your opposition
would be that it is an issue of resources. If it is an issue of
resources, please tell me exactly how it is a resource problem
given the 15-20 national decisions made each year. If you give
me specifics on how many people you need and what particular
jobs the would do, I can try to help.
We anticipate that there will be an increased workload for
HCFA staff who work in the coverage area and we have dedicated
additional resources. We have hired new personnel including a
former FDA executive secretariat who was responsible for
running an advisory committee panel there. If the formal
requests we receive are complete, the staff that we currently
have or are in the process of hiring should be able to handle
the requests according to the timelines outlined in the
coverage notice. However, if a significant percentage of the
formal requests are incomplete, we will face resource
constraints. Incomplete and informal requests place the burden
on the agency to outline what is necessary for the request to
be accepted. We believe, though, that the requirements for the
formal requests established in the notice are clear and should
minimize the number of incomplete requests.
3. Can you explain the legal and practical distinctions between
publication of the coverage process policy as a rule versus
publication as a notice? Is the agency legally bound by the
provisions in the notice?
The Administrative Procedure Act enables (APA) an agency to
issue ``rules of agency organization, procedure, or practice''
without completing notice and comment rulemaking (5 U.S.C.
Sec. 553(b)(3)(A)). The legal effect of these rules, however,
is not identical to legislative rules adopted through notice
and comment rulemaking.
In contrast to legislative rules, rules of agency
organization, procedure, or practice may not impose new
substantive legal requirements. The primary purpose of the
procedural rules exemption in the APA is to ensure that
agencies retain latitude in organizing their internal
operations. Procedural rules express the agency's intended
course of action, but do not conclusively affect the rights of
private parties.
While the agency is expected to follow the procedural rules
it has put in place in order to make decisions--and we
certainly intend to follow the procedures that we have
developed for issuing national coverage decisions--the agency
may amend those procedures without completing the notice and
comment procedures. In addition, the agency is not required to
provide a 30 day delayed effective date as is normally required
for a legislative rule. HCFA will, however, provide advance
public notice before making any changes to the procedures
announced in the April 27, 1999 notice. This practice is
consistent with 5 U.S.C. Sec. 552(a)(1)(C).
4. How will you consider, respond to, and incorporate public
comment on that notice? Do you intend to meet further on the
notice with stakeholders and modify the notice to reflect
relevant information learned in comments from such meetings?
We welcome comments from the public on the processes
spelled out in the notice. Comments may be submitted to us in
writing or via the HCFA homepage. The appropriate addresses are
included in the April 27, 1999 notice. We will consider these
comments, respond if necessary, and incorporate as appropriate.
5. How does the current local decision-making process increase
patient access to medical technology?
Where no national policy exists, our local contractors
develop policy as they identify a need. This may in some cases
provide access to new technologies before national policy is
established. Our goal, however, is to provide more timely and
consistent national policy to improve access to new
technologies as quickly as is warranted by medical and
scientific evidence for all beneficiaries regardless of where
they live.
Chairman Thomas. Could I then ask the second panel to come
forward?
Mr. McDermott. Mr. Chairman. I would like to apologize. I
really would like to stay for this, but NATO has made the
airports crazed, and so some of us have to get going to get
planes to go home. So, I am sorry I can't stay.
Chairman Thomas. Well, I am sorry, too, and that is OK,
because this really is a panel of folks who are highly regarded
especially in terms of representing the interests of
beneficiaries. The first witness is Professor Eleanor Kinney of
Indiana University, and she is a former official at the
Department of Health and Human Services, serving in both
Democratic and Republican administrations; probably the leading
national scholar on the issue.
Terry Coleman, who has been Deputy Administrator of HCFA,
Chief Counsel of HCFA, both at the Food and Drug
Administration, and Health and Human Services.
And, last but not least, Vicki Gottlich, who has as an
attorney been representing the National Senior Citizens Law
Center, and I am a little worried about testing cause and
effect, because I believe the last time you were supposed to
testify at this hearing an alarm went off, a fire alarm, and we
were not able to have the rest of the hearing. So, it is with
some trepidation I welcome you for a second try.
And, with that, Ms. Kinney, if you would begin, and I would
indicate that all of you who have written testimony, it would
be made a part of the record, and you can address this in any
way you see fit in the time that you have.
Professor Kinney.
STATEMENT OF ELEANOR D. KINNEY, J.D., M.P.H., PROFESSOR OF LAW;
AND CODIRECTOR, CENTER FOR LAW AND HEALTH, INDIANA UNIVERSITY
SCHOOL OF LAW, INDIANAPOLIS, INDIANA
Ms. Kinney. Thank you very much, Chairman Thomas. I am very
honored to be here. I would like to offer my testimony for the
record and just touch on a few points in my remarks that I
think might help clarify some of the issues before you today.
In my judgment, this is a very complicated and difficult
issue. There are a lot of interests at stake. Specifically,
there are four stakeholders that I think have very important
interests that are not always consistent with one another--
first, beneficiaries, of course, being the most important;
second, HCFA; third, the medical profession with an interest in
practice; and, fourth, a very vibrant device in technology
industry that is important to our economy in many respects.
In my judgment, the current controversy is driven by four
factors, again, that often work at cross purposes. These
factors make it difficult to develop national coverage policy
at the national level and also at the local level by Medicare's
contractors. Specifically more and more services are going to
the part B side, which puts greater financial pressure on the
part B program. Incredible advances in medical technology are
increasing at a great pace. There's continuing inflation in
Medicare Program expenditures, of which I think you are acutely
aware. Finally, the numbers of Medicare beneficiaries will be
increasing in the future, which make even decisions on small,
little-ticket items potentially very, very expensive for the
Federal Government and taxpayers.
I was pleased to see that these hearings address both
national coverage policy, local coverage policy, and the
beneficiary appeals process, because they are inextricably
entwined and not in a particularly healthy way.
Our major problem has been with the way HCFA makes coverage
policy both at the national and local level. I have not had an
opportunity to look at the coverage policymaking procedure that
was proposed today. I hope they have dealt with the three major
problems that I see with HCFA's coverage policymaking process
in the past: a process that is closed, a process that is
duplicative in some respects of the FDA process, and a process
that did not permit interested parties to participate in a
meaningful manner. I have heard good things about the new
process that HCFA has proposed. Although I haven't studied it,
it sounds like some important reforms have been and hopefully
will be achieved. The opening up of the national coverage
making process is the essential step.
From what I have heard today and previously, I think we
need to give greater attention to policymaking at the local
level. At least we must make the policymaking process at the
local level consistent with what is done at the national level.
If HCFA has made a national coverage determination, providers
and beneficiaries and the industry should be able to expect
that the national policy will be enforced at the local level.
We have talked a lot about problems with beneficiary
appeals. The delay in these appeal procedures is unforgivable.
Further, the multiple layers which often don't seem to have a
readily apparent purpose, seem cumbersome. However, the real
problem with the part B appeals process is that it is now the
battleground where disputes over coverage policy are being
fought, and it is an inappropriate battleground.
There are two types of issues that come before the part B
appeals process that need attention. The first is special
situations in which the beneficiary might really benefit from a
noncovered item where conventional, covered treatment
modalities have failed. Ideally, Medicare should be able to
tailor a treatment process for such a beneficiary in
extraordinary circumstances and manage the use of noncovered
items or services in such cases through case management. That
is a little bit different than we are talking about today, but
I think that our process doesn't really address this need of
many beneficiaries. With the second issue, we simply have a
process that--well, I see that the light is on telling me that
I ought to come to close----
Chairman Thomas. No, no, no, that is the yellow. Here in
Washington, you have another 4 minutes to drive the
intersection. [Laughter.]
Ms. Kinney. Oh, OK. Out in the hinterlands, we get worried
when we see yellow.
At any rate, the second problem with the part B appeals
process is that it is handling the dispute that device
manufacturers have with HCFA's policy decisions implicit in
national coverage determinations. The part B appeals process
should not be handling these issues and adjudicating what is
appropriate national coverage policy for the Medicare Program.
The current law in Social Security Act section 1869 is correct.
Having said this, I want to emphasize that HCFA must operate a
policymaking process for national coverage policy where all the
players are able to put their best medical evidence on the
table and get a decision that they believe is credible. That
has not been done to date.
HCFA can't have it both ways. It is unfair to block
considerations by the ALJ, which is appropriate in my judgment;
and to require that courts remand national coverage policy to
HCFA for amplification of the record before invalidating which
is, again, probably appropriate, and then run a private
policymaking process for making national coverage policy. HCFA
needs to open up that policymaking process and let everybody
come in, make their views known, and put their best evidence
before the policy decisionmakers. In my judgment, if you
operate the initial policy process correctly, you are more
likely to avoid the kinds of appeals that shouldn't be before
the part B appeals process in the first place and get better
decisions all around for the protection of beneficiaries.
[The prepared statement follows:]
Statement of Eleanor D. Kinney, J.D., M.P.H., Professor of Law; and
Codirector, Center for Law and Health, Indiana University School of
Law, Indianapolis, Indiana
It is an honor to appear before the Subcommittee on Health
of the House Committee on Ways and Means to provide testimony
on Medicare Coverage Policy Decisions and Beneficiary Appeals.
In my testimony today, I would like to present some
observations about the processes for making and implementing
Medicare coverage policy and also the procedures available for
beneficiaries and their assignees to appeal the adverse claim
denials based on both national and local Medicare coverage
policy.
BACKGROUND ON THE MEDICARE PROGRAM
Medicare is a federal program providing comprehensive
health insurance for the elderly, severely disabled and people
with End Stage Renal Disease. Medicare is the nation's largest
health insurance program and covers 37 million Americans.
Traditional fee-for-service Medicare is comprised of two
programs--the Hospital Insurance program (Part A) and
Supplementary Medical Insurance program (Part B). Part A covers
hospital care and related home health and skilled nursing home
care. Part B covers physician and other outpatient services.
Under the fee-for-service program, Medicare beneficiaries
obtain services directly from the providers they select.
Medicare pays Part A providers directly under various payment
methodologies. Assuming that the beneficiary assigns his or her
claim for Part B benefits directly to the physician, supplier
or other provider, Medicare pays the provider or supplier
directly for the services.
In the Balanced Budget Act of 1997, Congress enacted a new
``Part C'' of the Medicare program--the Medicare+Choice
program. As of January 1, 1999, Medicare beneficiaries have the
option of enrolling in Medicare+Choice plans. Medicare
beneficiaries must select a Medicare+Choice plan or enroll in
the traditional Medicare fee-for-service program under Parts A
and B described above. Medicare+Choice plans must provide the
array of benefits in Parts A and B but may offer additional
benefits with savings achieved in efficient delivery of
services to Medicare Beneficiaries.
BENEFITS AND COVERAGE UNDER THE MEDICARE PROGRAM
Benefits are the specific items and services included in
the Medicare benefit package. Coverage defines the amount,
duration and scope of the benefits for which the Medicare
program will pay. The Medicare statute specifies the benefits
to which beneficiaries are entitled in very general terms. Part
A covers hospital care and related home health and skilled
nursing home care. Part B covers physician and other outpatient
services, including durable medical equipment. The Medicare
statute lists excluded services, although now Medicare+Choice
plans can provide some of these services from savings.
The Medicare statute contains a general coverage
prescription that ``items or services [which] are not
reasonable and necessary for the diagnosis and treatment of an
illness or injury, or to improve the function of a malformed
body member'' are not covered.\1\ Decisions on whether Medicare
covers an item or service are made by Medicare contractors that
administer the Medicare program on behalf of the Health Care
Financing Administration (HCFA) and initially adjudicate all
claims for Medicare coverage and payment for beneficiaries
enrolled in the fee-for-service program. \2\
---------------------------------------------------------------------------
\1\ 42 U.S.C. Sec. 1395y(a)(1) (1999).
\2\ The Medicare contractors for Part A are insurance companies
called fiscal intermediaries (FIs). For hospitals, Professional Review
Organizations (PROs) conduct utilization and quality review of hospital
inpatient services. The Medicare contractors for Part B are health
insurance companies called carriers. In the Medicare+Choice program,
the prepaid health plans contract directly with HCFA and implement
coverage policy.
---------------------------------------------------------------------------
Coverage policies and decisions fall into three categories
depending on the type of item or service involved.
1. First is coverage policy pertaining to the amount and
duration of a fairly conventional service, such as inpatient
hospital care or home health services. This type of coverage
policy is often implemented at the contractor level. The
contractor may rely on the use of computerized screens to
identify situations in which services exceed expected norms
regarding amount and duration. Coverage policy for these
services are contained in the applicable HCFA manual for the
Medicare contractors or providers.
2. Second is coverage policy pertaining to items, namely
medical devices used in the care of chronic illness or long
term care. These items or devices are often sold as durable
medical equipment and managed on the Part B side of the
program. HCFA publishes coverage policy on these items chiefly
in the list of durable medical equipment in the its Coverage
Issues Manual.
3. Third are new medical technologies and procedures that
are often experimental and come before the HCFA national office
for a national coverage determination. HCFA publishes national
coverage determinations in the Medicare Coverage Issues Manual.
There is some overlap between the second and third categories
of coverage policy.
In the early years of the Medicare program, coverage policy
had been made chiefly by Medicare contractors at the local
level. However, with the advances in expensive new medical
technology, the Medicare program was faced with more issues on
whether to cover new technologies which called for attention
from the national office. In the early 1980s, HCFA began
publishing national coverage determinations as coverage rulings
in the Federal Register and contractor manuals.
In part, this pressure and concern came from medical device
manufacturers that, as of 1976, had to get approval from the
Food and Drug Administration (FDA) before marketing new medical
devices to assure ``the reasonable safety and effectiveness of
medical devices intended for human use.'' \3\ Medical device
manufacturers were confounded when FDA approval did not
necessarily result in Medicare coverage and that further review
for Medicare coverage purposes was required. Beneficiaries and
their physicians were concerned that their access to new
technologies were limited by Medicare coverage determinations.
Also many were concerned about the inconsistency of Medicare
coverage policy nationwide as carriers had the authority to
make coverage policy on a local basis. For example, in the
early 1980s, heart transplants were covered in California but
not in other parts of the country.
---------------------------------------------------------------------------
\3\ 42 U.S.C. Sec. 360c (1999).
---------------------------------------------------------------------------
In 1987, as part of the settlement in Jameson v. Bowen,\4\
which contested the application of a national coverage policy,
HCFA promulgated a notice explaining its procedures for making
coverage decisions.\5\ In this notice, HCFA stated its
intention to promulgate a rule for making national coverage
determinations. In January 1989, HCFA promulgated a proposed
rule establishing procedures and criteria but never published a
complete final rule.\6\ The rule was to establish criteria and
procedures for HCFA decisions as to whether and under what
circumstances specific health care technologies could be
considered ``reasonable'' and ``necessary'' in more open and
streamlined procedures with increased public participation and
expedited procedures for ``new breakthrough'' technologies. In
1995, HCFA did publish a final rule with a comment period to
specify conditions when Medicare would cover certain devices
with an investigational device exemption through the FDA and
certain services related to those devices.\7\
---------------------------------------------------------------------------
\4\ [1987-1 Transfer Binder] Medicare & Medicaid Guide para. 36,033
(E.D. Cal. Feb. 20, 1987) (Settlement Agreement and Release of Claims).
\5\ Health Care Financing Administration, Medicare Program,
Procedures for Medical Services Coverage Decisions; Request for
Comments, 52 Fed. Reg. 15,560 (Apr. 29, 1987).
\6\ Health Care Financing Administration, Medicare Program;
Criteria and Procedures for Making Medical Service Coverage Decisions
That Relate to Health Care Technology, 54 Fed. Reg. 4302 (Jan. 30,
1989).
\7\ Health Care Financing Administration, Medicare Program;
Criteria and Procedures for Extending Coverage to Certain Devices and
Related Services, 60 Fed. Reg. 48,417 (Sept. 19, 1995).
---------------------------------------------------------------------------
Previously, when making national coverage policy, HCFA
conducted an internal review or consulted with its Technical
Advisory Committee (TAC).\8\ This committee was comprised of
ten carrier medical directors, a managed care medical director,
and representatives of other federal health agencies. The TAC
could recommend that HCFA issue a national coverage policy,
refer the issue for assessment by the Agency for Health Care
Policy and Research or other qualified public or private
assessment organization, postpone the decision pending more
information, or make no decision. HCFA could accept or reject
the TAC's recommendation. TAC proceedings were closed to the
public and outside parties with an interest in the item or
service under review had no opportunity to participate
formally.
---------------------------------------------------------------------------
\8\ Issues Relating to Medicare's Coverage Policy, Hearing before
Subcommittee on Health, 105th Cong., 1st Sess. (1997) (Testimony Bruce
C. Vladeck, Administrator, Health Care Financing Administration).
---------------------------------------------------------------------------
Many stakeholders, particularly the medical device
industry, have been critical of the closed character of HCFA's
coverage decision making process. In the 1980s, the
Administrative Conference of the United States recommended that
HCFA establish greater regularity and openness in its coverage
decision making processes.\9\ The American Bar Association also
recommended similar reforms in Medicare coverage policy
making.\10\ Concerns about regularity and openness continue as
troublesome issues today. GAO has been a persistent critic of
HCFA's coverage decision making processes at both the national
and local level.\11\
---------------------------------------------------------------------------
\9\ See ACUS Recommendation 87-8, National Coverage Determinations
under the Medicare Program, 1 C.F.R. Sec. 305.87-8; ACUS Recommendation
86-5, Medicare Appeals, 1 C.F.R. Sec. 305.86-5. See also Eleanor D.
Kinney, National Coverage Policy Under the Medicare Program: Problems
and Proposals for Change, 32 St. Louis U.L.J. 869 (1988); Eleanor D.
Kinney, The Medicare Appeals System for Coverage and Payment Disputes:
Achieving Fairness in a Time of Constraint, 1 Admin. L. J. (Am. U.) 1
(1987).
\10\ American Bar Association, Recommendations on Medicare
Procedures by the ABA House of Delegates (August 1988).
\11\ See, e.g., U.S. Gen. Accounting Off., Medicare Part B:
Regional Variation in Denial Rates for Medical Necessity (1994); U.S.
Gen. Accounting Off., Medicare-Technology Assessment and Medical
Coverage Decisions (1994).
---------------------------------------------------------------------------
HCFA is currently redesigning its coverage decision making
process. In September 1998, HCFA conducted a ``town hall'' on
Medicare Coverage decision making and published a white
paper.\12\ HCFA has appointed a Medicare Coverage Advisory
Committee comprised of outside experts that conducts meetings
which are open to the public and at which requesters of
coverage for a device or service can present their case.\13\
HCFA plans to publish a notice shortly outlining the
administrative process for making national coverage policy.
HCFA also plans to develop general criteria that will guide in
developing criteria for specific sectors of the health care
industry.
---------------------------------------------------------------------------
\12\ Health Care Financing Administration, How Coverage Review is
Conducted: White Paper for Town Hall Meeting Held on September 25, 1998
(1999).
\13\ Health Care Financing Administration, Medicare Program;
Establishment of the Medicare Coverage Advisory Committee and Request
for Nominations for Members, 63 Fed. Reg. 68,780 (Dec. 14, 1998).
---------------------------------------------------------------------------
BENEFICIARY APPEALS SYSTEMS UNDER THE MEDICARE PROGRAM
There are a multitude of appeals systems under the Medicare
program depending on the type and status of the appellant and
the subject matter of the dispute. In general, the two main
types of appellants are Medicare those and Medicare providers.
For Medicare beneficiaries, appeals procedures are different
for beneficiaries who have enrolled in a Medicare+Choice plan
under Part C and for those who have opted to remain in
traditional fee-for-service Medicare under Parts A and B. For
Medicare+Choice enrollees, there are grievance and appeal
procedures within the managed care plan and then administrative
and judicial review.\14\
---------------------------------------------------------------------------
\14\ 42 U.S.C. Sec. 1395w-21 (1999).
---------------------------------------------------------------------------
Initially, the Medicare statute only permitted appeals on
the part of beneficiaries with disputes over Part A services in
the conventional administrative review structure of the Social
Security Administration (SSA) of which the Medicare program was
a part. Beneficiaries with concerns had a right to a fair
hearing before the carrier. In 1972, responding to increased
hospital and nursing home disputes over Medicare reimbursement,
Congress established the Provider Reimbursement Review Board to
adjudicate payment disputes of institutional providers.\15\
---------------------------------------------------------------------------
\15\ 42 U.S.C. Sec. 1395oo (1999).
---------------------------------------------------------------------------
During the late 1970s and 1980s, there was increased
pressure from beneficiaries and particularly providers for
administrative and judicial review of Part B claims. In 1984,
in Heckler v. Ringer,\16\ the Supreme Court ruled that a
beneficiary could not challenge a national coverage
determination prohibiting coverage for bilateral carotid artery
resections to relieve respiratory distress without exhausting
administrative remedies and proceeding through the Social
Security Act's appeals process. In part, beneficiaries,
providers and particularly suppliers and manufacturers on their
behalf wanted to challenge national coverage decisions and
other Medicare coverage policy upon which claim denials were
based.
---------------------------------------------------------------------------
\16\ 466 U.S. 602 (1984).
---------------------------------------------------------------------------
Much concern was expressed about the fact that
beneficiaries with Part B appeals did not have statutory
administrative and judicial review but only fair hearings
before carrier officials. The Supreme Court, in Schweiker v.
McClure,\17\ concluded that carrier Part B hearing procedures
were sufficient and administrative review before an
Administrative Law Judge (ALJ) and judicial review were not
required under the procedural due process clause of the federal
constitution. In 1985, the Subcommittee on Health of the Senate
Finance Committee held hearings on Medicare appeals at which
beneficiaries' complaints about the Part B appeals process was
the central theme.\18\ Nevertheless, in the Omnibus Budget
Reconciliation Act of 1986, Congress established administrative
review for part B claims, but also imposed significant
limitations on administrative and judicial review of national
coverage determinations.\19\
---------------------------------------------------------------------------
\17\ 456 U.S. 188 (1982).
\18\ Medicare Appeals Provisions: Hearings Before the Subcomm. On
Health of the Senate Comm. On Finance, 99th Cong., 1st Sess. (1985).
\19\ 42 U.S.C. Sec. 1395ff (1999).
---------------------------------------------------------------------------
The Part B appeals process has been problematic since its
inception. HCFA stirred up controversy in the late 1980s when
it determined that it would retain carrier hearings for Part B
claims.\20\ This proposal was unsuccessfully challenged in
Isaacs v. Bowen \21\ which upheld HCFA's authority to retain
this step. Then HCFA sought to create an administrative law
judge corps within HCFA to adjudicate Part B disputes but
backed away from the concept in the face of vigorous opposition
on many fronts.\22\ HCFA never implemented these plans. A GAO
report found that the Part B administrative appeals process
during these early years was quite lengthy.\23\ Many are
concerned about the Part B appeals process,\24\ including the
American Bar Association.\25\ Problems have continued to
surface in judicial decisions as well.\26\ HCFA has
acknowledged the need for reform.\27\
---------------------------------------------------------------------------
\20\ Health Care Financing Administration, Medicare Carriers Manual
Sec. 12195B (1986).
\21\ 865 F.2d 468 (2d Cir. 1989).
\22\ See Oversight Hearing on Adjudicatory Procedures of the Dep't
of Health & Human Services Before the Subcomm. on Administrative Law
and Government Relations of the House Judiciary Comm., 101st Cong., 1st
Sess (1989).
\23\ U.S. General Accounting Office, Statistics on the Part B
Administrative Law Judge Hearings Process (1989).
\24\ See, e.g., Judith G. Waxman & Alfred J. Chiplin, Jr., Medicare
Part B Appeals--and You Thought the System was Fixed, Clearinghouse
Rev. 384 (Special Issue, Summer 1989); Bess M. Brewer, Risky Business:
Five Years of Navigating the Medicare Part B Appeals Process,
Clearinghouse Rev. 537 (Sept. 1992) (raising beneficiary concerns);
Timothy P. Blanchard, Medical Necessity Denials as a Medicare Part B
Cost-Containment Strategy: Two Wrongs Don't Make it Right or Rational,
34 St. Louis. U.L.J. 939 (1990) (raising provider concerns).
\25\ American Bar Association, Recommendations on Medicare
Procedures by the ABA House of Delegates (August 1988).
\26\ See, e.g, Warder v. Shalala, 149 F.3d 73 (5th Cir. 1998);
Friedrich v. Secretary of Health and Human Services, 894 F.2d 829 (6th
Cir. 1989); Mathews v. Shalala, 1997 WL 124106 (S.D.N.Y., Mar. 18,
1997); Cedars-Sinai Medical Center v. Shalala, 939 F.Supp. 1459 (C.D.
Cal. 1996); Bosko v. Shalala, [Transfer Binder 1997-1] Medicare &
Medicaid Guide para. 45, 139 (W.D. Pa. Aug. 28, 1996).
\27\ Medicare Appeals Process: Hearings before the Subcomm. On
Health of the House Comm. On Ways and Means, 105th Cong., 2d Sess.
(Apr. 23, 1998) (Testimony of Michael M. Hash, Deputy Director, Health
Care Financing Administration).
---------------------------------------------------------------------------
Medicare Fee-For-Service Appeal Procedures
Below are described the current appeal procedures for
beneficiaries dissatisfied with determinations under Parts A
and B of the Medicare program and who have elected the fee-for-
service Medicare option.
Part A. Under Medicare Part A, which funds inpatient
hospital and related post hospital services, beneficiaries may
obtain administrative and judicial review of denied claims. For
claims involving hospital services and utilization review
determinations, beneficiaries must seek reconsideration before
the Peer Review Organization (PRO). For claims over $200,
beneficiaries may appeal adverse PRO determinations to an SSA
ALJ and seek judicial review of adverse administrative
decisions for claims of $2,000 or more.\28\
---------------------------------------------------------------------------
\28\ 42 U.S.C. Sec. 1320c-4 (1999).
---------------------------------------------------------------------------
For all other beneficiary appeals under Part A, the
beneficiary seeks reconsideration of the FI's determination.
For claims involving $100 or above, they may appeal to an SSA
ALJ with judicial review for claims of $1,000 or above.\29\
---------------------------------------------------------------------------
\29\ 42 U.S.C. Sec. 1395ff (1999).
---------------------------------------------------------------------------
Part B. It should be emphasized that the right to appeal is
for beneficiaries only and providers have rights to appeal only
if they have accepted assignment of the beneficiaries claim and
stand in the shoes of the beneficiary. The Part B appeals
process retains the fair hearing proceeding before the
carrier.\30\ After the carrier's final disposition, a
beneficiary may appeal an adverse determination if the amount
in controversy is $500 or more to an SSA ALJ.\31\ Judicial
review is available for disputes of $1,000 or more.
---------------------------------------------------------------------------
\30\ 42 U.S.C. Sec. 1395u (1999).
\31\ 42 U.S.C. Sec. 1395ff(b)(2) (1999).
---------------------------------------------------------------------------
Review of National Coverage Determinations. The Omnibus
Budget Reconciliation Act of 1986 imposed significant
limitations on the review of national coverage
determinations.\32\ Specifically, review of the coverage of any
particular type or class of items or services is subject to the
following limitations. Specifically, an ALJ may not review a
national coverage determination. A court shall not set aside or
invalidate a national coverage determination on grounds that
requirements in the Administrative Procedure Act \33\ relating
to publication in the Federal Register or opportunity for
public comment were not satisfied or that Medicare's rulemaking
requirements \34\ were not followed. Further, in any case in
which a court determines that the record is incomplete or
otherwise lacks adequate information to support the validity of
a national coverage determination, it shall remand the matter
to the Secretary for additional proceedings to supplement the
record and the court may not determine that an item or service
is covered except upon review of the supplemented record.
---------------------------------------------------------------------------
\32\ 42 U.S.C. Sec. 139ff(c) (1999).
\33\ 5 U.S.C. Sec. Sec. 551-559 (1999).
\34\ 42 U.S.C. Sec. 1395hh(b) (1999).
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Medicare+Choice Appeal Procedures for Beneficiaries
Medicare+Choice plans must have ``meaningful grievance
procedures'' with organizational determinations made by health
plans and external review for reconsiderations.\35\ The
Secretary shall contract with an independent, outside entity to
review and resolve in a timely manner reconsiderations that
affirm denial of coverage. Following external review, there is
administrative review before an SSA ALJ with subsequent
judicial review.
---------------------------------------------------------------------------
\35\ 42 U.S.C. Sec. 1395w-21 (1999). See Jennifer E. Gladieux,
Medicare+Choice Appeal Procedures: Reconciling Due Process Rights and
Cost Containment, 25 Am. J. L. & Med. 61 (1999).
---------------------------------------------------------------------------
THE CURRENT CONTROVERSY
The process for making Medicare coverage policy as well as
adjudicating coverage in the cases of individual Medicare
beneficiaries has been controversial. The historical
development of the procedures for making Medicare policy and
adjudicating appeals over its applications reflects this
controversy. The reason for the controversy in the past and,
especially for the future, is the collision of four forces:
The increased provision of expensive care in
outpatient settings and thus coming under the Part B side for
claims administration and adjudication.
The incredible advances in medical technology for
the diagnosis and treatment of disease since the 1960s.
However, this advance pales in terms of anticipated advances in
medical technology in the future.
The continuing inflation in Medicare program
expenditures that threatens the solvency of the Medicare trust
funds and puts great pressure on the federal budget of which
Medicare constitutes a significant component.
The increasing numbers of Medicare beneficiaries
due to demographic changes in the elderly population as
potential consumers of newly approved technologies.
It is worth looking at the interaction of these forces in
some detail. The issue of technology is especially problematic
for the Medicare program because it potentially translates into
increased program expenditures with resulting pressures on
Medicare trust funds and other sources of financing. The
stewards of the Medicare program must be cognizant of these
developments in formulating coverage policy for the Medicare
program as expanded coverage for any item or service
potentially contributes to increased program expenditures
particularly if used in the care of many beneficiaries.
The battle over Medicare coverage policy is currently being
fought out in the Part B appeals process. Beneficiary or, more
likely, providers and suppliers who have accepted assignment
from beneficiaries and are appealing on their behalf, are
challenging the denial of Part B claims. There are two major
types of issues in Part B appeals which need attention:
Special situations in which the beneficiary could
really benefit from a non-covered item or service in a cost
effective treatment.
Coverage policy applied to new technologies that
inappropriately stifles development of medical innovation and
hurts the legitimate business interests of device
manufacturers.
The current Part B Appeals Process is not capable of
adjudicating either type of issue. In neither case is the
beneficiary or the manufacturer able to obtain the relief they
desire. Regarding the application of coverage policy to
beneficiaries in the first situation, at no point in the
appeals process does a decision maker have any flexibility
whatsoever to allow a prescribed item or service that might be
of great benefit to a beneficiary and even save Medicare
expenditures in the care of that beneficiary.
Regarding the impact on the manufacturers of new
technologies, the appeal procedures do not provide a decision-
maker at any level with authority to overturn a national
coverage determination. Even if an appeal comes before a
federal court, the court must remand the policy back to HCFA
for amplification and further development of the record.
Finally, for all Part B appeals, the appeals process is
quite long with an internal appeal before the Medicare
contractor and then administrative review and judicial review.
It often takes many months--well over a year--to get through
these layers of review.\36\ A cumbersome process with no
possibility of relief is frustrating and counter productive to
all parties concerned.
---------------------------------------------------------------------------
\36\ Medicare Appeals Processes: Hearings Before the Subcommittee
on Health House Committee on Ways and Means, 105th Cong., 2d Sess.
(Apr. 23, 1998) (Testimony of Michael M. Hash, Deputy Director, Health
Care Financing Administration).
---------------------------------------------------------------------------
IDEAS FOR REFORMS
In contemplating reforms, it is useful to identify the
affected stakeholders and their legitimate interests in the
Medicare coverage decision making process. The most important
stakeholder is the Medicare beneficiary who has a legitimate
interest in getting the best available treatment when in need.
The second stakeholder is HCFA, which stands in the shoes
of Medicare beneficiaries who finance the Part B program with
Part B premiums as well as current workers who finance Part B
with their taxes. HCFA's interest is ensuring that it purchases
health care services for beneficiaries in a cost effective
manner. Such stewardship includes paying only for items or
services that are proven to be effective in the treatment of
illness and injury and not for items or services that are
experimental or ineffective. HCFA has argued historically that
the Medicare program should not finance the research and
development of medical devices or procedures--hence its strict
adherence to the coverage exclusion of experimental items or
services.
The third stakeholder is the provider community which has
an interest in having the ability to use and prescribe the best
treatment available for Medicare patients without the specter
of administrative hassles in getting paid from the Medicare
program. Institutional providers want to be able to purchase
medical devices and other supplies without being tied up in
subsequent coverage disputes and payment denials.
The fourth stakeholder is the medical device manufacturing
industry which has an interest in bringing new products to
market in an efficient and profitable manner. The device
industry faces two regulatory barriers before getting a product
to market: the device review process in the FDA \37\ and the
Medicare coverage decision making process. This latter process
has a great impact on their ability to make a profit on their
product and recoup their development costs. Understandably,
device manufacturers want predictable, non-duplicative and
efficient regulatory approval procedures to conserve expenses
and get to market quickly.
---------------------------------------------------------------------------
\37\ 42 U.S.C. Sec. 360c (1999).
---------------------------------------------------------------------------
Reform should proceed along the two major strategies: (1)
reform of the Medicare coverage policy making process to make
coverage policy in an open, accessible, expeditious and
accurate manner, and (2) reform the appeals process to
adjudicate cases in an expeditious manner. In my judgment, the
two processes are joined at the hip. A well designed, open
policy making process in which all interested parties can
participate effectively and present their positions before
responsible parties is the appropriate way to make coverage
policy. Such a reformed process will alleviate the need for
many to bring appeals. If the policy making process has
sufficient credibility, disappointed requesters many not pursue
some negative coverage decisions in the appeals process.
Reforms for the HCFA Coverage Decision Making Process
The HCFA coverage policy making process is the forum in
which to determine whether a new medical procedure or device
should be a covered Medicare benefit. The determination of this
issue always involves the consideration of difficult
``legislative'' facts such as the cost implications of coverage
and the medical benefit of new technology for beneficiaries.
The HCFA coverage making process should be designed to marshal
the best medical and scientific evidence available in the
scientific literature and the results of relevant clinical
trials. The process should obtain the scientific advice
available both inside and outside of government. HCFA's
establishment of the Medicare Coverage Advisory Committee is an
excellent step in moving toward a sound policy making process.
Further, the HCFA coverage decision making process must
allow for input from the individual or company promoting
coverage of a medical device or procedure as well as other
individuals or organization, such as medical specialty
societies, other provider organizations and patient advocacy
groups, with an interest in the coverage issue. These parties
should have an opportunity to provide adequate written and
possibly oral input in the coverage decision making process.
This openness is critical to give the process credibility among
affected parties, including the medical device industry, the
provider community and beneficiaries.
HCFA might also consider making ``probationary'' coverage
determinations that allow for a device or procedure to be
tested and evaluated on a demonstration basis before a final
coverage determination is made. Such a probationary procedure
would have to be carefully designed to control Medicare
expenditures for unproven medical technologies and would
probably be used in only a few instances.
The following principles should guide the design of the
coverage decision-making process from a procedural perspective:
HCFA should provide adequate notice that its
coverage decision making process is going to consider a
national coverage determination or other coverage policy
regarding a particular device or procedure. The notice should
be provided in a manner likely to reach beneficiaries,
providers, suppliers and device manufacturers.
Requestors of Medicare coverage for a medical
device or procedure, namely a medical device manufacturer,
should have an adequate opportunity to present their case in
oral and written form to the Medicare Coverage Advisory
Committee and also to the officials in HCFA that will actually
decide on the coverage policy.
All other individuals or organizations, such as
medical specialty societies, other provider organizations and
patient advocacy groups, with an interest in the coverage issue
should have an opportunity to provide adequate written and
possibly oral input in the proceeding for making coverage
policy.
To the extent possible, the coverage decision
making process should not impose requirements or otherwise
duplicate the FDA device approval process.
Reforms of the Medicare Part B Appeals Process
Again, the current Part B appeals process is the battle
ground on which the current disputes over the appropriateness
of Medicare coverage policy regarding medical devices and
procedures is being waged. The appeals process is not the
proper forum for resolving issues of the validity or
appropriateness of any given policy and, in particular,
Medicare coverage policy. Neither ALJs nor federal judges have
the technical expertise nor the broader perspective in the
context of a single case to make decisions involving the
correctness of a Medicare coverage policy.
Nor are current appeals systems adequate to address the
claims of beneficiaries that have unique circumstances and
could benefit from a particular non-covered item or service.
For example, HCFA might specify that carriers could provide
coverage for a specified non-covered item for beneficiaries
with particular needs and where other covered treatments have
failed. Many insurance companies and managed care organizations
provide non-covered services on this basis. Ideally, the
carrier could be accorded the discretion to decide such cases
and also to establish the requisite case management oversight
to ensure the safety of the beneficiary and conserve Medicare
dollars. The carrier fair hearings might appropriately be used
to appeal such special situations when the carrier has already
denied coverage.
The following principles should guide reform of the Part B
appeals process:
The interests of beneficiaries should be paramount
and appeals procedures should be designed to adjudicate their
concerns effectively.
Appeal procedures should be as streamlined as
possible and extra layers of review should be implemented only
if they serve a particular purpose required to facilitate the
expeditious and fair resolution of the disputes.
ALJs and other adjudicators should not have
authority to consider the validity of Medicare coverage policy
and, in particular, national coverage determinations.
In sum, the Part B appeals process is not the forum to
adjudicate the validity or appropriateness of HCFA coverage
policy. It has been called to do so because the national
coverage policy process to date has been inadequate to provide
a forum for interested parties, including beneficiaries,
providers and device manufacturers to raise their concerns and
arguments regarding the coverage of a new medical device or
procedure in the first instance.
However, the question remains as to what appeal procedures
and forums should be available to enable providers, device
manufacturers and other interested parties to challenge HCFA's
decision on the coverage of a particular medical device or
procedure. In Chevron, U.S.A., Inc. v. National Resources
Defense Council,\38\ the Supreme Court established the
principle that reviewing federal courts have limited authority
to overturn agency policies and interpretations of their
enabling legislation. The Court's rationale for its clear
preference for limited judicial review of agency policy is that
the agency has ultimate responsibility to manage the
statutorily mandated program and needs to have the authority to
make the requisite policies and decisions to carry out their
statutory assignments.
---------------------------------------------------------------------------
\38\ 467 U.S. 837 (1984).
---------------------------------------------------------------------------
In sum, Congress should think carefully about the
implications of giving final authority over Medicare coverage
policy to a court or other decision maker that is not
accountable for the fiscal performance of the Medicare program
or the safety and welfare of its beneficiaries. The better
approach, in my judgment, is to focus on improving HCFA's
Medicare coverage decision making process in the first instance
to make it truly open to beneficiaries and their providers and
the developer of new medical technologies that are so important
in the advance of medical care.
CHRONOLOGY
Key Legislative Developments
Social Security Amendments of 1965, Pub. L. No. 89-97
(1965).
Establishing the Medicare program is established
with appeal rights only for beneficiary concerns over hospital
services.
Social Security Amendments of 1972, Pub. L. No. 93-603
(1972).
Expanding Medicare eligibility to include the
disabled on the Social Security Disability Insurance Program.
Medical Device Amendments of 1976, Pub. L. No. 94-295
(1976).
Establishing FDA approval of medical devices.
Tax Equity and Fiscal Responsibility Act of 1982, Pub. L.
97-248 (1982).
Establishing the Peer Review Organization Program
with Peer Review Organizations to review hospital expenditures.
Social Security Amendments of 1983, Pub. L. No. 98-21
(1983).
Establishing the DRG Prospective Payment System
for Hospitals.
Omnibus Budget Reconciliation Act of 1986, Pub. L. No. 99-
509 (1986).
Authorizing Administrative and Judicial Review for
Part B Claims.
Establishing Special Rules for Appeals of National
Coverage Determinations.
Omnibus Budget Reconciliation Act of 1989, Pub. L. No. 101-
239 (1989).
Establishing Resource-Based, Relative Value Scale
for determining Medicare payment to Physicians.
Establishing the Agency for Health Care Policy and
Research with the authority to conduct technology assessments.
Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-
66 (1993)
Reforming Payment Methods for Durable Medical
Equipment.
Budget Balanced Budget Act of 1997, Pub. L. No. 105-33, 111
Stat. 251 (1997).
Establishing the Medicare+Choice Program (Part C)
to replace the Medicare HMO program.
Key Rules and Notices on Medicare Coverage Policy Making Procedures
Health Care Financing Administration, Medicare Program,
Procedures for Medical Services Coverage Decisions; Request for
Comments, 52 Fed. Reg. 15,560 (Apr. 29, 1987).
Health Care Financing Administration, Medicare Program;
Criteria and Procedures for Making Medical Service Coverage
Decisions That Relate to Health Care Technology, 54 Fed. Reg.
4302 (Jan. 30, 1989).
Health Care Financing Administration, Medicare Program;
Criteria and Procedures for Extending Coverage to Certain
Devices and Related Services, 60 Fed. Reg. 48,417 (Sept. 19,
1995).
Health Care Financing Administration, Medicare Program;
Establishment of the Medicare Coverage Advisory Committee and
Request for Nominations for Members, 63 Fed. Reg. 68,780 (Dec.
14, 1998).
Major Congressional Hearings on Appeals
Medicare Appeals Provisions: Hearings Before the Subcomm.
On Health of the Senate Comm. On Finance, 99th Cong., 1st Sess.
(1985).
Oversight Hearing on Adjudicatory Procedures of the Dep't
of Health & Human Services Before the Subcomm. on
Administrative Law and Government Relations of the House
Judiciary Comm., 101st Cong., 1st Sess (1989).
Issues Relating to Medicare's Coverage Policy, Hearing
before Subcommittee on Health of the House Comm. On Ways and
Means, 105th Cong., 1st Sess. (April 17, 1997).
Medicare Appeals Processes: Hearings Before the
Subcommittee on Health House Committee on Ways and Means, 105th
Cong., 2nd Sess. (Apr. 23, 1998).
The Medicare Coverage Process and Beneficiary Processes:
Hearings Before the Subcommittee on Health House Committee on
Ways and Means, 106th Cong., 1st Sess. (Apr. 22, 1999).
Chairman Thomas. Thank you very much, Professor Kinney.
Mr. Coleman.
STATEMENT OF TERRY COLEMAN, J.D., PARTNER, FOX, BENNETT &
TURNER
Mr. Coleman. Thank you, Mr. Chairman. Since I have worked
as a lawyer both at HCFA and in the private sector, I hope that
I can provide some useful information to the Subcommittee from
those two perspectives, and I will summarize a few issues.
The first issue is who should make Medicare coverage
policy? The unusual aspect of Medicare's current process for
making coverage decisions, as we have heard, is its
decentralized nature. The Medicare contractors independently
interpret and apply Medicare's requirements and make most of
the coverage decisions. I believe this deference to the
contractors is historically based, in part, on HCFA's view that
Congress wanted the contractors to be relatively independent
and to make decisions based on local medical practice, and we
heard about that earlier. The result of this decentralized
process is that Medicare coverage varies depending on location.
The degree of variation is not necessarily extreme, but
conditions for coverage clearly vary from State to State, and
items and services covered in one State will not necessarily be
covered in other States.
In recent years, HCFA has recognized that this is not
entirely a desirable practice and has attempted to increase
uniformity. But much of this effort has not taken the form of
additional national coverage decisions but instead greater
coordination of actions by the carriers, such as in developing
model policies. Increasing uniformity through joint carrier
actions rather than decisions by HCFA has serious procedural
disadvantages, in my view. First, the carriers use a relatively
nonpublic process in which the opportunity for input is
limited, and, perhaps, most troubling is that coordinated
action by the contractors amounts to the making of national
Medicare policy by nongovernment employees who are not
accountable through the normal process of administrative and
congressional oversight.
Second issue, the opportunity for public input in coverage
policy decisions. The process for making coverage decisions is
informal. Under the Medicare statute, national coverage
decisions are exempt from the notice and comment rulemaking
requirements that ordinarily apply to substantive agency
policies. When I was at HCFA, I was involved in the 1986
legislation that enacted this exemption. Its primary purpose
was to permit national coverage decisions to be made more
quickly than the 2 years or so it takes to put out a
regulation, and if the national coverage decision process is to
remain viable for more than occasional use, there has to be a
process other than full rulemaking. But even though it
shouldn't involve full rulemaking, HCFA's announcement today to
allow for greater public input is a major improvement over the
current relatively closed process. The objective should be to
develop a procedure that allows the public an opportunity to
know what HCFA is considering; to place items on HCFA's agenda;
to submit information; to respond to any concerns that HCFA may
have, and to receive a timely decision. To the extent that the
contractors remain involved in coverage decisions, they, too,
should be subject to a more open process that allows for
broader public participation.
The third issue is a need for a comprehensive statement in
the regulations of the criteria that HCFA and the contractors
are to use in making coverage decisions. At present, there is
no clear statement of the policy on many fundamental issues,
such as what is considered an experimental procedure? What are
the criteria used to determine whether a particular service is
considered medically necessary? What discretion, if any, do the
carriers have to deny coverage of a drug for conditions
approved by the FDA? And numerous other issues. The lack of
clearly defined criteria creates a great deal of confusion,
especially under the decentralized process in which the
carriers, operating on their own, continue to play a major role
in making Medicare policy.
Finally, the issue of judicial appeals. Initially, the only
appeals mechanism in the statute for part B coverage denials
was a hearing before the Medicare carrier; no judicial review
was allowed. In 1986, though, the Supreme Court unanimously
held in the Michigan Academy case that judicial review of
Medicare part B policies was available. The Court ruled that
Congress intended to bar judicial review only when the issue
was a specific dollar amount and that beneficiaries could
challenge Medicare regulations and policies directly in court.
At about the same time the Supreme Court greatly expanded
Medicare part B judicial appeal rights in this way, however,
Congress amended the Medicare statute to create an appeals
system for part B that is parallel to the system for part A.
Under this process, beneficiaries and others who want to appeal
coverage policies must go through a series of administrative
hearings that we have heard about on specific denied claims,
and that process can take 2 years or more. So, ironically, the
1986 amendment, which was seen as expanding appeal rights, had
the effect of diminishing judicial appeal rights by forcing all
appeals into the very lengthy ALJ process. As a practical
matter, the Supreme Court's holding was overruled by Congress,
perhaps unintentionally, and there is no longer an effective
means to challenge HCFA's coverage policies. In my view,
Congress should consider restoring the rights of beneficiaries
and other interested parties to obtain direct judicial review
of national coverage decisions as the Supreme Court at one time
said existed.
Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of Terry Coleman, J.D., Partner, Fox, Bennett & Turner
MEDICARE PROCESS FOR COVERAGE DECISIONS AND BENEFICIARY APPEALS
Thank you for the opportunity to testify regarding the
Medicare process for coverage decisions and appeals. Since I
have worked as a lawyer for the Health Care Financing
Administration (HCFA) and its parent Department of Health and
Human Services, and subsequently have practiced in the private
sector, I hope I can provide some useful information for the
Committee based on that combined perspective. This statement
represents my personal views and not necessarily those of my
current or past clients.\1\
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\1\ In accordance with the Committee's rules, I state that I have
not received any Federal government grants or contracts during the
current or past two fiscal years, and that I am not representing any
entities in my appearance before the Committee. I am currently a
partner in the Washington, D.C. law firm Fox, Bennett & Turner, where I
have practiced since 1989. Prior to that, I held various positions in
the Department of Health and Human Services, including Deputy General
Counsel (1981-86), Acting General Counsel (1984-85), Chief Counsel of
HCFA (1986-88), and Deputy Administrator of HCFA (1988-89).
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Decentralized Process for Making Coverage Decisions
A threshold question in considering the Medicare coverage
process is who should make the policies. The unusual aspect of
Medicare's current process for making coverage decisions is its
decentralized nature. The Medicare claims processing
contractors--the carriers and fiscal intermediaries--
independently interpret and apply Medicare's requirements. In
addition, in a relatively small number of cases, HCFA's Central
Office issues national coverage decisions that apply
everywhere. The result of this largely decentralized process is
that Medicare coverage varies depending on location. The degree
of variation is not necessarily extreme, but conditions for
coverage of certain items and services clearly vary from state
to state, and items and services covered by Medicare in some
states may be denied coverage in other states.
The Medicare contractors not only interpret how Medicare
policy applies to particular claims--which they must inevitably
do--but they also issue broad policies. HCFA expressly
authorizes the contractors to develop ``local medical review
policies'' that define what each carrier considers to be a
medically necessary use of an item or service. The contractors
also interpret other provisions of Medicare law when there is
no national interpretation.
The policy of decentralization stems, I believe, from two
factors--a long-standing interpretation about the respective
roles of the contractors and HCFA intended by Congress, and the
inability of the HCFA Central Office to take on a larger
workload. The first factor derives from the fact that the
Medicare statute, from its enactment in 1965, has required the
program to use insurance companies to process claims and
administer the program. This provision led to the view within
HCFA and its predecessor agency that Congress wanted the
contractors, rather than the federal government, to make many
of the detailed decisions about administration of the program.
This view was fortified by the way in which the statute was
drafted. In particular, section 1842 of the Act, which
describes how the carriers are to administer the Part B
program, imposes certain responsibilities directly on the
carriers, rather on the Secretary as statutes are ordinarily
worded. This language led some in HCFA to believe that the
agency was limited in the extent to which it had authority to
control decisionmaking by the carriers. While this view has
undoubtedly diminished in recent years, I believe the
historical notion that HCFA should refrain from too much
control over the contractors' policies explains much of the
current arrangement. Also influencing deference to the
contractors was the belief that medical practice varies
regionally and that local carriers are in the best position to
adjust coverage policy to reflect those regional variations.
The other factor leading to decentralization was the
relatively small staff at the HCFA Central Office. Since the
staff is able to make comparatively few national coverage
decisions, and the carrier medical directors have been
available to fill any decisionmaking void, it has been easy to
defer to the contractors' decisions.
The decentralized decisionmaking process results in a lack
of uniformity in coverage policy that is difficult to defend.
It would seem desirable for Medicare beneficiaries to have the
same benefits regardless of where they live. Although medical
practice clearly varies regionally, this variation is usually
seen as an undesirable result of differences in practice style
rather than being scientifically based. In addition, the
decentralized process makes it difficult for persons interested
in Medicare coverage of a new technology to present information
to the program. If HCFA does not issue a national coverage
decision, individual medical directors all over the country
separately consider the data, consult with their own experts,
and arrive at independent conclusions.
In recent years, HCFA has recognized the undesirable
aspects of nonuniform coverage policies and has attempted to
increase the degree of uniformity. Much of this effort has not
taken the form of additional national coverage decisions,
however, but instead greater coordination of actions by the
carriers. For example, the four durable medical equipment
regional carriers jointly developed their extensive coverage
manual. Carrier medical directors often hold meetings under the
auspices of HCFA at which they exchange views on coverage
policy with an eye toward increasing uniformity. The carriers
have formed workgroups which have issued ``model'' coverage
policies intended for adoption by all carriers.
Increasing uniformity through joint carrier action rather
than national coverage decisions by HCFA has serious procedural
disadvantages. The carriers use a relatively non-public process
in which the opportunity for input is limited. In addition, if
a national organization seeks to influence coverage policy, it
is difficult to learn what individual carriers are doing and to
deal with the many carriers involved. Perhaps most troubling is
that coordinated action by the contractors amounts to the
making of national Medicare policy by non-government employees
who are not accountable through the normal process of
administrative and congressional oversight.
There is some debate in the provider community as to
whether increased issuance of national coverage decisions by
HCFA is desirable. Those who are reluctant to see greater
involvement by the HCFA Central Office fear that HCFA may act
unreasonably, and that the decentralized process, offering the
possibility that at least some carriers will act reasonably, is
better. My personal view is that HCFA should issue more
national coverage decisions, provided that, as I will discuss
later, it does so with an open process and there is a practical
opportunity for judicial review of the decisions.
It would be useful if Congress clarified the respective
roles of the contractors and HCFA in establishing coverage
policy. It is one thing for HCFA to rely on the contractors
because its staff size is inadequate to handle all the
questions. It is another thing altogether for HCFA to defer to
the independent decisions of the contractors because HCFA may
believe that Congress wants coverage decisions to reflect
supposed regional differences in medical practice or that
Congress prefers coverage decisions to be made by the
contractors rather than by HCFA. If Congress believes in the
desirability of uniform Medicare coverage policy throughout the
country to the extent possible, it could make that direction to
HCFA clear.
Also, to the extent that the contractors retain authority
to make policy, Congress may want to address whether they
should, in effect, be permitted to make national policy without
HCFA's involvement by developing joint policies with other
contractors.
Opportunity for Public Input in Coverage Policy Decisions
The process for making decisions about coverage policy is
informal both at HCFA and at the contractors. In 1986, Congress
revised the Part B Medicare appeal procedures and in the
process exempted national coverage decisions from the notice
and comment rulemaking requirements that ordinarily apply to
substantive agency policies.
I was involved in the 1986 legislation on behalf of HCFA
and am familiar with the background of this exemption. Its
purpose was twofold. First, since the legislation was
establishing a new procedure for judicial review of Medicare
Part B decisions, including coverage policies, there was a
concern that the pre-existing body of coverage decisions would
be found procedurally defective. HCFA and its predecessor
agency had issued a large number of national coverage decisions
since the beginning of the Medicare program. Those decisions
were not issued after notice in the Federal Register and
opportunity for public comment, and there was little or nothing
otherwise in the form of an administrative record that would
explain and support the decisions. Accordingly, without the
exemption, there was the possibility that many completely sound
decisions would be overturned because of a failure to comply
with the Administrative Procedure Act.
In addition to the concern that the existing body of
national coverage decisions would be placed in jeopardy by the
new appeals process, there was also concern that national
coverage decisions should be allowed to be made without
burdening the process with the requirements that the
Administrative Procedure Act imposes on new regulations. HCFA's
experience, like that of many other federal agencies, is that
the rulemaking process--developing and publishing a proposed
regulation, reviewing and developing a written response to the
comments received, and publishing the final version--typically
takes two years or more and requires extensive effort. If the
national coverage decision procedure were to remain viable for
more than occasional use, there had to be a process other than
full rulemaking.
While it remains desirable that national coverage decisions
should be exempt from full rulemaking, HCFA's announcement
several months ago that it will revise its procedures to allow
for greater public input is a major improvement over the
current relatively closed process. The objective should be to
develop a procedure that allows the public an opportunity to
know what HCFA is considering, to place items on HCFA's agenda,
to submit information, to respond to any concerns that HCFA may
have, and to receive a timely decision.
The procedures used by the contractors to develop coverage
policy are also informal. In the case of local medical review
policy, the contractors are required by HCFA to present
proposals to a Carrier Advisory Committee that consists of
physician representatives and to circulate the proposal to
local medical organizations for comment. The degree to which
these comments influence the outcome appears to vary from
contractor to contractor, but in many cases it has proved to be
a useful process. A significant deficiency, however, is that
proposals are distributed only to selected local physician and
provider groups and not to beneficiary or national
organizations that might have an interest in the matter.
In the case of coverage decisions that are not considered
local medical review policies, the contractors' decisionmaking
may be an entirely closed process. Interested parties may not
learn of the policy until it is announced. Some of the
carriers' joint efforts I discussed earlier, such as the
development of model policies, have also been conducted
essentially in secret.
It would be desirable if Congress developed an
administrative process for HCFA's use in making coverage
decisions that struck a balance by providing an opportunity for
public input without burdening the process with rulemaking-type
requirements that make it useless as a practical matter. To the
extent that the contractors remain involved in making coverage
decisions, they too should be subject to a more open process,
and a process that allows for the participation of the public,
including beneficiary and national organizations.
Criteria for Coverage
There is no comprehensive statement in the Medicare
regulations of the criteria that HCFA and the contractors are
to use in making coverage decisions. In addition, the
provisions in the Medicare manuals that discuss various aspects
of coverage policy are often incomplete or ambiguous. As a
result, there is no clear statement in any official Medicare
publication of the policy on such fundamental issues as what is
considered an experimental procedure, what are the criteria
used to determine whether a particular service is considered
medically necessary, the discretion if any that carriers have
to deny coverage of a drug for conditions approved by the Food
and Drug Administration, and many other common issues. The lack
of clearly defined criteria for coverage creates much
confusion, especially under the decentralized system in which
carriers continue to play a major role in applying Medicare
policy.
HCFA attempted to remedy this situation in the 1980s by
developing a Federal Register notice to set forth the process
and criteria for Medicare coverage. Although this document was
published as proposed regulations in 1989, it has never been
finalized, and HCFA apparently plans to begin over again.
It is essential that HCFA regulations clearly set out in
detail the general rules and criteria for Medicare coverage. If
the regulations were sufficiently clear and comprehensive, they
would eliminate many of the disputes with the contractors,
which develop their own interpretations of the Medicare statute
and policy in the absence of any guidance from HCFA.
The absence of comprehensive regulations means that the
Medicare carriers differ not only on how they apply Medicare
policy to particular services but they even differ on the
policy they purport to apply. A recent example I am aware of is
the policy on what type of clinical studies reported in the
medical literature should be required to support Medicare
coverage of an approved drug being used in a manner not
included in the Food and Drug Administration-approved labeling.
Some carriers insist on there being Phase III studies reported,
while other carriers are more flexible and consider all types
of studies. This does not seem to be a matter on which there
should be state-by-state differences in policy. Another example
is that carriers differ in whether they deny coverage of
certain drugs that can be administered subcutaneously because
they differ in their definition of what is excluded from
coverage as a self-administered drug. Broad principles of
Medicare coverage such as these should be decided at the
national level by HCFA, rather than being left for independent
decision by each Medicare contractor.
If the HCFA Central Office lacks the resources to deal with
issues, it should consider other ways to reach nationally
uniform policies rather than always delegating authority to the
contractors. For example, a topic on which HCFA could ease its
burden is determining which ``off-label'' uses of drugs should
be covered. Many drugs are used by physicians for purposes not
included in the labeling as approved by the Food and Drug
Administration. HCFA's general policy is that each carrier can
determine whether a particular off-label use is appropriate
and, if so, Medicare will cover the use. Because this approach
results in non-uniform and sometimes ill-considered decisions
by carriers, Congress in 1993 amended the Medicare statute to
establish rules for coverage of off-label uses of drugs used in
cancer chemotherapy. Under the statute, Medicare must cover
such drugs if the off-label use in question in listed in one of
the major drug-use compendia or is otherwise supported by
clinical studies published in peer-reviewed scientific
literature. The compendia base their monographs on a review of
the literature and are considered scientifically sound. HCFA
could administratively adopt the same policy for all drugs but
for some reason has chosen not to do so. This would seem to be
an opportunity for HCFA to establish uniform rules for Medicare
coverage based on the scientific literature with little effort.
Appeals of Coverage Decisions
The Medicare statute allows beneficiaries who have been
denied coverage of an item or service to appeal that decision
through a series of administrative appeals and then into
federal district court if the increasing jurisdictional amount
prerequisite is satisfied at each step of the appeals process.
The process differs slightly between Medicare Part A and
Medicare Part B, but I will focus on Part B, since disputes and
appeals are relatively rare with respect to coverage of Part A
services.
When the Medicare statute was first enacted, the only
appeals mechanism for Part B coverage denials was a hearing
before the Medicare carrier for disputes involving at least
$100. No judicial review was allowed because, the legislative
history indicates, Congress assumed that Part B disputes would
involve small amounts of money that did not warrant burdening
the federal courts with additional litigation.
Subsequently, the courts added further remedies. Although
Congress had established no administrative hearing for cases
worth less than $100, a court held that constitutional due
process required an oral hearing, and HCFA therefore created
one.\2\ More important, in June 1986 the Supreme Court held in
the Michigan Academy case that, because the availability of
judicial review was to be presumed in the absence of clear
congressional intent to the contrary, judicial review of
Medicare Part B policies was available.\3\ The Court held that
Congress intended to bar judicial review only of cases in which
the issue was a specific dollar amount, and that beneficiaries
and others could challenge Medicare regulations and policies.
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\2\ Gray Panthers v. Schweiker, 652 F.2d 146 (D.C. Cir. 1980), 716
F.2d 23 (D.C. Cir. 1983).
\3\ Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667
(1986).
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At about the same time that the Supreme Court greatly
expanded Part B judicial appeal rights, Congress was
considering the issue of Part B appeals. In October 1986, the
Medicare statute was amended to create an appeals mechanism for
Part B that is parallel to the appeals system for Part A. Under
this system, the individual appealing first requests
reconsideration of the denial. This ``review'' step is
frequently the first time the carrier has actually considered
the claim, since the initial denial may have been by computer.
If the claim is still denied after review, the appeal goes to
an informal hearing before an employee of the carrier and, if
the claim is denied again, to a hearing before an
administrative law judge. Many appeals are resolved favorably
to the appellant at the carrier hearing or administrative law
judge stages, but the appellant can proceed to federal district
court if he is still dissatisfied and the amount in dispute is
at least $1000.
The 1986 legislation that created the Part B appeals
mechanism included some special provisions related to national
coverage decisions. The law provides that national coverage
decisions may not be reviewed by administrative law judges;
that national coverage decisions may not be overturned because
they were not issued through the Administrative Procedure Act
process; and that if a court determines that the administrative
record underlying a national coverage decision is inadequate,
it must remand the matter to HCFA for additional proceedings to
supplement the record before the court rules.
As I discussed earlier in connection with the exemption
from notice and comment rulemaking requirements, these
provisions were intended to address two concerns--protecting
the past national coverage decisions from being overturned
because of the manner in which they were issued, and
maintaining some informality in the process for issuing
national coverage decisions. The compromise adopted in the
statute subjects national coverage decisions to judicial
review, but if the administrative record is deemed inadequate
to support the decision, HCFA is given an opportunity to
supplement the record before the court rules on whether the
record, as so supplemented, supports the decision. As a
prospective matter, this process was intended to allow HCFA to
avoid the burden of developing an extensive administrative
record for national coverage decisions that may not be
controversial. In the event that a decision thought to be
simple is challenged, HCFA can attempt to defend its decision
by supplementing the record. If Congress revises the process
for making coverage decisions, it should consider retaining
this or some similar mechanism to allow HCFA to make national
coverage decisions promptly, while still allowing for
appropriate judicial review.
Ironically, the 1986 amendments had the effect of
diminishing appeal rights for challenges to broad Medicare
policies. As I indicated earlier, just a few months prior to
the enactment of the amendments, the Supreme Court had allowed
direct challenges to Medicare policies as long as particular
claims were not involved. Since the 1986 amendments forced
appeals into the administrative law judge process, however,
almost all courts have since ruled that direct challenges to
agency policies are no longer available. As a result, any
challenge to a Medicare Part B regulation or policy must now
take the form of an appeal of particular denied claims and must
be appealed through the entire administrative appeals
mechanism--a process that can easily take two years or more--
even though the officials involved in the administrative appeal
have no authority (and should have no authority) to overturn a
national coverage decision. Only after two years or more of a
pointless administrative process can the policy be challenged
in court. Even then the challenge takes the form of an appeal
of particular claims, and the decision is technically limited
to those claims. Thus, as a practical matter, the Supreme
Court's holding has been overruled by Congress, and there is no
longer an effective means to challenge HCFA coverage policies.
In my view, Congress should consider restoring the right of
beneficiaries and other interested parties to obtain judicial
review of Medicare regulations and other policies without first
going through the administrative law judge process. The Supreme
Court unanimously recognized that right in 1986, but Congress
implicitly, and perhaps inadvertently, repealed it only a few
months later when it enacted the existing appeals mechanism.
Issues Related to Coverage of New Technologies
Although the Committee's focus is on the process for making
coverage decisions, I would like to briefly mention two related
procedural issues that also bear as a practical matter on
coverage of new technologies.
Issuance of New Codes
Every drug and medical device that is covered by Medicare,
and for which separate payment is made, has a billing code
under the HCFA Common Procedure Coding System. New codes are
issued by HCFA in cooperation with insurance organizations. The
policy of HCFA and these other organizations is that an
application for a new code is not considered until the product
has been on the market for six months. In addition, the cut-off
date for consideration of new codes is relatively early in each
year for code changes to take effect the following January 1.
As a result, if a drug is approved by the Food and Drug
Administration on, for example, February 1, 1999, the
requirement for six months of marketing experience and the
early cut-off date mean that a new code for the drug will not
go into effect until January 1, 2001--nearly two years after
approval.
Until a specific code for a drug goes into effect,
physicians administering the drug must use a non-specific,
miscellaneous code and provide additional information about the
drug in narrative format on the claim. This means that the
claim cannot be processed automatically, and payment to the
physician is delayed. Physicians may be reluctant to use new
products if they encounter payment delays and more burdensome
billing requirements.
The reason that HCFA requires six months marketing
experience is apparently the desire to determine whether a new
product will result in a sufficient number of Medicare claims
to warrant issuing a new code. While this may be a justifiable
policy to apply in the case of minor medical devices, which may
not be successful in the marketplace, it is unreasonable to
apply this policy to new drugs and important medical devices
that will plainly generate many thousands of Medicare claims.
Indeed, it is unclear why there should be an application
process at all for new drugs, in which a committee evaluates
whether to issue a new code, since Medicare covers all new non-
self-administrable drugs. If HCFA routinely issued a new
billing code as soon as it was informed that an injectable drug
was being marketed, the cut-off date could be extended much
later in each year, and the need for six months marketing
history could be eliminated. In the unlikely event that no
claims were ever filed for the drug, the code could be deleted
at a future time.
Adjusting DRGs for New Technologies
In the case of drugs, medical devices, and surgical
procedures furnished to hospital inpatients, a question that is
often more important than coverage is the payment level for the
new technology. New procedures are assigned to a diagnosis-
related group (DRG) that describes their general circumstances.
For example, treatment of brain cancer with a new drug would
fall into the DRG for non-surgical treatment of brain cancer,
and a hospital using the drug would receive the existing
payment amount for that DRG. If that payment amount is not
appropriate for the new procedure, HCFA allows for the
possibility that the new procedure can be transferred to a
different DRG with a more appropriate payment level, or that a
wholly new DRG might be created for the new procedure. The HCFA
policy, however, is that it will evaluate whether the payment
level is appropriate based only on Medicare claims data.
Therefore, the new procedure must remain in the initial DRG at
least a year or two while claims data are accumulated and
analyzed by HCFA.
This rigid insistence on using only Medicare claims data
results in delays in setting appropriate payment levels. When
payment amounts are significantly less than the costs incurred
by hospitals, they may refrain from using the new procedures,
to the detriment of Medicare beneficiaries. For example, when
Medicare first decided to cover bone marrow transplants for
certain conditions, they were assigned to DRGs for the
underlying conditions, which had average payment levels of
about $5,000 to $10,000. Of course, everyone understood that
this amount was far below the actual cost of a bone marrow
transplant, but HCFA adhered to its policy of making no changes
until actual claims data were collected. Eventually, that data
became available, and in 1990 HCFA created a new DRG for bone
marrow transplants and assigned it the average payment amount
of about $45,000.
While it is understandable that HCFA does not want Medicare
to overpay for new procedures, there would seem to be room for
the agency to make a conservative estimate of costs and assign
new technologies to DRGs that are more likely to represent
their true costs. It seems to be poor policy to discourage
hospitals from providing life-saving treatments such as bone
marrow transplants for leukemia by deliberately setting a
payment rate that is far below any fair estimate of the costs
involved. Adjustments to refine the payment amount can be made
in subsequent years based on actual claims data in the same
manner that they are made now.
A related issue is the problem of tracking the use of new
drug therapies in hospital claims data. Although new ICD-9-CM
codes are assigned to new surgical procedures for hospital
billing purposes, they are not assigned to new drug therapies.
Accordingly, even after a year or more of actual claims data
exists, it may be difficult or impossible to identify the
patients who received the new drug therapy. If those patients
cannot be identified, it is impossible to determine whether the
drug therapy is classified in the appropriate DRG or to move
the therapy to a different DRG. It would be desirable if HCFA
assigned ICD-9-CM codes to costly drug therapies so that use of
the drug therapy could be followed and the DRG adjusted if
appropriate.
Conclusion
In summary, there are a number of issues that Congress may
wish to consider to improve the Medicare process for coverage
decisionmaking and appeals:
The role of the contractors in deciding coverage
policy should be re-examined, since their involvement leads to
non-uniform interpretation of Medicare benefits and
requirements. To the extent that they continue to make policy,
the use of coordinated action by these unaccountable companies
to promulgate national coverage policies is highly
questionable.
There should be more openness and opportunity for
public participation in national coverage decisions without
imposing the Administrative Procedure Act requirements
applicable to rulemaking.
HCFA should issue regulations that clearly and
comprehensively set out the criteria for Medicare coverage of
items and services.
Congress should consider reinstating the procedure
for direct judicial review of Medicare Part B policies that the
Supreme Court established but that was effectively overturned
by Congress in the 1986 amendments.
HCFA should consider a more flexible approach to
dealing with issues that in reality affect the introduction of
new technologies, such as the issuance of new codes and the
assignment of new procedures to appropriate DRGs.
Thank you for the opportunity to present this statement.
Chairman Thomas. I thank the gentleman. I know that this
particular area that we were dealing with was one in which my
colleague from California, Mr. Waxman, was heavily involved,
and I have a hard time believing that if something was done and
if he was involved, it was unintentioned.
Ms. Gottlich.
STATEMENT OF VICKI GOTTLICH, ATTORNEY AT LAW, NATIONAL SENIOR
CITIZENS LAW CENTER
Ms. Gottlich. Good afternoon, and I want to thank you for
the opportunity to come talk before this Subcommittee. The
National Senior Citizens Law Center is a nonprofit organization
that has advocated for older people and people with
disabilities for over 25 years. We have a large network of
advocates with whom we converse on Medicare issues, and my
comments today reflect a lot of the comments I have received
from attorneys and paralegals who do the actual representation
of beneficiaries in Medicare cases.
We, too, are very concerned about the national coverage
determination process. I have not had the opportunity yet to
look at the new proposed rule, but in the fall when HCFA
requested comments on the national coverage determination
process, NSCLC sent in comments that sound very similar to what
is being proposed. We had asked that there be an administrative
process so that beneficiaries and other interested individuals
could ask for redeterminations of NCDs or could ask for new NCD
determinations. It was our hope that in this administrative
process we would then be able to go to Federal court. We did
not foresee that we would then have to go through the layers of
reviews that we have at this time.
We are also heartened that beneficiary representatives will
be allowed to be included in the new Medicare Coverage Advisory
Committee. We would like to ensure, however, that beneficiaries
are adequately represented. We always think of seniors as
Medicare beneficiaries, when, in fact, 5 million or more
beneficiaries are people with disabilities. And for the younger
disabled community, many of them are very adversely affected by
national coverage determinations that involve new equipment or
new devices. Many of them are very knowledgeable, and their
interests need to be represented as well.
The effect of the local coverage determinations can be very
harsh on Medicare beneficiaries. While a Medicare beneficiary
may be able to benefit from the coverage determination in the
area where the service is received, that can be a hardship for
individuals, and, in fact, I have worked with some attorneys
whose clients had to disenroll from managed care plans and move
to other portions of their States or other portions of the
country in order to get coverage of a service that is only
approved in a specific part of the country.
One of the problems that we foresee and that the Chairman
touched on a little bit is the fact that the Medicare part A
and part B process really is a reimbursement process for
services that have been received, and in certain instances,
beneficiaries who cannot afford to lay out the money for the
services are not able to even enter the appeals system. This
happens in several situations. It is generally when you are
trying to buy assistive devices or durable medical equipment;
it happens if you are trying to get skilled nursing home care,
and it can happen if you are trying to get home health care.
The way the process works in those situations is if the home
health agency or the SNF says to you, ``We don't think that
this is covered. You can pay privately. We will submit a demand
bill to the intermediary or the carrier. They will then
determine whether or not Medicare will cover this service.'' If
you can't pay out of pocket for this service, then you are
foreclosed from ever getting a determination from Medicare
whether or not that service should be covered.
We have also found other problems with this situation. Many
times, the providers will not submit the demand bills to the
intermediary, and in one really egregious case that we know of
from Cincinnati, it took 2 years for the home health agency to
finally agree to submit the demand bill to the fiscal
intermediary. They only did so based on pressure from HCFA, and
in the letter from HCFA telling them they had to submit the
demand bill, HCFA also told them how to submit the bill so that
it would be paid because it was 2 years old and was a stale
bill.
One of the other things that we would like would be to have
some kind of expedited determination process so that if you
cannot afford to get the service, if you cannot afford to get
the durable medical equipment, then you can get an opinion from
the fiscal intermediary or the carrier issued on a very short
basis, 15 days, that this item should be covered.
Notice is a really top issue for us. Adequate notice is
what informs people of their right to appeal. For the most
part, people do get adequate notice of part A and part B
coverage, but there are certain instances where notices are not
being provided. The home health industry is one area where
notices are not being provided, and people don't know that they
have appeal rights. We are in the process of suing HCFA over
this issue right now. And I know we are not focusing on HMO
appeals, but the GAO report last week about the failure of HMOs
to comply with the Balanced Budget Act is really helpful and
really bears out everything that we have found.
We have talked about delays, and we concur very heartily in
the concern about delays; 2 years for an ALJ hearing is not
sufficient. I do want to note, however, that there is a little
known process that allows you to get a very, very expedited ALJ
hearing, and it is really only if someone is terminally ill.
So, there is actually a client that I am working with who got
notice from his HMO on January 25 that his service would no
longer be covered, and his ALJ hearing is tomorrow. I have
never seen that before, and I have been doing this a long time.
The one other issue that we would like to mention is the
clarification of the home health appeals process. In the
Balanced Budget Act when most of home health benefits were
moved to part B, there was some concern about whether the part
A or the part B appeals process would apply. The BBA provides
that the same appeal rights for beneficiaries under parts A and
B apply by changing the amount in controversy for home health
claims under part B to $100. We would like to make sure that
those claims do not have to go through the part B hearings
before they get to the ALJ hearing.
And I guess there is one other comment I would like to
make. For us policymakers, we think this process is confusing
with all the layers of review. So, if you were to ask me, I
would say cut it all out. When I talk to advocates who actually
represent clients, their viewpoint is very different. They say
that carrier hearings help. They say that review at the fiscal
intermediary stage helps and that they often get favorable
decisions. They also point out that the part B hearings are
very useful where the amount in controversy is under $500,
because you then can't get an ALJ hearing. We would suggest
that those levels of review be made optional so that you can go
straight to the ALJ stage but use those levels of review if
your claim is very small.
Thank you.
[The prepared statement follows:]
Statement of Vicki Gottlich, Attorney at Law, National Senior Citizens
Law Center
Good afternoon. I am Vicki Gottlich, an attorney with the
National Senior Citizens Law Center (NSCLC) in Washington, D.C.
NSCLC is a non-profit organization that has advocated for over
twenty-five years on behalf of low-income older people and
people with disabilities in a variety of areas, including
Medicare, Medicaid, and private employer-sponsored health
insurance. As part of our Medicare work, we convene monthly
teleconference calls with Medicare advocates from across the
country to discuss current issues and problems faced by
Medicare beneficiaries. We also have a special grant from the
National Association of Protection and Advocacy Systems (NAPAS)
to provide technical assistance on Medicare issues to advocates
for people with disabilities. Issues concerning what is a
Medicare covered service and questions about appeals procedures
frequently arise in my individual conversations with advocates
as well as in the monthly phone calls. I therefore appreciate
the opportunity to discuss with the Subcommittee today the
issues Medicare advocates have identified and the experiences
of beneficiaries.
As the Subcommittee is aware, Medicare is divided into
three parts. Part A generally covers hospital and other in-
patient services, Part B generally covers doctors services and
durable medical equipment, and Part C establishes the
Medicare+Choice program. Each part has its own initial appeals
process which beneficiaries must exhaust before moving on to a
hearing before an administrative law judge (ALJ), then to
review by the Department Appeals Board, and then possibly to
federal court. In addition, there are special appeals rules for
hospital discharge and special notices for discharge from a
skilled nursing facility. There are separate procedures for
quality of care complaints.
While the list sounds--and is--complicated, the average
beneficiary does not experience the confusion about the process
that one would think arises from such a convoluted system. Most
beneficiaries are not aware of the details of appeals
procedures until their claim for payment of a service,
procedure or equipment is denied. When that happens, the denial
notice sent to the beneficiary by the fiscal intermediary, if
it is a claim under Part A, or by the carrier, if it is a claim
under Part B, describes the appropriate appeals process for a
claim under that part. Similarly, hospital discharge notices
given to beneficiaries in advance of their discharge and
``Sarrassat'' notices given in advance of discharge from a
skilled nursing facility describe the procedures to use in
those situations. Thus, beneficiaries are given information on
how to file an appeal of that particular kind of claim at the
time they need the information.
The fact that beneficiaries should be informed of their
rights in the fee-for-service context does not mean that the
system is problem free. I will now address several of the main
concerns about coverage determinations and appeals procedures
raised by beneficiaries and their advocates.
National Coverage Determinations
Beneficiary representatives give great priority to establishment of
a mechanism to protect the rights and interests of beneficiaries in the
National Coverage Determination (NCDs) process because, under the
current NCD process, their clients' rights and interests are not
protected. We have considered various remedies, including litigation,
to redress the harm suffered by elderly clients and clients with
disabilities who are unable to obtain critically needed medical
procedures because of NCDs based on scanty evidence, questionable
standards, or stale information.
Currently, there are two ways in which the public might
theoretically have input into the content of Medicare rules denying
coverage of medical procedures. One is by involvement in the Health
Care Financing Administration (HCFA) process for enacting NCDs. The
second is by raising issues concerning the legitimacy of the NCD during
the beneficiary appeal process I described briefly above. For different
reasons, these two avenues for input by the consuming public are
essentially foreclosed at this time.
Involvement by consumers in the initial HCFA NCD enactment process
is very rare. First, few patients know that they will need a medical
procedure when the NCD rule making process is underway. Second, even if
a patient has timely knowledge of an NCD process that would affect her,
she generally lacks resources to participate effectively in the
process. Third, as this Subcommittee is well aware, HCFA's Technology
Advisory Committee (TAC) did not openly invite participation by
Medicare beneficiaries or the general public. There was a lack of
clarity about obtaining a NCD for new procedures, devices, etc. outside
the context of an appeal.
The appeals process also provides no recourse for beneficiaries.
Beneficiaries have been foreclosed from questioning NCDs in the course
of coverage appeals by 42 U.S.C. Sec. 1395ff (b) (3). That provision
makes it nearly impossible for a beneficiary to challenge the rule upon
which services were denied by preventing consideration of the issue at
the administrative level. If the claim reaches federal court, a federal
judge who determines that the record is incomplete or insufficient to
support the validity of the NCD must, under Section 1395ff (b) (3),
remand the case for supplementation of the record. The court may only
determine that an item or service is covered after review of the
supplemented record.
Last fall, HCFA held a Medicare Coverage Town Meeting and published
a notice in the Federal Register inviting comments on changes to the
NCD process. NSCLC and the Consumer Coalition for Quality Health Care
joined in comments filed by the Center for Medicare Advocacy in
response to the Town Meeting and Federal Register notice. We suggested
to HCFA that the agency create a meaningful opportunity for
beneficiaries to question NCDs. The NCD process must be faster and less
arcane. We proposed that a process be established to allow a
beneficiary who is denied services or payment because of an NCD or who
is seeking to establish an NCD to request prompt administrative
reconsideration of the NCD. By filing a petition with HCFA, the
beneficiary could initiate an administrative review of the NCD that
focuses on whether it currently meets the criteria for enactment of
NCDs. Such a post-enactment review is particularly necessary for NDCs
involving new procedures because new evidence concerning efficacy
emerges over time, with HCFA re-evaluation often lagging behind. In
order to give legitimacy to this reconsideration process, the
beneficiary should have the further right of appeal to federal court.
NSCLC also responded to HCFA's Federal Register request last
December for nominations to the new Medicare Coverage Advisory
Committee that is being formed to replace the TAC. We nominated two
beneficiary representatives who have had experience with the current
process. We also encouraged other beneficiary advocates, including
advocates who are knowledgeable about assistive devices and other
technologies, to apply to serve on the new committee. It is crucial
that beneficiaries be adequately represented in any new process
developed by HCFA for making NCDs. Adequate representation means
inclusion of advocates who represent the interests of the diverse
Medicare beneficiary community. We often refer to ``seniors'' when
describing Medicare beneficiaries, yet over 5 million beneficiaries are
younger people with disabilities. Many members of this community are
adversely impacted by HCFA's failure to include new devices and
technologies among Medicare's covered services. Their voice needs to be
heard in any process that reviews and re-evaluates new technologies,
services and procedures.
Lack of appeal rights under fee-for-service Medicare where the service
has not already been received.
The current Medicare appeals process under Parts A and B is
premised on a delivery model in which beneficiaries obtain a
service or procedure and then seek reimbursement. This system
adequately meets the needs of beneficiaries who are not waiting
for a determination by Medicare before they obtain needed care.
Problems arise, however, where the issue is prior authorization
of services or items as opposed to reimbursement.
For many low-income beneficiaries, the current system
precludes their ability to obtain the equipment and services
they need. They cannot afford first to purchase the equipment
or receive the service, the initial step in getting Medicare to
cover their medical need, and then submit a claim for
reimbursement. In the context of Medicare home health services,
if the home health agency believes Medicare will no longer
cover the service, the beneficiary must pay for the service
privately while the agency submits a ``demand bill'' to the
fiscal intermediary. Again, beneficiaries who cannot afford to
pay out of pocket have no access to the appeals process to
determine whether Medicare will in fact pay for their care.
We have also found that if a home health agency or a
skilled nursing facility determines on its own that Medicare
will not pay, the agency or facility may deny the beneficiary
access to the service by refusing to admit the beneficiary.
Where that determination is not correct, the agency or
facility's unwillingness to even provide the service precludes
the beneficiary from filing a demand bill to get a
determination from Medicare about whether the service will be
covered. Without such a determination from the fiscal
intermediary in these cases, the beneficiary cannot seek an
appeal.
Just as beneficiaries enrolled in a Medicare+Choice plan
have the opportunity for an expedited appeal when the plan
denies a service, beneficiaries in fee-for-service Medicare
should have access to an expedited determination that Medicare
will pay (or not pay) for the needed device or services.
Beneficiaries should be able to request an intermediary or
carrier determination, issued within 15 days of the request,
that Medicare will cover the equipment or service in question.
They can then present the determination to the provider or
physician and obtain the item or service in question. If the
request is denied, they should have the opportunity to appeal
through an expedited appeals process. Such a process will
enable individuals who cannot afford to pay out of pocket the
opportunity to access the appeals process.
NSCLC is co-counsel in a nationwide class action filed in
the United States District Court for Connecticut called Healey
v. Shalala. In that case, we are challenging the appeals
process as it applies to denials, terminations, and reductions
of Medicare home health services. Among the issues raised in
the case are the lack of expedited review and the lack of an
appeals process for beneficiaries who cannot afford to pay
privately for their care. The case provides a good example of
the dire consequences to the beneficiary from being deprived of
both a service and a process through which to appeal that
denial. Within the first few months after the Healey case was
filed, two of the named plaintiffs who were denied home health
services died.
I mentioned earlier that, where a provider believes that
Medicare will not pay for a service and requests the
beneficiary to pay out-of-pocket, the beneficiary may request
that the provider submit a ``demand'' bill to the fiscal
intermediary (for skilled nursing facility or home health
claims) or to the carrier to get a determination of coverage
that can then be appealed if unfavorable. We have found,
unfortunately, that some providers are unwilling to submit
demand bills, thus depriving beneficiaries of the right to
pursue their claims with Medicare. In one egregious case from
Cincinnati, it took two years to get the provider to submit the
demand bill for home health services.
Adequate notice
Appeals processes work only when beneficiaries are informed
of their appeal rights. In the fee for service context, as I
noted earlier, standard notices explain what those rights are
and how beneficiaries may access the review process.
Unfortunately, there are situations in which Medicare
beneficiaries are not adequately informed of their right to
appeal or, if informed, are not given information that would
allow them to begin the appeal process. For example, the Healey
case arose because Medicare home health beneficiaries did not
receive notice from their home health agencies that their home
health services would be reduced or terminated. If they did
receive written notice, the notices often did not explain their
right to request a ``demand bill'' and to file an appeal if the
demand bill was rejected. In addition to the other relief in
that case, we are seeking that HCFA require home health
agencies to give beneficiaries a standard notice that explains
what services are being denied, reduced, or terminated, the
reasons for the denial, reduction, or termination of services,
and the procedures to follow to get a formal determination of
Medicare eligibility from the fiscal intermediary.
A GAO report \1\ issued last week found that, despite a
court ruling and changes made to the Medicare managed care
appeals process by the Balanced Budget Act of 1997, Medicare
HMOs still are not providing beneficiaries with adequate notice
of their appeal rights. The GAO found that notices frequently
failed to explain appeal rights and/or did not state the reason
for the denial. They often were given with little advance
notice of discontinuation of a service such as skilled nursing
care, leaving beneficiaries without time to plan how to obtain
and pay for the service. The GAO, after reviewing cases sent to
the Center for Health Dispute Resolution for review, also noted
that some beneficiaries do not receive notices at all.
---------------------------------------------------------------------------
\1\ Medicare Managed Care: Greater Oversight Needed to Protect
Beneficiary Rights (GAO/HEHS 99-68, April 1999).
---------------------------------------------------------------------------
The GAO's findings comport with the experiences of the
Medicare advocates with whom I work across the country. In one
case from South Florida, for example, the beneficiary was told
orally by her HMO that home health services would stop the next
day. She was given no an explanation why they were being
terminated and given no explanation of her appeal rights. When
the attorney called the HMO on the client's behalf to get more
information and to ask for an expedited plan reconsideration,
she was told by the plan representative that the client had no
appeal rights at all.
We therefore concur with the GAO recommendations that HCFA
develop standard notices and increase its oversight, monitoring
and enforcement of the Medicare+Choice appeals process. We
would extend this recommendation to oversight, monitoring and
enforcement of the appeals processes available under other
Medicare appeals systems.
Delays in the appeals process
From a policy perspective, the multiple levels of review in
the appeals process appear to add confusion and to be somewhat
unnecessary. However, in practice, the carrier review and
intermediary reconsideration stages sometimes allow for claims
to be resolved without the need for ALJ review. According to
HCFA statistics, the reversal rate is 76.9% for carrier reviews
and 42.9% for intermediary reconsiderations. In addition,
carrier review and intermediary reconsideration provide a forum
to resolve small disputes that do not meet the jurisdictional
limits for ALJ hearings ($100 for Part A claims and $500 for
Part B claims). The real problem that arises at this level of
review is the length of time it takes to get a carrier or an
intermediary determination. Delays can be particularly
intolerable where a beneficiary has paid or is paying for a
service out of pocket.
Several small changes can address this issue. These levels
of review could be made optional for beneficiaries with larger
claims who want to proceed directly to an ALJ hearing. Also,
carriers and intermediaries should be required to make
decisions within 30 days of receipt of the claim. If decisions
are not made within that time frame, beneficiaries should be
allowed to proceed automatically to the ALJ level, and be
notified of this right when they are told of their initial
appeal rights.
Similarly, time limitations should be established for ALJ
hearings and decisions. We have heard from beneficiary
representatives whose clients waiting as long as two years to
get an ALJ hearing, and may wait almost as long to get a
decision. Again, if time limitations are not adhered to, the
beneficiary should be allowed to proceed directly to federal
court. There also needs to be a provision for expedited ALJ
hearings. The Social Security Administration already has a
little known procedure to move a case to the top of the ALJ
hearing waiting list in limited circumstances, generally where
the claimant is terminally ill. This procedure may need to be
broadened and better publicized to protect individuals who
would meet the Medicare+Choice criteria for expedited
consideration.
Clarification of the home health appeals process
When the Balanced Budget Act of 1997 transferred most of
Medicare home health benefits from Part A to Part B, Congress
was aware that this change could result in the same beneficiary
having some of her home health claims being processed under the
Part A process and some of her claims being processed under the
Part B process. Thus, the BBA provides the same appeal rights
for beneficiaries under Parts A and B, changing the amount in
controversy for ALJ review in Part B home health claims from
$500 to $100. What is not clear to advocates is whether claims
for home health benefits under Part B would be administered
completely as if they were claims under Part A. We would like
further clarification that all home health claims, whether paid
under Part A or Part B, would be administered through the Part
A system.
Creation of a Medicare Court
Beneficiary advocates have questions about the creation of
a special Medicare Court. We are not aware of any data to show
that enough Medicare cases are filed to warrant the
establishment of a new Article I court. According to HCFA
reports, few intermediary reconsiderations and carrier reviews
are requested, and the reversal rates, particularly for carrier
reviews, are high. While we don't know the number of ALJ
hearings requested, we know anecdotally that the number of
appeals decreases as beneficiaries progress through the appeals
system, and that few federal court cases are brought.
Therefore, a first exploratory step before establishment of a
new court might be to gather more empirical data about the
number of appeals at the ALJ, Departmental Appeals Board, and
federal court levels.
We appreciate the efforts of Chairman Thomas and this
Subcommittee to support adequate appeal rights for Medicare
beneficiaries. We look forward to continuing to work with you
on this important issue.
Chairman Thomas. Thank you very much. All of you gave us
excellent testimony. I guess if I were going to be outraged
about anything I have heard so far is that this is not 1965;
this is 1999; this is an administration that it is in its
second 4-year term in which they use a lot of words about being
on the side of the beneficiary, and what we heard today from a
beneficiary activist, Ms. Gottlich, was that you are very
concerned about having access to appeals governed by wealth;
that there is a frontloaded process in which some people are
not able to participate to get what they believe is justice. If
this were in the legal area, that would be outrageous; it is
just as outrageous in this area.
But, probably, even worse than that was Dr. Kang's
suggestion that because of the differing decisions in various
local areas, if you are denied in your region you can go to the
other region that offers the service, and you can get it. Well,
now who gets to move around the regions? I mean, this is then
the wealthy who get to select where they get it if it is
available anywhere, and if you are unfortunate to be poor and
have to live in an area and you have been denied, you don't get
it. Now, that is the kind of inequity that maybe should have
been put up with in 1965, but it is just outrageous today,
especially when it is the consumer advocate who is complaining
about the wealth structure, and it is the representative from
HCFA who has given you a way around the system, and oh, by the
way, it is only if you are wealthy enough to play the game.
That is what I find really outrageous.
Professor Kinney, you touched on the local versus the
national, and, again, we heard the argument that somehow this
diversity is healthy, and I would just like to go across the
panel and ask you if the--have you had a chance to look at the
notice that just came out today in terms of the change?
Ms. Kinney. It was just--I only got it when I came into the
hearing room this morning.
Chairman Thomas. And that is why this is not as useful as I
would have liked. I am pleased the administration decided to
follow the law. I am disappointed it has taken them so long to
give us a product that we can try to evaluate to see if, in
fact, it does a better job. We are all anticipating that it
does do a better job, but I guess I am a little disappointed
based on all the arguments I heard a year ago that they have
continued to make the decision that there won't be a process of
rationalizing the local in any meaningful way except after what
seems to be a very laborious process. Is it a positive on the
whole or is probably not a positive any longer that we allow
these hundred flowers to blossom until somehow there is this
agreement that it ought to be done at the national level? Is
that still a useful way to try to deliver services?
Ms. Kinney. I am not sure it is avoidable. There are a
large number of individual cases to be decided nationwide and
lots of new treatments and devices being developed all the
time. Medicare is now structured to enable decentralized
decisionmaking on these money issues by carriers and other
contractors. And I am not sure that we could develop as
effective a mechanism at the national level to identify all the
potential devices, procedures, operations, that call for a
specific coverage decision and make appropriate decisions in an
expeditious and consistent manner.
On the other hand, I have always been troubled by the ``Let
a hundred flowers bloom approach.'' Early in the eighties, for
example, Medicare covered heart transplants in California but
not in other parts of the country. This has been a persistent
problem of the program since its inception. We can do a better
job of coordinating the decisions that are made at the local
level with what are being made at the national level. For
example, HCFA might establish a regional or national office to
collect, consolidate, and reconcile these policies. HCFA should
establish better mechanisms and criteria for referring issues
that call for a national coverage determination. So, while I
think that regional variation is probably unavoidable, better
coordination policy is possible.
Chairman Thomas. Yes, at least communication and
information transfer between different regions so there could
be decisions made based upon fresh information.
Mr. Coleman.
Mr. Coleman. My experience is that the lack of uniformity
does not stem from some sort of conclusion about the local
medical practice. It simply results from the fact that the
medical directors in each carrier evaluate the situation
differently. They purport to be applying the same criteria;
they purport to be looking at the literature or whatever to
decide whether or not an MRI scan is useful in a particular
procedure, but they come to different conclusions having
nothing to do with local medical practices.
Chairman Thomas. And could you infer from that that maybe
this is one of the more effective cost control methods?
Mr. Coleman. Certainly. I mean, it depends on the
personality of the local medical director. If the local medical
director is very conservative and wants to hold down costs, it
is not surprising that his coverage decisions tend to be more
strict than somewhere else.
Chairman Thomas. Ms. Gottlich, any comments?
Ms. Gottlich. From a cynical viewpoint, sometimes we prefer
that the decisions be made on a local level, because then we
know that we can appeal them through Federal court, and if they
are made on a national level, then they are not subject to
Federal court appeal if we don't like them. But I am concerned
about the delays in getting the information from one local area
to the other; it is the coordination, and then getting the
information to HCFA. I don't understand why if the local region
is covering something for a long period of time and meets their
criterion, why it shouldn't be moved up and everybody get
covered.
Chairman Thomas. Yes, timelines, criteria, number of
regions, some kind of a tip that gives you a direction that
ought to be followed. And just, finally, Ms. Gottlich, I
appreciate your tip in terms of how to expedite the review. I
don't know how much comfort it would give me that I found out
that I was denied before I died.
Does the gentlewoman from Connecticut wish to inquire?
Mrs. Johnson of Connecticut. I just want to be sure--thank
you very much for your testimony and when you do see these
regulations and have a chance to study them, we would certainly
want to know what you think. But, Ms. Gottlich, did I
understand you correctly to say that you have seen a situation
in which under a managed care choice plan someone got an appeal
dealt with in a brief period of time?
Ms. Gottlich. Absolutely. I was floored. It is a person
with AIDS, and he did the initial appeals himself. He asked for
an expedited review. He wrote ``I am terminally ill,'' which,
unfortunately, he is, and he went through the appeals process.
He is now represented by an attorney; it is a case in New York.
Mrs. Johnson of Connecticut. How long did it take him to
get to where he is now?
Ms. Gottlich. As I said, he got the notice on January 25
that the service would not be covered. So, he went through the
plan reconsideration, through CHDR, and now the ALJ hearing is
tomorrow, which is----
Mrs. Johnson of Connecticut. Now, is this the result of the
policy of the managed care plan he participates in?
Ms. Gottlich. No, I think that what happened in this
particular managed care plan was that they actually followed
the rules. We have had lots of situations in managed care plans
that don't follow the rules, and, unfortunately, some Medicare
HMOs are still saying there are no appeal rights, which is
unconscionable. But, anyway, they followed the rules. So,
they----
Mrs. Johnson of Connecticut. So, in other words, Medicare
has actually set up good rules if we can enforce them for
managed care choice plans.
Ms. Gottlich. That is right.
Mrs. Johnson of Connecticut. And, in fact, participants in
managed care choice plans have superior appeal rights to
Medicare participants in fee-for-service.
Ms. Gottlich. Oh, no question.
Mrs. Johnson of Connecticut. I am truly, absolutely
appalled at the lack of any rights of the fee-for-service
participants in managed care, and your comments earlier on the
value of the local process and the more earlier levels of
setting and educating everybody involved were very interesting
to me. How we draw from that and have a more responsive
relationship between the local processes and the Federal
process so there is more uniformity is really a concern to me.
I cannot get an adequate estimate about how much it will cost
us to include seniors in clinical trials, because, frankly,
some of the local groups are already including them, but they
don't want to call it that. They sort of don't want to own up
because then it makes them stick out. So, they are just not
saying it is clinical trials; they are just providing whatever
health care sees. So, we can't get estimates, because we don't
have a policy here. So, we are literally denying seniors, many
seniors, the right to participate in clinical trials while many
seniors have the right to participate in clinical trials, and
the system has absorbed that cost if, indeed, there is any. So,
this is a very big problem, and, ironically, any managed care
plan that is going to grow big in the private sector has to
have an MCQA certification, and that provides a lot more
visibility than a lot of these coverage decisions that we are
providing now in the public programs. Thank you very much for
your testimony.
Chairman Thomas. Does the gentlewoman from Florida wish to
inquire?
Mrs. Thurman. I really don't, and I am sorry I missed your
testimony. I just like to say, Ms. Kinney, I am interested at
some time you have made a lot of recommendations in how you
think you might streamline. I hope that maybe sometime, Mr.
Chairman, we will have an opportunity to better look at that;
maybe even get more testimony from that. And the only other
thing I would say is that it looks like this has been going on
for a long time, not just short period of time.
Chairman Thomas. It is, and I will tell the gentlewoman
that it came to a head, because we finally got them to admit
that what they were doing was against the statute, and I guess
I am a little underwhelmed at the more than a year review of
what would resolve it in terms of opening up the process, and I
just thought that since a number of these areas had been looked
at for some time, that we would see some tweaks along the line
to improve both on a timeline and on a cleaning up of all those
lines crossing. So, I am little more disappointed in the
proposed work product than I wanted to be.
Mrs. Thurman. And I don't disagree with that, and I think
that all of the things that have been mentioned here today,
particularly to those that are being covered by this, on the
other side of this, I know that we have also made a lot of
changes in the law, and, as we heard just a couple of weeks ago
or months ago about the 300 changes that have been going on,
that is quite a bit of a responsibility too.
Chairman Thomas. Which leads me to my next question, and I
would like you folks to respond to it. I don't like to spend
money unless we have to, because it is not my money; it is
other people's money. But, periodically, as areas have gotten
more complex and decisions are more and more required to be
made in a context of expert and particular knowledge, we have
created courts under article 1 of the Constitution instead of
the judicial branch article that are called legislative
courts--tax court of the United States in terms of the
complexities of the tax law. Do you believe we have reached a
point or that it is overdue that we create, in essence, a
Medicare court, a legislative court, rather than relying on the
hit and miss choice in the administrative law justices from the
Social Security Administration; that we talk about people who
are going to render decisions in this area who are
knowledgeable in the law who understand it, and who, through a
collection of decisions, build a degree of what the
constitutional courts would call state of decisis, so that you
can maybe speed up the process by having courts dedicated to
this decisionmaking process? Is Medicare adult enough to
require its own court, I guess is what I am saying?
Ms. Kinney. Well, I think the Medicare court idea is an
intriguing idea. One of the concerns you have is whether the
decisionmakers on the court could be ``captured,'' if you will,
by the bureaucracy. By this I mean, over time, their thinking
would become too aligned with the program and out of touch with
the concerns of beneficiaries. A benefit of the general
jurisdiction courts has been their ability to take a fresh look
at issues. I do think it is important to make sure that the
right issues come before the court and that policy issues like
the national coverage determinations probably should stay with
the agency--that is, HCFA-- which is accountable for the money
spent by Medicare and also the safety of the beneficiaries.
Further, I am not sure that a Medicare court would be any
better to adjudicate the validity of those policies than the
Federal judiciary now. But, I think it is an idea that it is
intriguing in terms of simplification. I would also like to see
the courts try to experiment with alternative dispute
resolution techniques and other ways to deal with beneficiary
disputes.
Chairman Thomas. Thank you, because I really haven't made
up my mind, and I am trying to see where the evidence falls.
Mr. Coleman, do you have a comment on that at all?
Mr. Coleman. My comment, I guess, would be that the most
complicated issues in Medicare relate to cost reimbursement,
and those are the issues that go through the Provider
Reimbursement Review Board and then into the courts. Cost
reimbursement is being phased out, as you know, so that body of
cases--which I think is the most complicated body of cases--
will eventually go away, hopefully. And to the extent that more
and more Medicare beneficiaries move into managed care, it will
diminish further. So, it is a kind of need which may be
diminishing rather than increasing.
Ms. Gottlich. I have practical considerations. Where would
the court be located? How would clients who are homebound or in
nursing homes get to the court? If it is in Washington, DC, how
would legal services attorneys from Alaska and Hawaii or even
southern Maryland or southern Virginia afford to get up here?
So, those are my practical concerns.
Chairman Thomas. Thank you, and, of course, if we are
successful in implementing a premium support model, a lot of
these particular decisions would be negotiated in a way which
would resolve many of them faster, more expeditiously, and
between competing interests in the marketplace. But, I am
looking at ways to try to straighten that process out, and I
appreciate your input in that regard.
If there are no further questions, I want to thank you very
much for your testimony, and, as the gentlewoman from
Connecticut said, if you will be filing comments on this
notice, we would very much like to get them, and if you don't
go to the filing stage, we would like your comments anyway.
[The following was subsequently received:]
Memo
To: Subcommittee on Health, House Committee on Ways and Means
United States Congress
From: Eleanor D. Kinney, J.D., M.P.H.
Samuel R. Rosen Professor of Law &
Co-Director, The Center for Law and Health
Indiana University School of Law--Indianapolis
Indianapolis, IN
Subject: Supplemental Statement on Medicare Coverage Decisions and
Beneficiary Appeals
Date: October 21, 1999
In the April 22, 1999 hearings of the Subcommittee on Health, House
Committee on Ways and Means, Chairman Thomas offered witnesses an
opportunity to submit additional comments for the record on the recent
Notice of the Health Care Financing Administration (HCFA) on Procedures
for Making National Coverage Decisions (the Notice).\1\ Below are my
comments on the Notice.
---------------------------------------------------------------------------
\1\ Health Care Financing Administration, Notice, Medicare Program;
Procedures for making National Coverage Decisions, 64 Fed. Reg. 22,619
(April 27, 1999).
---------------------------------------------------------------------------
Introductory Comments
The coverage policy making procedures described in the
Notice are, in general, well conceived and designed to
facilitate fair and expeditious decision making on difficult
questions of Medicare coverage of new and existing medical
items and services including medical technologies. The Notice
is clearly written and describes an open process that accords
all interested parties clear guidance on how to participate in
the Medicare coverage decision making process.
HCFA is also to be commended for the innovative use of the
Internet in the publication and docketing aspects of the
coverage decision making process. It is also useful to permit
electronic filing of comments regarding anticipated coverage
decisions as this opportunity facilitates the participation of
Medicare beneficiaries and physicians in formulating Medicare
coverage policy.
I have three major concerns with the Notice: (1) its
promulgation as a procedural rule and the resulting appearance
that HCFA's commitment to the process is uncertain, (2) the
representation of beneficiaries in the process, and (3) the
wisdom of allowing local Medicare contractors to supplement
national coverage decisions.
1. Promulgation as a Procedural Rule
The most important objective HCFA should accomplish with
this Notice is to establish a process that has the reputation
for integrity and effectiveness among Medicare beneficiaries
and the other parties, namely medical providers as well as
medical device manufacturers, with a direct professional or
business interest in specific Medicare coverage issues.
However, the Notice seems inconsistent with this key objective
in several respects.
Specifically, HCFA justifies its decision to promulgate the
Notice as a procedural rather than legislative rule \2\ in an
unfortunate way (pp. 22,621-22). Specifically, HCFA refers to
the coverage decision making process as an ``internal
operation.'' It does seems odd to characterize this process,
which has a major impact on many Medicare beneficiaries and
their providers as well as the manufacturers of new medical
technologies, as ``internal.'' Further, the justification for
procedural rules, e.g., according an agency ``latitude in
organizing its internal operations,'' does not really fit the
coverage policy making process in which there is great public
interest.
---------------------------------------------------------------------------
\2\ 5 U.S.C. 553(b)(3)(A) (exempting ``rules of agency
organization, procedure, or practice'' from notice-and-comment
rulemaking).
---------------------------------------------------------------------------
Perhaps more important, HCFA does not really commit itself
to firm deadlines or timeframes in the coverage decision making
process. For example, in Section E, ``Additional Factors
Affecting Our 90-Day Timeframe for Responding to Formal
Requests,'' HCFA suggests that many factors justify extensions
of decision making timeframes. While such extensions for the
listed reason may be appropriate as a practical matter, such
flexibility with timeframes gives the impression that they are
effectively voluntary from HCFA's perspective. HCFA may want to
consider revisiting the timeframes in the Notice and making
them more firm once HCFA has more experience with the process
under the Notice.
Ultimately, the reputation of the Medicare coverage
decision making process depends on its implementation and
operation. Thus, HCFA should make every effort to ensure that
the process is implemented and operated with integrity.
Specifically, HCFA should meets deadlines and timeframes except
in extraordinary and understandable circumstances. Further,
HCFA should state requirements for achieving affirmative
coverage decisions in the process clearly and explain reasons
for negative coverage decisions adequately.
In the future, HCFA might consider promulgating a
legislative rule through notice-and-comment rulemaking to
establish the elements of the Medicare coverage decision making
process. This step would greatly enhance the reputation of the
process for integrity, effectiveness and fairness and would
also confirm HCFA's commitment to the process. A process with
such a reputation would engender confidence in HCFA's decisions
on Medicare coverage issues and, hopefully, reduce appeals
generated by medical device manufacturers of the type that now
occur in the Medicare beneficiary appeals process or in
judicial challenges. Finally, a coverage policy making process
with a strong reputation is crucial to meet the challenges
posed by the advances in costly new medical technologies now
and in the future.
2. Representation of Beneficiaries in the Process
One of the strongest aspects of the Notice is HCFA's
commitment to facilitating the input of Medicare beneficiaries
in making coverage decisions. In its section on ``Informal
Contacts'' (p. 22,621), HCFA will assume the responsibility of
``gathering and preparing the information necessary to proceed
to a formal request'' when requests are made by ``a Medicare
beneficiary or another member of the public who we could not
reasonably expect to have access to scientific data that may be
necessary to support a formal request.'' This is an excellent
strategy which shows HCFA's thoughtful regard for the barriers
to beneficiaries in coverage policy making.
The problem of obtaining adequate input from beneficiaries
in the coverage policy making process is very difficult.
Beneficiaries, as a general rule, do not have the requisite
medical expertise or financial resources to participate in the
policy making process in a meaningful manner. Further, unless
individual beneficiaries have a particular need for a
particular item or service, they are unlikely to participate
actively in decision making with respect to specific coverage
issues. Further organizations that customarily represent
beneficiary interests are not generally well versed in medical
matters.
Ostensibly, under liberal administrative law theory, the
agency represents the public in a regulatory process. The
agency, as the delegate of the elected legislature, must
execute the directives of the public's duly elected
representatives. In that regard, HCFA should continue to
emphasize its role as the advocate for Medicare beneficiaries
in the coverage decision making process.
In addition, HCFA might explore other strategies that will
enhance effective beneficiary representation in the coverage
decision making process. For example, HCFA might consider
appointing physicians and others with relevant medical
expertise to the Medicare Coverage Advisory Committee with the
specific mandate to represent the interest of beneficiaries.
That appointee might have the specific charge to work with
beneficiaries and interest groups representing their interests
in marshaling beneficiary input on specific coverage decisions.
HCFA might visibly allocate staff to this effort as well.
3. Allowing Medicare Contractors to Supplement National
Coverage Decisions
Medicare contractors are authorized to make ``local medical
review policies'' (LMRP) that govern Medicare coverage in the
absence of other guidance from the national office. In the
Notice, HCFA clarifies that Medicare contracts must follow
national coverage determinations and that LMRPs must be
consistent with these policies. However, the Notice also
indicates that a Medicare contractor ``may, however, make an
LMRP that supplements a national coverage decision.'' (p.
22,621).
This later option seems unwise. If an issue were worthy of
a national coverage decision, then HCFA has made a judgment
that there should be consistency in coverage throughout the
United States. However, allowing local Medicare contractors to
augment national coverage policies dilutes their uniform and
consistent national character. This result could be quite
troubling for some providers as well as medical manufacturers
that operate nationwide. In sum, where HCFA has determined that
an issue is of national import, national consistency should be
promoted.
BENNETT, TURNER & COLEMAN, LLP
WASHINGTON, D.C. 20006
October 7, 1999
The Honorable William M. Thomas
Chairman, Subcommittee on Health
Committee on Ways and Means
U.S. House of Representatives
Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Thomas:
At the Health Subcommittee's April 22, 1999 hearing on Medicare
coverage decisions and beneficiary appeals, you invited me and other
members of the witness panels to submit comments regarding the revised
procedures established by the Health Care Financing Administration
(HCFA) for making national coverage decisions. Those procedures were
published in the Federal Register of April 27, 1999.
From my standpoint, the principal elements of the new procedures
are:
Establishment of internal timeframes for the various steps
in HCFA's process of making a national coverage decision;
Definition of the required contents of a formal request to
HCFA for a national coverage decision;
A commitment to post information on the HCFA Internet site
so that the public can determine what coverage decisions HCFA is
considering and where HCFA stands in the process; and
The use of a Medicare Coverage Advisory Committee to
consider issues referred to it by HCFA.
Although these actions are clearly improvements in HCFA's process,
the changes are nevertheless quite modest and fall far short of
addressing all the deficiencies of the current process. The thrust of
the changes is to introduce greater openness into the HCFA process of
making coverage decisions, which had been essentially secret. This is a
welcome development. In addition, establishing a formal procedure to
ask for a national coverage decision will undoubtedly be useful to many
affected by the Medicare program.
The new procedures, however, do not deal with some of the greatest
needs relating to the coverage process, including:
Establishing clear criteria for what Medicare considers a
medically necessary service that will govern both HCFA and its
contractors;
Improving the process for public input into local coverage
decisions made by Medicare intermediaries and carriers; and
Creating an effective appeals mechanism by which coverage
decisions made at the national and the local levels can be challenged.
These issues should be addressed by HCFA or the Congress.
As to the new procedures that HCFA has adopted, in my view the main
shortcomings relate to the deadlines for action on national coverage
decisions, which are not very demanding. Although HCFA has stated that
it will act on formal requests for coverage decisions within 90 days,
the action at the end of that period may be merely a decision to ask
for a technology assessment by an outside entity, to refer the issue to
the Medicare Coverage Advisory Committee, or to do nothing at all and
leave the issue to the local Medicare contractors. If an issue is
referred to an outside entity for a technology assessment, there is no
firm deadline for the assessment and the notice does not appear to
establish a timeframe in which HCFA will act following receipt of the
assessment.
If HCFA makes a decision in favor of coverage, implementation would
not be immediate. HCFA states that generally national coverage
decisions would be made effective within 180 days after the first day
of the next full calendar quarter following the decision. For example,
if HCFA makes a national coverage decision on February 1, it would go
into effect by September 30. The notice attempts to justify this
extraordinary delay as necessary for administrative changes such as
adoption of billing codes and making systems changes at the
contractors.
The potentially lengthy periods of time in which HCFA may consider
whether to extend coverage to a new procedure or technology, and the
subsequent delay in implementation of a decision favoring coverage,
seem unduly prolonged. During these periods Medicare contractors may
continue denying Medicare beneficiaries access to a new procedure or
technology--even for months after HCFA has decided that it should be
covered.
Thank you for the opportunity to submit these comments.
Sincerely yours,
Terry Coleman
National Senior Citizens Law Center
Washington, DC 20005
Chairman William Thomas
Subcommittee on Health
House Committee on Ways and Means
Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Thomas:
You asked the witnesses at the April 22, 1999, hearing on Medicare
appeals to submit to you our comments on the new HCFA National Coverage
Determination (NCD) process. Please accept this letter as my response
to your request.
HCFA's new procedure, which was published in the Federal Register
on April 27, 1999, accomplishes various goals. The procedure (1)
details several situations which will initiate HCFA's review process
for making a national coverage decision;(2) describes the process for
requesting a new NCD or review of an existing NCD; (3) establishes time
frames for acting on a formal request; (4) establishes a process for
posting the status of formal requests that are under investigation on
the HCFA web site; and (5) establishes a Medicare Coverage Advisory
Committee to review requests and recommend to HCFA whether services are
``reasonable and necessary.''
The new procedure will make some improvements in the NCD system by
creating guidelines and adding more openness and public in-put into the
process. To assist beneficiaries who request an NCD, HCFA reserves the
discretion to treat informal contacts from individuals or organizations
as formal requests, and may in some cases gather and prepare the
information necessary to proceed to a formal request. I am also pleased
to report that Sally Hart, Esq., a consumer advocate nominated by the
National Senior Citizens Law Center, was appointed to serve on the
Medicare Coverage Advisory Committee.
Nevertheless, HCFA's procedure does not address two of the major
concerns I raised in my initial testimony. The process still involves a
substantial amount of delay. HCFA ``intends'' to make decisions on
formal requests within 90 days but acknowledges that this deadline may
not be met in a number of cases. If the issue is complex and
controversial and potentially a technology assessment, the formal
request may be referred to the Medicare Coverage Advisory Committee,
which meets only twice a year. Any additional information discovered or
submitted during the consideration period will restart the tolling of
the 90 day period. And the 90 day clock does not even begin to run
until after a request for an NCD is designated a formal request.
Especially where consumers ask HCFA for an NCD, the request can
languish for an indefinite period of time in the informal stage while
sufficient evidence is gathered to transform it into a formal request.
HCFA also does not address our primary concern, the lack of an
adequate appeals process when Medicare coverage is denied based on an
out-of-date NCD or because HCFA has not yet determined whether Medicare
will cover a new service or technology. The Notice fails to outline a
meaningful process for beneficiaries to question NCDs. As I explained
in my testimony before the Subcommittee, beneficiaries are left with
virtually no recourse other than to request a formal determination by
HCFA. The onerous NCD process makes it unlikely that many beneficiaries
who need a particular service or technology will submit a formal
request and that, if a request is submitted, it will be processed in a
timely enough manner to benefit the requesting beneficiary.
Thank you for your continuing interest in improving the Medicare
appeals process for beneficiaries.
Sincerely,
Vicki Gottlich, Esq.
Chairman Thomas. Thank you very much.
And if I could now call up the third panel. On the third
panel, this is an example rather than abstract or third party.
These are individuals who have direct, personal experience with
the coverage process.
The first witness will be Walter M. Rosebrough, who is
chief executive officer of the Hill-Rom Company in Indiana, and
he will be representing in his official capacity the Health
Industry Manufacturers Association; some of those individuals
who have come up with a lot of these new, innovative medical
technologies.
The second panel member is Frank Kiesner--if that is
correct--chief executive officer of Oncotech Incorporated, and
they are very cutting edge in dealing with cancer patients.
And then our third witness will be Dr. William Plested, who
is a thoracic and cardiovascular surgeon, and he will be
representing the American Medical Association and will provide
us with some of the virtues and vices of the current system
from a physician's perspective.
Any written testimony you may have will be made a part of
the record, and, Mr. Rosebrough, we will begin with you, and
then we will simply move along the panel.
STATEMENT OF WALTER M. ROSEBROUGH, JR., PRESIDENT AND CHIEF
EXECUTIVE OFFICER, HILL-ROM COMPANY, BATESVILLE, INDIANA; AND
MEMBER, BOARD OF DIRECTORS, HEALTH INDUSTRY MANUFACTURERS
ASSOCIATION
Mr. Rosebrough. Thank you, Mr. Chairman. I am testifying
today on behalf of HIMA, the Health Industry Manufacturers
Association, on whose board of directors I also serve. HIMA
strongly supports efforts to improve the Medicare appeals
process. My written testimony, which has been provided to you,
suggests some our suggestions in detail, but in the few minutes
today that I have, I would like to share my own company's
difficulty in getting Medicare payments for some of our
therapeutic products, specifically, the Clinitron bed and the
frustrations we have had dealing with the Medicare appeals
process.
The Clinitron used a technology called air-fluidized
therapy to treat patients that have extremely compromised skin.
Classic examples of these type of patients are burn patients or
patients with severe ulcers. As hard as it is to believe,
pressure ulcers or bed sores can get so bad, you can literally
see the bones of the patients. They are life-threatening,
chronic wounds. In effect, the Clinitron makes these patients
float as though they were suspended in a fluid which reduces
the pressure and friction on the skin which enhances the
healing process. This technology is used in hospitals and
nursing homes as well as in home care in North America, Europe,
Japan, and throughout the world.
In 1990, we applied for and HCFA issued a national coverage
decision approving this technology for a specific population of
very severe wounds in home care after extensive proof of both
clinical and cost effectiveness. Since then, however, the
agency's DMERCs, durable medical equipment regional carriers,
have denied the majority of claims for reimbursement for this
treatment. These denials are disturbing and in our opinion
directly contrary to the national coverage decision. As a
result, we have had to appeal these decisions to administrative
law judges on a case-by-case basis to overturn the DMERC
decisions.
I want to emphasize that in thousands of cases brought to
the administrative law judges, or ALJ, over the 9-year period
since the approved national coverage, the judges have
overturned the DMERC rejections in over 95 percent of the
cases; over 95 percent of the cases, ALJ has overturned those
decisions. In fact, in most cases, the DMERCs don't even show
up for hearings anymore.
On the one hand, Mr. Chairman, we are very pleased by the
overwhelming success rate at ALJ. On the other hand, we are
deeply troubled. Despite the remarkable consistent record of
ALJ overturning the DMERCs and despite the tremendous efforts
we put forth to work with the DMERCs, they have done virtually
nothing to change their policies of denying the initial claims
for the Clinitron. In fact, for the most recent 6-month period,
they have denied about 80 percent of the requests for
reimbursement. From this, it is very clear to us that the
appeals process has done absolutely nothing to resolve the
fundamental dispute of the regional DMERC policies that we
believe are inconsistent with the HCFA national policy.
Our second major concern is that this system of case-by-
case adjudication just takes too long. HCFA data show that in
fiscal 1997, on average, for part B carrier claims, it took 119
days, about 4 months, for a beneficiary to get through the
carrier review and fair hearing steps. When this is added to
the other steps in the process, it takes us for our process,
overall, an average of more than 2 years to obtain a decision
from ALJ on coverage. My wife and I had two children in
approximately that same time period, and that is even with an
affirmative national coverage decision. From a manufacturers
perspective, Mr. Chairman, I can tell you personally that the
kind of experience we have gone through to secure our Medicare
coverage has been discouraging. But from a patient's
perspective and for those physicians who write the orders for
those products, I believe it is doubly discouraging.
How many therapies are denied to needy patients because of
this bureaucracy? I have no idea. How confusing is it to the
patient when they get their copay bill 2 years after they have
received the therapy? How many providers can afford to take the
risk and a capital cost of 2-year receivables? To have one
level of the agency say yes and a lower level of the agency say
no and then to wait 2 years to get a final answer, in my view,
is simply ridiculous.
In the short time I have left, Mr. Chairman, let me just
list a handful of suggestions that we think are most critical
to address these problems. First, Congress should require HCFA
to create a clear, understandable appeals process for local
coverage policy decisions. Currently, none exists. Only the
claim-by-claim adjudication that is in our case may never
resolve the real policy issue; it is only claim by claim.
Second, Congress should confirm that manufacturers of medical
products have standing as agreed parties in coverage decisions
and appeals. This would let us bring forward in a single appeal
the policy issues in question rather than requiring individual
beneficiaries to bring, perhaps, thousands of individual claims
which may never resolve the central issue. By the way, as an
aside, it would be much more efficient and might require much
less money than we have been talking about today in
adjudicating those appeals. Third, Congress should require HCFA
and its contractors to meet reasonable, commonsense timeframes
for appeals. Any process or review that takes 2 years is
inefficient and totally unacceptable.
As I said, Mr. Chairman, my written testimony contains
additional recommendations and details. I will be happy to
answer any questions you or other panelists may have.
[The prepared statement follows:]
Statement of Walter M. Rosebrough, Jr., President and Chief Executive
Officer, Hill-Rom Company, Batesville, Indiana; and Member, Board of
Directors, Health Industry Manufacturers Association
Summary
My name is Walt Rosebrough. I am the President of Hill-Rom,
Inc., a manufacturer of patient care systems, including
hospital beds, located in Batesville, Indiana. I am testifying
today on behalf of the Health Industry Manufacturers
Association--known as HIMA--on whose Board of Directors I
serve. Accompanying me is Brad Thompson, a partner in the law
firm of Baker & Daniels and counsel to HIMA.
In my remarks today, I want to leave you with the following
five points:
While the Health Care Financing Administration, or
HCFA, is working hard to reform the process by which it makes
coverage decisions and deserves much praise, there remain
important issues such as the need for early collaborative
meetings between the agency and manufacturers that continue to
be unresolved.
One of those unresolved issues--the need for an
effective appeals process--is critically important to ensuring
that the agency is accountable for the coverage decisions it
makes.
Our experience at Hill-Rom with the
CLINITRON bed shows that the current appeals process
is ineffective at resolving policy disputes at the local level,
and moves far too slowly to meet the needs of beneficiaries.
There are several statutory improvements that
Congress can make to the appeals process, including creating an
appeals mechanism for policy issues at the local level and
adding the opportunity for administrative review of national
coverage decisions. These steps will more efficiently and
effectively resolve coverage disputes.
HCFA, as a government agency that regulates the
access to care by seniors, should not be exempt from the need
to offer an effective appeal mechanism.
Before I begin, Mr. Chairman, I want to say a special
thanks to you personally and to the Subcommittee for the
instrumental role you have played in bringing about needed
improvements in the Medicare coverage process. There is no
question that HCFA's efforts to modernize coverage--to make it
more open, timely, and predictable--are due, to no small
degree, to your continuing efforts.
Device Industry Proposed Reforms of Medicare's Technology Policies
To assist HCFA in its task of reforming Medicare coverage,
HIMA in mid-1998 developed a range of recommendations for
specific improvements to the system. They are described in
HIMA's paper entitled ``Modernizing the Medicare Coverage
Process: A Prescription for Fundamental Reform of Medicare's
Technology Policies.'' Copies have been submitted to the
Subcommittee.
Earlier this year, HIMA also participated in the work of a
broad group of medical device industry representatives that
developed consensus policy positions on the procedural elements
of Medicare coverage decision-making. That consensus paper was
delivered to HCFA in January. The same group is now set to
tackle the substantive criteria that HCFA should use to
evaluate technology for possible coverage.
Recommended Coverage Process Reforms
One of the most significant improvements to the coverage
process that HIMA and the industry recommend is the need for
HCFA to use a notice-and-comment type approach to collecting
data and other useful information on proposed coverage
policies. While we are certainly not advocating that HCFA
follow rule-making in reaching individual coverage decisions,
we do think it is critical that HCFA use the Internet and other
economical avenues to reach out to a broad public audience to
collect information on coverage issues.
In addition, the device industry recommends that HCFA
ensure openness in the process for initiating coverage
decision-making and in the process for requesting a technology
assessment. We also think HFCA should offer manufacturers and
others the opportunity to request an early meeting with the
agency to reach agreement on the type of information necessary
for HCFA to make a coverage determination.
These collaborative meetings might take place well before
the start of the coverage process. Not only would such meetings
improve the quality of the data presented to the agency, the
meetings would add greater certainty to the process from the
company's standpoint.
Procedural Reforms Should Be Codified in a Rule
As you know, Mr. Chairman, the controversy over the
coverage process has been alive for well over ten years. To
achieve the necessary accountability, obtain broad public input
on the design of the coverage process, and resolve these issues
in an enduring fashion, we believe the agency needs to put
these concepts in a binding rule. Unfortunately, the agency so
far has opted instead for an informal notice of the kind it
published in 1987. We hope it will reconsider that decision.
Agency Progress To Date
The good news is that the agency--with your strong support
and oversight, Mr. Chairman--is already making significant
efforts to reform the coverage process. After talking with many
of the stakeholders and holding a town hall meeting last
September, HCFA has re-chartered its technology advisory
committee to make it compliant with the Federal Advisory
Committee Act. HCFA has also shed some light on the basis for
its recent coverage decisions, and I believe it is working on
some guidance in a couple of areas. In addition, HCFA appears
willing to discuss some issues--such as timeframes--that are so
important to ensuring timely access to care. Dr. Kang has made
a tremendous effort to have a dialogue with stakeholders, and
we hope the current spirit of cooperation continues on all
sides.
Effective Appeals Process Essential in Making Coverage Process Work
HCFA has not embraced all of the stakeholders' suggestions.
One area of contention is the need to reform the appeals
process. A significant part of the industry consensus paper was
devoted to describing improvements that are needed in the
system of Medicare appeals. Having an effective appeals process
for a government agency such as HCFA is absolutely essential to
ensure the proper level of accountability.
Appeals are necessary when an agency, for whatever reason,
departs from a legal standard--whether that standard is the
process the agency needs to follow or the criteria the agency
is supposed to apply. Judicial and administrative appeals are
not intended to allow stakeholders to overturn an agency
decision when reasonable minds simply differ. The agency's
decisions are entitled to deference. Even so, the mere
existence of an effective appeals mechanism creates an
environment in which the agency listens more closely to the
public's concerns.
Current Appeals System does not Resolve Coverage Disputes Effectively
or Promptly
While an effective appeals system is essential to ensuring
appropriate coverage decisions, the current system
unfortunately has several deficiencies. I would like to
describe for you what we at Hill-Rom see with respect to how
the current appeals system handles issues surrounding coverage
of one of our products--the CLINITRON ATHOME
Air Fluidized Therapy Unit--or more commonly known as the
CLINITRON Bed.
Background on the CLINITRON Bed
The CLINITRON bed uses a technology called ``air fluidized
therapy,'' or AFT, to treat a variety of very sick patients.
These patients include, for example, severe burn victims and
those with severe pressure ulcers that don't respond to other
therapies. Very basically, AFT involves tiny silicon beads that
are placed in motion beneath the patient by gentle air flow.
The light air flow through the beads ``floats'' the patient
resulting in reduced pressure on the patient's body. The
reduction of pressure and accompanying elimination of shear and
friction to the skin enhance healing and help prevent further
tissue damage.
We developed the product in the 1970s. Numerous studies
were conducted which reinforced the clinical efficacy of AFT.
In 1987, the Public Health Service developed consensus
guidelines for the proper use of AFT at home, with input from
health professional societies and patient groups. By 1990,
enough data existed that, after extensive study, HCFA issued an
affirmative national coverage decision delineating the patients
who could benefit from this therapy at home. That policy can be
found in section 60-19 of the Medicare Coverage Issues Manual.
As you well know, HCFA deliberates carefully before issuing
national coverage determinations, and not many technologies
have met that standard.
One would have thought that our story would end there. It
did not.
To be quite blunt, the Durable Medical Equipment Regional
Carriers, or DMERCs, did not embrace HCFA's decision. As best
we can determine, they simply did not agree with the HCFA
physicians and scientists on the usefulness of the technology
and have sought to add their own definition of medical
necessity that is inconsistent with the national policy. As a
result, we estimate that the DMERCs have denied close to 80
percent of all claims for reimbursement of the CLINITRON bed
presented to them since the national policy was published in
1990.
Appeals of AFT Claim Denials
While those denials have dissuaded some doctors and
patients from seeking this treatment, many others, indeed
thousands of beneficiaries with the severe injuries identified
in the national policy, have sought to obtain access to AFT--
despite the opposition from the DMERCs.
The appeals process for these denials involves five steps.
In sequence, they are (1) a paper review by the carrier, (2) a
``fair hearing'' by a carrier hearing officer, (3) a hearing
before an administrative law judge, (4) an appeal to the
departmental appeals board, and (5) if necessary, an appeal to
a U.S. court. Because of the tremendous time, inconvenience,
and cost of such appeals, we have helped our elderly patients
by accepting assignment of their claims, and have kept track of
the results.
In the literally thousands of AFT appeals to administrative
law judges since 1990, the beneficiaries have been successful
in overturning the carrier decisions in more than 95 percent of
the cases.
What the AFT Experience Tells Us About the Appeals System
On the one hand, that success rate is the good news about
the system. With an obviously strong case seeking the
enforcement of a national coverage decision, the beneficiaries
are successful in over 95 percent of the AFT cases.
But in two very real ways, this example shows the system
also fails. First, incredibly the initial denial of claims
continues after nine years of the DMERCs losing thousands of
appeals and after numerous meetings between the DMERCs and
Hill-Rom. For the most recent 6-month period, the average
denial rate for AFT by the four DMERCs is still over 80
percent. The appeals process has done nothing to resolve the
fundamental dispute over the local DMERC policies that are
inconsistent with HCFA's national policy.
Second, the system simply takes too long to effectively
resolve even the claim-specific disputes. Data obtained from
HCFA show that, in fiscal 1997, on average for a part B carrier
claim, it took 119 days for a beneficiary to get through the
carrier review and fair hearing. HCFA has previously testified
before Congress that it takes 664 days, on average, to receive
a decision from an administrative law judge, measured from the
date the hearing is requested. Thus, combined, it takes an
elderly patient on average 783 days, or well over two years, to
obtain a decision from an ALJ after initiating the appeals
process. That is simply too long to be an effective option for
most beneficiaries. Moreover, most small medical device
companies could not afford to take assignment of claims in
these circumstances, and survive long enough to get paid.
Congress Should Make Improvements in the Medicare Appeals Process
In our experience, as well as the experience of others who
have worked with the Medicare appeals process, there are
several improvements that Congress can make.
Permit Appeals From Local Policy Decisions
While the current law allows judicial appeals from national
coverage decisions (albeit through a seriously flawed process),
unfortunately there is no appeals process at all for local
coverage policy decisions. Rather, we must rely on a system
that forces each beneficiary to appeal individual claim denials
on a claim-by-claim basis. When broad principles are in dispute
at the local level, Congress should allow aggrieved parties to
challenge the broad principle at issue, rather than force an
inefficient claim-by-claim adjudication that, as in our case,
may never resolve the real dispute.
Medical device innovation is unique in the medical field,
and is characterized by continuous, incremental improvements,
based on the feedback of professionals who use these
technologies in actual clinical settings. The local coverage
process is especially well suited to evaluating innovative
medical technology, and should remain essentially intact. Thus,
while we recommend reforming the appeals process at the local
and national levels, we start from the important premise that
the present ratio of local to national decisions serves the
system well. The current emphasis on local decision-making
offers important flexibility that needs to be preserved, is
more economical to administer, and helps to ensure that new
technology does not diffuse until it is well-accepted.
Create Reasonable Timeframes for Appeals
As I explained above, the appeals process simply takes too
long to complete. While this is obviously a function of
resources, the decision-makers in the appeals process also need
to understand the importance of timely decisions. Statutory
timeframes would communicate the Congressional expectation
regarding the promptness with which these appeals should be
resolved.
Require Finality of Policy Decisions
In many instances, HCFA and the DMERCs deliberate on
coverage issues for years. Because there are no final decisions
during the time of that deliberation, any appeal is effectively
foreclosed, even at the national level.
For an appeals mechanism to create the proper level of
accountability, there must be some way to require HCFA and its
local contractors to reach decisions that would then be subject
to appeal. To be sure, these decisions do not need to be a
``yes'' or ``no.'' They could include a decision that, as of
the date of the decision, there does not yet exist enough data
to make a coverage decision. Permitting appeals of this type of
decision would create accountability in those instances where
the agency is simply dragging its feet and adequate data do
already exist.
Allow Administrative Appeals of National Coverage Decisions
Under the current law, people who disagree with a national
coverage decision are required to go directly to court, with no
opportunity for administrative review. Given the tremendous
medical and scientific complexity of national coverage
decisions, we believe it would be productive to interpose a
level of administrative review before proceeding to court.
While the creation of a Medicare court would reduce the
problem, federal district court judges today usually do not
have the training to comfortably consider the types of issues
that need to be considered as a part of a national coverage
decision. An administrative body with the proper expertise, in
all likelihood, would make more informed judgments to the
benefit of everyone involved, before any judicial review.
Confirm That Manufacturers have Standing as Aggrieved Parties
in Coverage Decisions
The Administrative Procedure Act gives aggrieved parties
standing to challenge broad rules imposed by an agency. To
allow the challenges to broad policies at the local level that
I referred to earlier, it is important for the Congress to
clarify that manufacturers that sell products used by Medicare
beneficiaries are aggrieved parties and have the ability to
directly challenge policies that affect the access of
beneficiaries to their products. This would reduce the appeals
cost for the government because manufacturers would be able to
address the broad issues in a single appeal, rather than
require individual beneficiaries to bring perhaps thousand of
individual appeals, with no guarantee that the process will
actually resolve the real dispute.
Permit Courts To Order Corrective Action, Rather than Merely
Remanding Back to the Agency
The current statute sets forth certain limitations on
appeals from national coverage decisions, such as requiring
that a court merely remand a dispute for further development of
the record, rather than, in appropriate instances, fashioning a
corrective order. That limit is out of step with what the
Administrative Procedures Act authorizes in the review of any
other administrative action. We see no reason to treat national
coverage decisions differently from other agency actions and
recommend deleting that limitation.
HCFA Unfounded in Claiming its Decisions Should not be Subject to
Appeal Because it is a ``Market Actor''
Medicare Holds Monopoly Position
We have heard HCFA say, in many different forums, that the agency
is more akin to a private insurance company or market actor than a
regulator. HCFA's reasoning seems to suggest that, because HCFA
reimburses for items and services in addition to regulating, it ought
to enjoy the same freedom from the need to publicly justify its
purchases that it perceives private insurers enjoy. We do not agree
with the comparison, or with the premise that private insurance
companies do not have rigorous appeal processes.
Unlike a private insurance company, whose shareholders voluntarily
choose to invest in that insurer, Americans have no choice but to pay
the social security taxes that fund the Medicare trust fund. And thus
when Americans become seniors who qualify to receive benefits under
Medicare, at that point we still have no real choice but to participate
in Medicare. Medicare quite simply has a monopoly position in the
marketplace for health insurance for the more than 38 million
beneficiaries who depend upon the program for health care coverage.
Market Forces Keep Private Insurers Accountable
In practical terms, this means that the fee-for-service side of
Medicare does not have the same market place forces keeping it
accountable that private insurers have. On a daily basis, private
insurance companies must strive to make sure that their policyholders
are happy with the level of services the insurance company provides.
Otherwise, their policyholders will vote with their feet.
If a private insurer, for example, does not make appropriate
coverage determinations, not only can individual beneficiaries complain
to the insurance company, they and/or their employers can vote with
their feet. They can switch to a different insurer. Indeed, because
most private insurance is handled on a group basis, that gives the
employers and other group representatives significant market power to
ensure appropriate coverage decisions. That same sort of leverage does
not exist in the individualized Medicare arena.
Not only do private insurers have to worry about their top line,
they have to worry about their bottom line. If insurers make poor
coverage determinations, such as failing to cover new technology that
would save them money, their bottom line suffers, and the owners of the
company and the capital markets hold the company accountable. With all
that Congress must monitor, Congressional oversight of HCFA cannot
create the same level of accountability, nor is it efficient to ask
aggrieved parties to seek Congressional involvement whenever a dispute
arises.
While there is choice within the Medicare system between fee-for-
service and managed care plans, that choice does not create
accountability in the coverage process for devices. The decisions that
the HCFA Office of Clinical Standards and Quality makes set the
standard in determining which devices beneficiaries can have access to,
regardless of what part of Medicare is involved. Moreover, the
significant differences between what the Medicare managed care plans
and the fee-for-service part of Medicare offer in terms of access make
it unlikely that competition between the two would ever hold HCFA
accountable for the device coverage decisions HCFA makes.
For all of those reasons, the HCFA Office of Clinical Standards and
Quality is not subjected to the same sort of marketplace pressures and
accountability to which private insurers are subjected. The Congress
must, therefore, look for an alternative means, such as appeals, to
ensure that accountability.
The Medicare Fee-For-Service Appeals Process Should Be Updated
In 1997, when Congress created the Medicare+Choice program in the
Balanced Budget Act, it took the opportunity to enhance the appeals
process on the managed care side of Medicare. That Act--together with
HCFA's implementing regulations--outlines an appeals process with
explicit time limits for the various stages of review and incorporates
review by outside parties. These key features should be carried over to
the fee-for-service side of Medicare.
In fact, HCFA's reluctance to improve the Medicare appeals system
seems out of step with the modern trend. Many private insurers (the
same group to which HCFA likes to compare itself) appear to be
enhancing their appeals processes in response to President Clinton's
Consumer Bill of Rights and Responsibilities in Health Care. That Bill
of Rights, which applies to Medicare, proclaims that ``All consumers
should have the right to a fair and efficient process for resolving
differences with their health plans, including a rigorous system of
internal review and an independent system of external review.'' Yet
HCFA seems to be resisting, for example, any effective system of
independent external review for Medicare.
Conclusion
As you can tell from my remarks, many of these issues
require statutory amendments to resolve. We support legislation
to rationalize and improve the Medicare appeals process for
coverage, coding, and payment decisions. We hope this Committee
will give serious consideration to developing such legislation.
Thank you for this opportunity to present our views. We
look forward to working constructively with you and the agency
to develop appropriate solutions to these problems. I would
happy to answer any questions you might have.
Chairman Thomas. Thank you very much.
Mr. Kiesner.
STATEMENT OF FRANK J. KIESNER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, ONCOTECH, INCORPORATED, IRVINE, CALIFORNIA
Mr. Kiesner. Thank you, Chairman Thomas. I am here to talk
about fair access and timely access to benefits for cancer
patients. Our company provides a service which takes the living
tumor cells from cancer patients' biopsies into our lab, and we
expose those tumor cells to the different chemotherapy drugs
that an oncologist is considering using. We can identify a
condition which is referred to as extreme drug resistance, and
when that condition exists, the possibility that if that drug
is given to the patient, that the patient will benefit from it
is negligible. The service has been provided for over 50,000
cancer patients throughout the country from over 800 different
hospitals, and if you look at the service from the viewpoint of
the cancer patient, it eliminates the toxicity and lost time
from ineffective therapy, and from that viewpoint and from the
cancer patient's viewpoint, it is a humane service.
TransAmerica, acting as the carrier for southern
California, has denied this service based on--and this is very
important--based on a factual determination in 1995 that the
service we provide is proscribed by a national coverage policy
which was enacted in 1982. Administrative law judges have
reached the conclusion that that 1982 enactment doesn't apply
to what we do. Dr. Bagley of HCFA has written a letter to the
San Francisco regional office that the enactment of 1982 does
not apply to what we do. Hearing officers within TransAmerica,
themselves, have reached the conclusion that that enactment
does not apply to what we do, and, finally, the law department
from TransAmerica has written a letter to our attorney
acknowledging that the 1982 enactment doesn't apply to what we
do. To this day, the carrier denies extreme drug resistance
testing based on that 1982 enactment.
We have been through the hearing process within
TransAmerica; we have been through an ALJ; we participated in
negotiated rulemaking, and we appeared before the TAC
Committee. Based on all of this experience, I would like to
make some recommendations. First and most importantly, the
local decision in relation to technology coverage for cancer
patients must be done in an open, informed, and public forum
where scrutiny can be imposed on the quality of the decision.
Second, the appellate process has got to be removed from
the local carrier. Our experience is they side with the
carrier, so much so, that even when the hearing officer will
acknowledge that the 1982 enactment does not apply, in writing
their opinion they will impose subsequent hurdles that we had
not had notice of and cannot respond to.
Third, make the ALJ's technology decision binding on the
carrier. In our case, there is one question that is, does the
1982 enactment apply to our technology? The ALJ made the
determination after a 2-year process that it does not.
TransAmerica says ``We won't acquiesce in that ALJ decision,
because it is limited to the few patients that were before the
ALJ at the time.'' It took us 2 to 2\1/2\ years to get to the
ALJ. They don't acquiesce, and we are in another cycle now
where we have to go through the hearing officer, up to the ALJ,
and that same issue is going to be decided, and I believe it is
going to be decided the same way it was decided the first time.
And what is the effect of this? Cancer patients don't get the
benefits.
This Subcommittee has the power to do something very good
for cancer patients, and that is provide an open environment
for technology decisions to be made, and have an appellate
process that has enough teeth in it so that when errors are
determined to have been made, they can be reversed. In the
absence of that, cancer research is going to be lost;
innovation is going to be lost; companies like ours are going
to perish before the skills and talents of our employees will
ever reach the bedside. I don't believe this is in the best
interest of the cancer patient. Thank you.
[The prepared statement follows:]
Statement of Frank J. Kiesner, President and Chief Executive Officer,
Oncotech, Incorporated, Irvine, California
I am President and CEO of Oncotech, Inc., a pathology
laboratory based in Irvine which provides cancer testing
services to over 800 hospitals throughout the country. Oncotech
has provided its Extreme Drug Resistance (``EDR'') test for
over 50,000 cancer patients, including thousands of Medicare
patients. The purpose of the test is to identify, before
chemotherapy is given, if the patient's tumor is intrinsically
resistant to a chemotherapy drug under consideration. When a
cancer patient is found to be extremely resistant to a drug,
the probability that the patient will respond to that drug is
negligible. This information is used to eliminate resistant
drugs from therapy, thereby saving the cancer patient the
toxicity, time and cost associated with a drug to which the
patient is resistant.
Transamerica, the Medicare carrier for Southern California,
continues to deny claims for EDR testing based upon a national
non-coverage policy which has been found by ALJ's, by
Transamerica Hearing Officers, by Transamerica's Law
Department, and by HCFA, not to apply to Oncotech services.
Oncotech's experience, resulting from participation in the
TAC, and Negotiated Rulemaking, both at the national level, and
Transamerica at the local level, has led us to request your
assistance to change, in a positive manner, the authority and
process by which local Medicare carrier medical directors
address new technology. In our view, the restrictive and
troubling nature of coverage decisions which Congress
previously identified within HCFA's Technology Assessment
Committee (TAC), is present within Transamerica. This situation
is in direct opposition to the best interests of cancer
patients, good government and providers attempting to improve
cancer care through new technology.
Respectfully, I believe that the following changes would be
helpful to Medicare patients, the Medicare program and to
Medicare suppliers and providers.
1. Make Coverage Decisions Open to Public Input and Scrutiny
Technology coverage decisions by local carrier medical
directors should be open to public scrutiny. For example, Blue
Shield of California has a technology review committee which
publicly reviews its medical director's technology decisions.
This committee is comprised of individuals who represent the
interests of providers, hospitals, beneficiaries and the
community. Blue Shield's medical director prepares a position
paper on the coverage issue in question and is required to
present that position in a public meeting attended by the
committee members who are empowered to vote and providers,
technology experts and members of the press who are allowed to
comment. Dialogue and discussion which occurs in this format,
precedes a public vote by committee members. This open,
democratic process is the foundation for informed coverage
decisions and for the acceptance of those decisions within the
community. In this environment, at the March 2, 1994 meeting of
the Medical Policy Committee, Blue Shield of California reached
the following conclusion:
``Drug resistance testing in oncology is accurate and
reliable. This information can affect clinical decision making
and lead to avoidance of ineffective and potentially harmful
chemotherapeutic agents. Although there are few prospective
clinical trials comparing standard therapy with chemotherapy
chosen by in vitro assay, there are sufficient data to
determine their safety, clinical utility and impact on clinical
decision making.''
In contrast, Transamerica, in relation to Extreme Drug
Resistance has made local coverage decisions behind closed
doors with no notice to suppliers such as Oncotech.
Transamerica refuses to disclose its consultants by name or to
provide for a public critique of its rationale. Oncotech has
been blinded to Transamerica's coverage criteria, to its
coverage related meetings and to the rationale for its
decisions. The following excerpts of the October 1, 1998
Hearing Officer decision describes the coverage process
followed by Transamerica:
``The Carrier's Medical Director recently requested comments,
in regards to the EDR assay from numerous oncologists. Their
responses varied, however, the majority agreed that the EDR
Assay and Drug Sensitivity Assay are based on the same
principle. In addition, most of them have not used the
technology. In one situation, three physicians commented that
they had only sent two specimens for assay testing in the last
seven years. Another oncologist determined that he could not
recommend the use of EDR since his research did not show the
effectiveness or usefulness of the EDR assay. Furthermore, I
contacted the Carrier's Oncology Advisor and per our
conversation with the Advisor agreed that both assays are based
on the same theory and concert and I concur.
The Carrier, acting within the scope of their authority, has
determined that the EDR testing and Sensitivity testing are
similar and achieve the same results. Therefore, at the present
time, EDR assay falls within the guidelines of Section 50-41 of
the Coverage Issues Manual and is excluded from coverage under
the Medicare Program. Therefore, I am affirming the Carrier's
position.''
After reading the above description, however, Oncotech has
no information concerning the identity of the physicians
involved, their qualifications, the principle tying EDR to drug
sensitivity or the extent and merit of one physician's
research. Most importantly, Oncotech did not have an
opportunity to respond to their concerns or add value.
Oncotech's scientific and medical expertise is renown
within oncology. Oncotech's Board of Directors includes Dr.
Vincent DeVita, past Director of the National Cancer Institute,
Dr. Frank Meyskens, Director of the UCI Comprehensive Cancer
Center, Dr. Trevor Powles, Director of the Breast Cancer
Program at the Royal Marsden Hospital in London. Finally, our
Scientific Advisory Board is chaired by Dr. Marc Lippman,
Director of the Lombardi Cancer Center at Georgetown
University. Yet, Transamerica will not provide a forum in which
these and other leading physicians can participate openly and
fairly.
2. The Review of a Technology Coverage Decision by
Transamerica's Hearing Officers Should be Free of Carrier Bias
and Written by Hearing Officers With Appropriate Technical
Competence
A. In our experience, Transamerica Hearing Officers
typically side with the carrier to the extent that when the
published reasons for the claim's denial are overcome during
the hearing, the Hearing Officer bases his decision upon new
and previously undiscussed hurdles. The provider is left with
an impossible burden. Our only redress is to appeal the
decision to an ALJ, wait two years, and hope for objectivity.
B. Hearing Officers who are responsible to decide
technology questions should have a background suitable for the
issue at hand. If consultants are needed, their opinions should
be given to the Hearing Officer at the time of the hearing when
a provider would have an opportunity to refute or comment if
appropriate. It is our experience that consultants to the
Hearing Officer are isolated from and unknown to the supplier.
There is no opportunity for dialogue between the hearing
officer, provider and consultant.
3. Require Local Medical Directors to Integrate ALJ Technology
Coverage Decisions into Technology Coverage Policy
The two to three year appellate process within
Transamerica, culminating at an Administrative Law Judge
preceding, was our only mechanism to redress Transamerica's
non-coverage decision. We were prohibited from going into the
legal system until our remedies within Transamerica and the ALJ
were exhausted. When, as occurred in this case, Transamerica
employed a tactic of non-acquiescence to the ALJ's decision,
the three year appellate process offered no real redress.
Today, Transamerica's approach has left Oncotech in the
identical position in relation to future claims that we were in
when we began the appellate process three years ago. Favorable
ALJ decisions are meaningless to suppliers if Transamerica's
Medical Director refuses to integrate them into subsequent
policy. This non-acquiescence tactic was overturned in Duggan
v. Bowen, 1998. The judge commented,
``It is remarkably unfair for the fiscal intermediaries that
make initial coverage determinations neither to take into
account nor to `acquiesce' in decisions made by either an ALJ
or the Appeals Council. Because the agency is committed to this
policy of internal non-acquiescence, which guts the
precedential value of any individual's successful appeal, many
plaintiffs are hit with another denial almost immediately after
they have succeeded in overturning an earlier coverage denial.
Plaintiffs are on a merry-go-round. They have a right to get
off.''
4. Provide a Mechanism for Independent and Immediate Review of
Erroneous Carrier Newsletter Pronouncements
Transamerica used minutes from HCFA's disbanded TAC
Committee as the basis for their June 1998 newsletter which
communicated to the practicing medical community that EDR and
the human tumor stem cell chemosensitivity assay are one and
the same. This newsletter undermines the very core of the EDR
technology and has affected Oncotech's credibility among its
clients. Transamerica's newsletter is in direct opposition to
ALJ decisions, a letter from Transamerica's Law Department to
Oncotech, a memo from Dr. Grant Bagley of HCFA to the San
Francisco regional office and recent Hearing Officer decisions.
To date, Transamerica has refused to clarify or modify this
statement.
5. Provide a Safe Harbor for Discussion of Coding and Fraud/
Abuse Questions Relating to New Technology
Providers of new technology need assistance from their
local carrier in questions relating to coding and fraud and
abuse. New technologies may not fit into established mindsets.
It is essential that a procedure be put into place for
providers and their local medical director to openly discuss
questions and concerns within a safe harbor. As a result of my
participation in the Negotiated Rulemaking process for clinical
diagnostic testing, I have been exposed to the incredible
sophistication of Medicare's coding system and its ambiguities.
Even large national laboratories with extensive legal and
reimbursement departments have difficulty. Local medical
directors must have a vehicle to deal with companies providing
emerging technologies, as the companies attempt in good faith
to fulfill the regulatory requirements associated with coding
and fraud and abuse questions.
6. Define and Make Public the Criteria for Technology Coverage
The criteria against which new technologies are measured
should be specific and public. Criteria such as
``investigational'' or ``experimental'' are too general. They
represent a nebulous standard which does not guide the
development of new technologies. Companies attempting to
introduce new technologies are unable to identify benchmarks
which, when reached, will assure coverage.
7. Accelerate the Appellate Process in Oncology
Congress has provided accelerated processes for the FDA's
approval of cancer related pharmaceuticals. Such a process for
cancer related testing is warranted. Companies such as Oncotech
cannot wait three years to have a coverage issue reach an open
hearing at the ALJ level. Our country invests hundreds of
millions of dollars each year in cancer related research. A
local carrier medical director, operating within a closed door
environment and dealing with technologies in which they are
untrained, creates institutional impediments to the translation
of research into available clinical tools. Oncology specialists
under contract who are able to visit providers and work with
them on a fully informed basis would be of great assistance to
medical directors who are reluctant to leave their
administrative bastions.
Finally, I feel it necessary to distinguish the procedures
followed at the national level from those discussed above.
Specifically, we have observed that the coverage questions
handled by the HCFA staff in Baltimore have been done in a most
professional and competent manner. They have been accessible,
objective and helpful. The principles of open and informed
decision making are being followed within the Negotiated
Rulemaking process. We must find a way to have these principles
imposed upon local coverage issues.
Thank you for your interest in this matter.
Chairman Thomas. Thank you very much, Mr. Kiesner.
Dr. Plested.
STATEMENT OF WILLIAM G. PLESTED III, M.D., MEMBER, BOARD OF
TRUSTEES, AMERICAN MEDICAL ASSOCIATION
Dr. Plested. Thank you, Mr. Chairman. My name is Bill
Plested. I am a thoracic and cardiovascular surgeon from Santa
Monica, California and a member of the Board of Trustees of the
American Medical Association. Reform of the Medicare coverage
decision and appeal process is long overdue. We commend the
Chairman for his efforts over the last 2 years to shed light on
the procedures employed by HCFA to generate national coverage
decisions. We also commend the Chairman and the Ranking Member
for enlightening HCFA regarding the difference between coverage
policy decisions and program integrity concerns. In fact, we
agree that HCFA's reluctance to separate its policies on
coverage from its policies on fraud and abuse is a major source
of the coverage policy problem facing Medicare patients and
their physicians. Provision of high quality medical care to
patient, not HCFA's efforts to find fraud and abuse, must serve
as the foundation of efforts to reform the Medicare coverage
policy process.
Coverage decisions should be based on evidence of clinical
effectiveness obtained from peer-reviewed medical literature
and consultation with practicing physicians. We have five major
concerns with the current Medicare coverage and appeals process
and the direction of HCFA's reform efforts to date. First,
local coverage policies should be developed through a standard,
open, scientific process. Once developed, the new standards of
openness, timeliness, and evidence-based decisionmaking must be
applied to all levels of the coverage policy process whether
local, regional, model or national. Although the physician
community has made these points to HCFA multiple times, HCFA's
Office of Clinical Standards and Quality has told us that it
has no control over the local carriers. Incredibly, the
carriers that develop coverage policies at the local level are
accountable to HCFA's Office of Program Integrity. It is clear
to us that if the new national standards are not applied to
local carriers, then carrier coverage decisions will continue
without any real standards or oversight. The AMA is not
suggesting that all coverage policies be established at the
national level, but there are numerous examples of flawed
carrier policies, and a standardized process is needed. For
example, some carriers deny Medicare coverage for preoperative
evaluations needed to clear patients for surgery. These are not
screening tests; they are vital to patient safety and must be
covered. Another example is Florida's carrier's policy that
lipid profiles are not covered for diabetic patients. This
directly conflicts with published guidelines from the American
Diabetes Association.
Second, program integrity must be treated as a separate
issue from coverage. In HCFA's outline for a new Medicare
coverage process, program integrity was cited as one of the
reasons for reconsideration of Medicare coverage. We strongly
disagree. If a service is believed to be subject to fraud or
abuse, then HCFA should find a means to target the specific
fraudulent or abusive practice. Mr. Chairman, we understand
that you and Mr. Stark have already written to HCFA to state
concerns that HCFA has divided responsibility over Medicare
coverage decisions between the Office of Clinical Standards and
Quality and the Medicare Integrity Program; we wholeheartedly
agree. Innovations in medical practice and technology can only
be made available to patients if Medicare coverage policies are
based on clinical effectiveness, not program integrity.
Third, entry into the standardized coverage process must be
simple. We do not support a bureaucratic FDA-type application
process.
Fourth, a fair and independent appeals process needs to be
developed. The appeals process takes far too long; involves
over complex regulations; costs too much, and lacks a truly
independent adjudicator. Essentially, the current appeals
process lacks any semblance of fairness or due process. A
timely and independent appeals process must be established
using an adjudicator who has expert knowledge of the Medicare
Program.
Finally, a means should be established for appealing
policies, not just individual claims. No vehicle exists for
addressing problems with local, regional or model coverage
policies. Patients can only appeal individual denials.
In closing, the current Medicare coverage and appeals
process is not patient-centered. In fact, there is no process.
We have only a confusing morass of Medicare regulations that do
considerably more harm than good to physicians' good faith
efforts to provide high quality care to their Medicare
patients. Thank you, Mr. Chairman.
[The prepared statement follows:]
Statement of William G. Plested III, M.D., Member, Board of Trustees,
American Medical Association
Introduction
Mr. Chairman, Mr. Ranking Member, and Members of the
Committee, my name is Bill Plested, MD. I practice
cardiovascular and thoracic surgery in Santa Monica,
California, and am a member of the Board of Trustees of the
American Medical Association (AMA). The AMA appreciates the
opportunity to testify on these important Medicare issues--
coverage decisions and beneficiary appeals.
Reform of the Medicare coverage decision process is long
overdue, and the AMA commends the Chairman's efforts over the
last two years to shed light on the procedures employed by the
Health Care Financing Administration (HCFA) to generate
national coverage decisions. The AMA also commends the efforts
of the Chairman and Ranking Member to enlighten HCFA regarding
the difference between coverage policy decisions and ``program
integrity'' concerns.
In fact, the AMA believes that HCFA's reluctance to
separate its coverage and quality of care policies from its
policies addressing fraud and abuse is the root of the coverage
policy problem facing Medicare beneficiaries and their
physicians.
There is a saying that, ``when your only tool is a hammer,
every problem looks like a nail.'' In its management of the
Medicare program, HCFA seems to approach virtually every issue,
whether it involves national or local coverage policy, payment,
coding, or quality, as an issue of waste, fraud and abuse. This
singular focus on fraud has become even more pervasive among
the Medicare Part B carriers than it is within the HCFA central
office. In addition to operating in an environment that places
a premium on recovery of so-called ``overpayments,'' the
carriers have also intensified their pursuit of fraudulent and
abusive practices to an excessive degree to protect their
current functions and budgets from being shifted to the new
Program Safeguard Contractors, who are perceived competitors.
Accordingly, even when HCFA establishes sound national coverage
policies, these policies are sometimes subverted by local or
regional carriers that place unwarranted constraints on covered
benefits.
The AMA believes that our patients who are insured by
Medicare should have access to the same clinically effective
innovations in medical practice and technology that we are able
to offer our privately insured patients. These innovations will
only be available to beneficiaries, however, if Medicare
coverage policies--whether national or local--are based on the
relative clinical effectiveness of the innovations, not on
``program integrity'' concerns.
AMA Recommendations for Reforming the Coverage and Appeals Process
Provision of high quality medical care to patients must
serve as the foundation of efforts to reform the Medicare
coverage policy process. Coverage decisions should be based on
evidence of clinical effectiveness obtained from medical
literature and consultation with practicing physicians,
especially the national medical specialty societies. Once
developed, the new standards, including standards of openness,
timeliness, and evidence-based decision making, must then be
applied to all levels of the coverage policy process, whether
local, regional, model, or national.
After enactment of the Balanced Budget Act of 1997,
representatives from the AMA and selected national medical
specialty societies met several times with HCFA staff to
discuss development of the national coverage policies that
would govern implementation of Medicare's expanded preventive
benefits. We viewed the consultative process of HCFA obtaining
the most current clinical and scientific information on
effective preventive approaches from medical specialty
societies as a positive development, and an example of a good
approach to coverage policy making. In correspondence with the
HCFA Administrator and comments on HCFA's September 25, 1998
Town Hall meeting, we have recommended that HCFA follow a
similar approach.
HCFA's Coverage and Analysis Group has been generally
receptive to our recommendations. We were pleased that the
Charter for the new Medicare Coverage Advisory Committee (MCAC)
indicated that MCAC functions will involve reviewing and
evaluating medical literature, technical assessments, and
information on the effectiveness and appropriateness of medical
services. We were also pleased that HCFA's solicitation of MCAC
nominations seemed to emphasize the importance of individuals
with expertise in medical practice. In addition, HCFA's use of
proposed rules with opportunities provided for public comment
has allowed for significant medical input into the regulations
governing the new preventive benefits. Nonetheless, we continue
to have five major concerns about Medicare coverage decision
and beneficiary appeals processes.
1. Local coverage policies should follow standards
When the new procedural standards for national coverage
decisions are developed, they should apply to all levels of
Medicare coverage decision making. Although the physician
community has made this point to HCFA consistently over the
last two years, the Office of Clinical Standards and Quality
continues to state that it has no control over the actions of
local and regional carriers because the carriers are
accountable to the Office of Program Integrity. This means that
the new national standards will not be applied at the local
level. We are also not aware of any HCFA plans for oversight of
carrier development of local policies.
The combination of a lack of enforced standards for
carriers and the single-minded focus on fraud and abuse are a
serious concern, especially because the carrier policies
frequently evolve into de facto national coverage decisions.
This is actually the purpose of ``model'' policies, which are
policies developed by a few Medicare carrier medical directors
(through a process viewed uniformly as a ``black box'') that
are disseminated to other carriers for their use. With guidance
from HCFA's Office of Program Integrity, the durable medical
equipment carriers are also making policies that effectively
serve as national coverage decisions, even though they were
established as regional carriers.
The AMA is not suggesting that all coverage policies be
established at the national level. While some local carriers
obtain input on proposed policies from practicing physicians
through consultation with their carrier advisory committees,
local policies often are simply based on a statistical analysis
of claims that indicates a higher frequency of a particular
procedure code than the national average. As the following list
illustrates, numerous examples are available of local policies
that directly conflict with the views of practicing physicians
about good standards of medical care:
The April 19 Washington Post (p. 2) indicates
that, despite Medicare coverage of preventive services, many
beneficiaries are not getting needed preventive care. One
example cited is the low percentage of elderly patients with
diabetes receiving blood lipid tests. What the article fails to
note, however, is that at least one Medicare carrier, which
handles the state of Florida, published a local coverage policy
for blood lipid tests in its July/August 1997 bulletin
indicating that diabetes is not among the covered diagnoses for
these tests. This policy is in direct conflict with published
guidelines from the American Diabetes Association and, in 1999,
physician claims for lipid tests are still being routinely
denied for diabetic patients in Florida. The carrier cites as
its rationale that the procedure codes for lipid tests ``have
been billed substantially more in Florida than at the national
level for multiple specialties. Further analysis of the data
indicates that these procedure codes ... are being billed with
diagnoses that do not support medical necessity.''
The primary focus of the Post article is
preventive care exams. HCFA did not accept repeated advisories
from the AMA, however, that it was not sufficient for
regulations on the new preventive benefits to address only
specific screening tests, but that they needed to clarify
Medicare coverage for visits where physicians counsel patients
about risks and benefits of preventive care. Given HCFA's lack
of national guidance on coverage for preventive visits and its
overzealous pursuit of fraud, it is not surprising that many
carrier policies are developed specifically to reduce the
number of covered Medicare claims for physician visits. For
example, the New York carrier, citing an Office of the
Inspector General report that ``Medicare should not be paying
for 30% of all physician services claims,'' is routinely
denying claims for physician visits to skilled nursing home
patients. Even after obtaining documentation showing that the
visits were needed to control heart failure (potentially
avoiding hospital admissions) or treat skin rashes, claims for
visits are denied as not medically necessary and no more than
one nursing home visit per month is covered.
It is standard clinical practice in urology to
give a man who complains of lower urinary tract symptoms a
prostate-specific antigen test (PSA). In many localities,
patients have no idea if the test will be covered because
Medicare's coverage policy depends on the test result.
Moreover, nearly half the carriers will not pay for the test if
the diagnosis turns out to be enlarged prostate.
Previously, Medicare covered removal of pre-
malignant skin lesions (actinic keratoses) by any method, but
in 1996 the Florida carrier instituted a local policy
restricting coverage only to certain lesions. Lesion removal
was considered medically necessary only if the lesions were
symptomatic, on certain parts of face, or if the patient had a
particular medical history or condition. The carrier ignored
information provided by dermatology specialty societies and
implemented a policy totally contrary to the standard of care.
The problem was then compounded when a carrier workgroup was
formed and the restrictive lesion removal policy became a
``model'' policy for use throughout the country.
In some localities, claims for the physical
evaluation necessary to clear patients for anesthesia and
surgery are being denied as noncovered because ``Medicare does
not cover screening services.''
Monitored Anesthesia Care (MAC) is a form of
anesthesia care that involves close monitoring of sedated
patients who may need to either be placed under general
anesthesia or revived, and it is intended to be covered just
like general or regional anesthesia. A large number of carriers
adopted a policy limiting MAC coverage to certain diagnoses.
Coverage was denied for a number of important services for
which anesthesia is clearly a requirement, such as breast
biopsies and pacemaker insertions. Although some carriers have
subsequently abandoned the policy due to concerted
informational campaigns by anesthesiologists, uneven coverage
across localities is likely to persist.
As part of the randomized clinical trial of Lung
Volume Reduction Surgery, HCFA decided that all patients,
including those chosen for surgery and those receiving only
non-surgical care, must receive pulmonary rehabilitation
services. For those Medicare beneficiaries who are not in the
clinical trial; however, coverage of pulmonary rehabilitation
varies widely across localities. If HCFA believes that
pulmonary rehabilitation is effective, then it should be a
covered service for the other patients that would benefit from
it.
In many localities, carriers establish arbitrary
limits on psychotherapy services, even though the Congress has
not limited the number of Medicare-covered psychotherapy
services for psychiatric patients.
2. Program Integrity should be treated as a separate issue from
Coverage
In HCFA's outline for a new Medicare coverage process,
which was provided prior to September's Town Hall meeting for
public review and comment, ``program integrity'' was cited as
one of the reasons for reviewing Medicare coverage policies. A
comment letter submitted by the AMA and more than 30 national
medical specialty societies stated that program integrity
concerns should not be a reason to discontinue or reconsider
Medicare coverage for a beneficial patient service. If a
service is believed to be subject to fraud or abuse, then HCFA
should find a means to target the specific fraudulent or
abusive practice.
We also stated objections to the HCFA suggestion that
coverage policies be reviewed or reconsidered for services that
represent a significant expense to the Medicare program, even
if the medical effectiveness of the services was not
demonstrated prior to Medicare coverage. In fact, if a service
is being frequently provided, the most likely explanation for
its high utilization rate is that physicians consider the
service to be very beneficial for their patients. Too often, as
noted in some of the above examples, local carriers decide to
limit Medicare coverage for services solely because the
frequency of service provision differs from average,
``normal,'' or ``expected'' utilization. While HCFA may
continue monitoring information about clinical effectiveness as
it becomes available and, based on new evidence or research,
decide to revisit previous coverage decisions, frequency of use
alone is not an appropriate reason to limit or withdraw
coverage.
3. There should be no application process
HCFA should engage in an ongoing effort to stay abreast of
new developments in medical practice and technology, working to
ensure that Medicare's coverage policies provide patients with
access to all reasonable and necessary diagnostic, therapeutic,
and preventive medical services. Instead, HCFA seems inclined
to have the first step in its coverage policy process be the
submission of an ``application'' for coverage, similar to the
Food and Drug Administration procedure. The AMA believes that
such a process would likely preclude small groups of
beneficiaries and physicians, or any entity with limited
resources and experience in the coverage process, from bringing
forward promising innovations for Medicare review. Even if
those with fewer resources manage to complete the application
process, HCFA is more likely to devote necessary resources to
reviewing applications from large corporate entities than, for
example, a new diagnostic or surgical procedure developed by a
small medical group.
4. A fair and independent appeals process should be developed
The process of appealing denied or downcoded claims takes
far too long, is not geared to address the voluminous and
complex regulations governing the Medicare program, can be far
more expensive to pursue than the amount that is actually in
dispute, and, even if a beneficiary or physician pursues an
appeal to the highest level, there is no ability to get an
independent judgment. Timelines should be established and
enforced. Judges and others involved in the appeals process
should be required to have expertise in Medicare, not Social
Security, which is the topic with which the current
administrative law judges hearing Medicare appeals are most
familiar. So-called ``fair hearings'' are not really fair
because the hearing officers are employed by the same carriers
that deny the initial claims. Many physicians fear even
requesting a fair hearing, out of concern that carriers may
view physicians who appeal as ``troublemakers'' and, therefore,
that carriers may begin scrutinizing their claims even more
closely. Also, the final level in the decision process should
not be the Department of Health and Human Services. As with
other legal questions that are resolved in U.S. courts, there
should be a means for obtaining a judgment on appeal that is
independent of the agency involved in the initial claim denial.
Often physicians also have no meaningful opportunity to
appeal claims that have been downcoded or denied based on a
carrier audit. When claims are subjected to postpayment audits,
for example, physicians are given three options for responding
to the carrier. In order to accept two of the three options,
physicians must waive their appeal rights. The third option
preserves the right to appeal, but physicians choosing this
option must subject their practices to a carrier audit of a
Statistically Valid Random Sample (SVRS) of claims. An SVRS can
cause monumental upheaval and disruption for a practice, even
bringing office operations to a complete halt, as well as
leading to expensive legal bills.
Essentially, the current appeals process lacks any
semblance of fairness and due process.
5. A means should be established for appealing policies, not
just individual claims
The coverage policy notices that HCFA has published over
the past 18 months provide good avenues for requesting
reconsideration of proposed national coverage policies,
although the AMA does not believe that it is necessary for HCFA
to go through notice and comment rulemaking for every national
coverage decision. We anticipate that HCFA will continue to
provide vehicles for commenting on and seeking revisions in
national coverage policy decisions, and this process should
become even more effective with the formation of the MCAC.
No similar vehicles exist, however, for addressing problems
with local, regional, or model coverage policies. Under the
current system, if a carrier establishes a bad coverage policy,
beneficiaries have no vehicle for appealing the policy
decision, they can only appeal individual denials. Moreover,
the outcome of any given appeal sets no precedent for other
appeals, so the potential exists for a perpetual cycle of the
same issue being questioned on the same basis over and over
again. In fact, HCFA does not even consider the policies
developed by local and regional carriers as Medicare coverage
decisions, but instead HCFA views them as program integrity
policies. This conflict between coverage and ``program
integrity'' must be resolved if patients and physicians are to
have confidence in the overall integrity of the Medicare
program.
Beneficiaries and their physicians should be able to offer
input into and appeal all coverage policy decisions, not just
national decisions.
Conclusion
The current Medicare coverage and appeals process is not
patient-centered, but instead is part of the confusing morass
of Medicare regulations that do considerably more harm than
good to physicians' efforts to provide high quality medical
care to their elderly and disabled patients. The AMA applauds
the Committee's interest in reforming this process. On behalf
of the AMA, I offer you our services in working further with
the Committee and the Congress to effectively address these
important matters. Thank you again for the opportunity to
testify today.
Chairman Thomas. Thank you very much, Dr. Plested.
This is a little off the mark, but since it was volunteered
by my colleague from California, if you have a reaction, I
would like some response to it or if you are familiar with it
or especially if any of your organizations have a position on
the idea, that a number of folks wonder why we have to go
through FDA and then to a certain extent duplicate the process
in going through HCFA, although there was an attempt to explain
that they really are different. Some of the explanation, to me,
wound up as a distinction without a difference or a very easily
contracted extension of FDA reviewing it and not two separate
processes in both the question of whether or not if is safe,
and, two, is it efficacious? Do you think that the idea that it
might be combined in one step makes sense? I mean, anytime I
can eliminate the bureaucratic steps--if you haven't thought
about it, if it is new to you or you are focusing primarily on
HCFA and its appeals process rather than the larger question,
it just seems to be especially in the areas of medical devices
in which we are moving relatively rapidly in change, that this
might be something that would be useful. Anyone wish to
comment?
Mr. Rosebrough. Just one quick comment. I don't think HIMA
has a stated policy at this point, so for HIMA I don't think
there is any, but the concern that I am sure that both they and
I would express is the local coverage policy issue is one that
we endorse. We think the diffusion of technology is enhanced by
having the ability for local coverage decisions, and if you
move that to the FDA, I am sure we would--I am not sure it
makes much difference which of the two agencies attack that as
long as they are funded appropriately and can get at that
issue, but if you move it to the FDA, we would want to make
sure that there was some local coverage capability in addition
to the national coverage decisions.
Mr. Kiesner. I have a little different perspective. I think
if you look at it from the point of view of timeliness, there
are a number of new therapies that are now being developed that
are targeted toward specific genetic and other molecular
conditions within the cancer patient. If you take the time to
have the FDA approve those therapies and then add another 2 or
3 years on top of that, it makes no sense, and the scientific
data, the clinical studies, and so forth, that are used to
validate the approval by the FDA are directly related to what
medical conditions Medicare should pay for.
Chairman Thomas. I believe I am correct on that point that
if FDA approves pharmaceuticals, they will be reimbursed by
HCFA, but I am just thinking that more and more it is a
combination of the drugs, as you say, therapies, which are a
combination of a number of items not just the drugs themselves,
so that that would be a potential--timeliness was a theme
through all of your arguments within the structure.
The gentlewoman from Connecticut indicated that the
Department of Labor said 15 days was appropriate. We are
sitting here trying to get the government to respond in 60 days
or 30 days, but it just seems to me that somewhere between 400
days and 30 days, there is a number that is appropriate both
for a timely review process and for an expeditious decision,
and I won't pin you down for the number of days, but my guess
is in the decisions that you folks have to make, they are more
often on the 30-, 60-, 90-day timeframe and not the 400-day
timeframe. Is that a reasonable assumption?
Mr. Rosebrough. That is a very reasonable assumption.
Chairman Thomas. I thank the gentleman. Does the
gentlewoman from Florida have any questions?
Mrs. Thurman. Mr. Chairman, or maybe one of the panelists
can explain this to me. Generally, I found in government that a
lot of the times we implement things because we think there is
a problem out there, and then we stretch it a little and then
these kinds of things result from this. I wasn't here in 1982,
and it sounds like some of you have had some experience with
this, and maybe Mr. Chairman or somebody--what do you think
created these steps in the first place? How did we get here
today? Somehow, I am missing something, I mean, especially with
the fraud and abuse going there. I mean, I don't know, and if
somebody could help me with that, I would be very appreciative.
Dr. Plested. I will be happy to take a stab at that.
Mrs. Thurman. And I would appreciate it, and if you can't,
we will try to find somebody that can, but it just seems
alarming to me that I am missing something, because we don't go
out looking for trouble, generally.
Dr. Plested. I am sure the Chairman can tell you, there are
basic, fundamental flaws in the Medicare Program, and the
tendency is to kind of not bite the hard bullet and look at the
basic, fundamental flaws and to look at something simple like
the Fraud and Abuse Program that bludgeons physicians and
hospitals, and this is added to by the fact that during this
period of time we have had two phenomenal explosions. One is
the size of our Medicare population, and the other is the
technology that you hear about, and if you put these all
together, we are looking at the fact that we have got to get
the basic, fundamental reform. In the meantime, we have to
protect today's beneficiary, and that is what we are all
talking about; how do we best do that today while we,
hopefully, get back to the question of fundamental reform?
Mrs. Thurman. Do you think there is something in here that
could create a problem that seems to be the reason there is so
much resistance to change? I mean, maybe I should have asked
HCFA that, but I am just--maybe you all can help me with it--
but I am just curious as to why they seem so adamant or trying
to change but still have some concerns?
Mr. Rosebrough. I think none of us by nature look for
external review of our work, and, you know, whether you are in
the private sector of public sector, getting an external review
is always a painful experience.
Mrs. Thurman. Yes, it was.
Mr. Rosebrough. It is my experience that getting--in our
position, the marketplace gives us our second opinion pretty
quickly, and we have to react to it. That is a painful
experience, but it is fruitful for all the parties involved. I
believe not having an appeals process with some external
pressure to it creates a situation where that if I were
probably a member of HCFA, I would not be looking for external
help either, but I think it is often an appropriate situation.
Mr. Kiesner. You know, I think that the answer to what you
ask may be related to really, what do you believe? And if you
believe that the Medicare Program is on a road to financial
debacle; if you believe that the way to save the program is
through denying your claims; if you believe that the providers
are basically out to exploit the system, you are going to have
one logic, one structure. On the other hand, if you believe
that Medicare has a duty to the patients; if you believe that
the role of the carrier is to determine ineffective from
effective therapy, and if you believe that basically physicians
and other providers are people of integrity and they just want
to exercise their best judgment, then you are going to have a
totally separate system.
Mrs. Thurman. From a standpoint of the carriers--and one of
you talked about how the system--you know, we ought to get the
carrier to have to stay with whatever the decision is, but, at
the same time, one of you said that generally when you go
through this--I guess it was on the----
Mr. Rosebrough. The administrative law judge?
Mrs. Thurman. That they actually were kind of going with a
carrier when they made the decision. Is there a bottom line
money issue? I mean, probably what you asked me or said about
what your philosophy is, but on the other side of it, I mean,
is there--particularly as our health care changes and how we
get our moneys into the pockets and those kinds of things--is
there a part of that going on because of the cost of new
initiatives that you think maybe some of this is being stopped
at least from those local folks?
Mr. Rosebrough. Well, of course, there is both money and
clinical practice decisions being made at all the places in the
system, and people are trying to, I believe, in general, do the
best job they can in doing that. What we need to have is some
certainty that we lay out a set of rules; we work by the set of
rules; we live by the set of rules; get good comments on that
set of rules, so when making those decisions in an open forum--
because everyone is trying--in my opinion, 90 percent of the
people doing this work are trying to do the best thing for what
they see as good for the Nation and patient, and the issue is
getting a nice, clean set of rules that works rapidly; gets
good public comments, so we can make those decisions in an
appropriate forum.
Mrs. Thurman. OK, thank you.
Chairman Thomas. The gentlewoman from Connecticut wish to
inquire?
Mrs. Johnson of Connecticut. HCFA has acknowledged that
national coverage determinations are not generally appealable
so that if you aren't satisfied with a national coverage
decision, you can appeal it to the Medicare Coverage Advisory
Commission. Is that satisfactory? I don't want a long answer; I
want a short answer, just in your view, because I have other
questions.
Mr. Rosebrough. We don't believe so, no.
Mrs. Johnson of Connecticut. OK. Anyone think it is? Now, I
don't think it is either, clearly.
When you look at FDA and HCFA, are there any
recommendations you would make to bridge that gap?
Dr. Plested. Mrs. Johnson, currently, that changes FDA's
mission, and the thing that we would keep coming back to is
that we must have a standardized process. The process being
scientific and open, and so forth, is what is really important.
The players in the process could change, and there certainly
could be a place for FDA in this, but what we need from them
doesn't fit their current mission, and----
Mrs. Johnson of Connecticut. Having dealt with both FDA and
HCFA, are there any reasons why we should automatically cover
whatever FDA has certified?
Dr. Plested. Absolutely not.
Mrs. Johnson of Connecticut. What about the national
guidelines? More and more of the big companies, the managed
care companies, are using specialty-developed guidelines for
asthma management, cardiac management, diabetes, and these are
pretty well out there. Should we be looking at when the
majority of private sector companies have adopted certain
guidelines that Medicare would automatically adopt those? Would
that help?
Dr. Plested. Possibly, but, again, you would need to have a
process, and that process could certainly include other
entities who have gone through a similar process and reached
the conclusion. As long as your process says that you need to
have a thorough review of the science and open input and
everything else, someone who brings you a work product
developed by a similar process could certainly be accepted,
yes.
Mrs. Johnson of Connecticut. And that is the thing, just
like they did in JCAHO and things like that. Should we
repeating the process if it has been gone through and it has
been solid enough so that a majority of actors in the health
care service sector are providing it? I mean, how do we define
that group of decisions that the government should not be
remaking?
Mr. Kiesner. I think our experience is that that is very
difficult, because there is wide diversity within the
commercial sector between guidelines that their institutions
would adopt, whether it is a cancer center or whether it is a
payer, and there still has to be some way to integrate all
those into a final decision that is meaningful.
Mrs. Johnson of Connecticut. Should there be a shorter
timeframe for decisions in which there has been a lot of
national activity?
Mr. Kiesner. I think there should be, and I think the real
question is how do you select those subjects that are raised to
the national level? And I think that the people in Baltimore
are working hard to get the process defined and in place in
order to deal with those things more quickly.
Mrs. Johnson of Connecticut. In your experience, is there a
way we could keep an overview of the local decisions that are
made and when there is a critical mass of decisions in a
certain area, pop that up to the national level, so there would
be greater uniformity?
Mr. Kiesner. I think that that is a little difficult today,
because there is so many cows that are out of the barn, so to
speak. On the other hand, if we are looking at new technology
that is as complex and sophisticated as found in the field of
oncology, it makes a great deal of sense to have it go to a
national policy decisionmaking body, and do it much earlier
before you get the diversity.
Mrs. Johnson of Connecticut. Well, particularly in these
illnesses in which we are really doing a lot of research and
the techniques of diagnosis and treatment are changing rapidly,
do we really want to put ourselves in the position of the
Federal Government going through a panel and science all over
again or if the oncologists have decided that this has promise
and it is available to the working people of America under 65,
is there a point at which, particularly in these cutting edge
things, that we ought not to say--I mean, that has been the
problem with clinical trials. If that is your only option and
you are going to die, why should you at 65 or 68 or 75 or 85
not have the same option of getting to that care as somebody
covered in one of our employer programs, many of which provide
coverage of clinical trials? So, I think we need to think of
how we can radically simplify this process.
One of the things that has destroyed Medicare in my
estimation--and I think it is a system in systemic collapse--is
the explosion of medical actions that can be taken. They cannot
price them; they cannot follow them; we can't do this. So, we
have to find a way to make this whole process of coverage
decisions far more state-of-the-art and timely, and I
appreciate your good testimony today; it was really impressive.
Dr. Plested. Mrs. Johnson, could I comment on one further
thing about that, because I certainly do agree with you, and it
comes back, again, to the point of having a standardized,
uniformed process by which the decision is made. We certainly
can't overwhelm HCFA with making all the decisions, but we have
to know that the local carriers follow a process that is
reasonable, so that then that can go on up.
Mr. Rosebrough. And that process is committed to and
followed as opposed to just being published.
Mr. Kiesner. And that there is an appeal oversight aspect
to the procedures that have teeth.
Chairman Thomas. And I still can't--and, as I said, we got
this today, finally, and I am pleased we announced the hearing
so we could get it. I believe it was a coincidence that it was
released today; keep forgetting that. [Laughter.]
I just do not understand--and we are going to continue to
push--there is no reason it isn't transparent. There is no
reason why we can't use, heavily, third-party input early in
the process so that they can't say they didn't know. We have
got to break this argument that all expertise resides in-house,
and that, ultimately, they are the ones who control.
Because what bothers me the most about this process, when
you begin to look at it, is that this whole business of local
review looks a whole lot more like the IRS procedure used to
than I want it to; that it looks a lot like cost control, and
it isn't really in the interest of the beneficiary, but too
many people knee-jerk in terms of the government structure
thinking that our review process is better than theirs, that
is, government versus the private sector, and I am absolutely
convinced it is not; it is the beneficiary who is suffering.
They are suffering because there is inconsistency of the best
medical practice applied. There are people who are trying to
provide services who are being shorted funds, because it is not
just weeks or months before you wind up getting a decision to
be paid; it is months and years, and that is just simply wrong.
So, I appreciate your willingness to come forward. I do
wish you will take a look at this process. There is no question
it is better than the old one. The question is, is it good
enough the way it has been presented? And if we are going to
have a chance to review it and make some changes, let us do it
as good as we can, so I would appreciate it if you would get
back to us, especially if you are going to respond to the
notice. I would like to have a copy of what you have sent, and,
if you are not, as I told the other panel, I would love to have
your ideas as well, because if it is good, we are going to move
it; if it isn't, we are going to try to change it. And I
appreciate very much your testimony.
[The following was subsequently received:]
Health Industry Manufacturers Association
Washington, DC 20005
July 19, 1999
Jeffrey Kang, MD
Director
Office of Clinical Standards and Quality
Health Care Financing Administration
Baltimore, MD 21244
RE: Federal Register Notice; Procedures for Making National Coverage
Decisions-HCFA-3432-GN
Dear Dr. Kang:
On behalf of our more than 800 members, I would like to thank you
for your efforts in preparing the recent Notice, which sheds light on
the process the Health Care Financing Administration (HCFA) will use to
make national coverage decisions for the Medicare program (64 Federal
Register, No. 80, pages 22619-22625, April 27, 1999).
The Health Industry Manufacturers Association (HIMA) is a
Washington, D.C.-based trade association and the largest medical
technology association in the world. HIMA represents more than 800
manufacturers of medical devices, diagnostic products, and medical
information systems. HIMA's members account for nearly 90 percent of
the $62 billion of health care technology products purchased annually
in the United States, and more than 50 percent of the $147 billion
purchased annually around the world. We at HIMA know that you share our
view of the importance of the Medicare coverage process. Medicare
coverage means patient access to state-of-the-art medical care for our
most vulnerable citizens. If the coverage process is not clear, if it
results in unnecessary delays, if it is not sensitive to the medical
innovation process, beneficiaries will pay the price--appropriate care
will be denied or unduly delayed, and medical progress will be
inhibited. We are pleased to see that this Notice contains a number of
specific steps to make the national decision making process more open
and understandable to the public, that it explains the way the new
Medicare Coverage Advisory Committee will assist in this process, and
that it makes an attempt to give the public a sense of how long the
various elements of this process will take.
We at HIMA appreciate the frank and open dialogue we have had with
you for the past year concerning the need to modernize the Medicare
coverage decision making process. HCFA has clearly made progress in
initiating reforms in this area, and we submit these comments in the
hopes that you will further refine and formalize these first coverage
process reforms, and that you will consider putting in place certain
steps not contained in the April 27 Notice.
Our comments reflect two key concerns. First, we are concerned that
the national decision making process is too long. Indeed, the review
process set forward for at least many technologies in the Notice
exceeds their product life cycles. We have a number of suggestions on
how to speed the time it takes to review new technology and make it
available to Medicare beneficiaries. Second, we have suggestions on
additional elements to include in the national coverage process that we
believe will strengthen it. In addition, we have noted a few suggested
clarifications or refinements to the items contained in the April 27
Notice.
HIMA has the following recommendations for accelerating the time
frames associated with the national coverage review process:
In modernizing the Medicare coverage process, HCFA should
focus on the time it takes to fully integrate a new medical technology
into the Medicare program, not merely on discrete steps in the process.
HCFA should measure (and report on) its performance by measuring the
total time it takes to complete the coverage, coding, and payment
processes, as well as the various components of these processes. In
addition, HCFA should, within one year of implementation of the April
27 Notice, set forth specific time frames for completing these
coverage, coding, and payment processes. Despite the time frames
specified in the Notice for certain elements of the national coverage
process, the task of bringing a new technology into the Medicare
program +and making it available to beneficiaries is too lengthy. The
Notice sets forth time frames that will take close to a year for the
most non-controversial reviews, and at least two (and perhaps three or
more) years for more controversial matters. Patients deserve prompt
access to needed medical treatments. It is unrealistic to expect this
process to consume this much time after a technology has been approved
or cleared for marketing by the U.S. Food and Drug Administration.
Measuring performance (and making the findings available to the public)
should serve as a management tool to help ensure that the coverage,
coding, and payment processes are coordinated and proceed in a timely
way. Further, we believe that, once HCFA has had experience with
implementing the new coverage process, it will be able to set specific
time frames for the coverage, coding, and payment processes.
HCFA should specify a 45-day period during which it will
determine whether to accept a formal request for a national coverage
decision. The Notice currently specifies that the national coverage
review process does not begin until a formal request has been filed by
a requestor and accepted by the agency. Acceptance by the agency starts
a series of time frames. The Notice states that: ``If we determine the
request is adequately supported, we will accept the request and begin
our review process.'' The Notice provides no certainty concerning how
long it will take the agency to review a formal request and determine
whether or not it is in order. We suggest that the formal submission of
the request should trigger the beginning of the review process and the
time frames set forth in the Notice. Further, we suggest that the
agency specify a period-up to 45 days, one-half the current 90-day
period set forth in the Notice-to determine whether the request is in
order. If the request is accepted, all time frames specified in the
Notice should be initiated from the date the request was received by
the agency. If the request is not accepted during the 45-day period,
the review process time frames are not begun. This is the current
practice used by the Food and Drug Administration in considering
whether to accept medical device Pre-Market Applications for filing.
HCFA should take steps to ensure that any referrals it
makes for MCAC review or for technology assessments are completed
within time targets specified by the agency. While the Notice provides
certain elements of the review process with time frames, none are
specified for the time an MCAC review will take. (The Notice states
only that HCFA expects the review will proceed ``as expeditiously as
possible.'') In addition, the Notice informs the public that technology
assessments may take anywhere from 90 days to a year, and perhaps
longer. When HCFA makes a referral, it should specify a time frame
within which it expects a response.
HCFA should clarify the situations under which MCAC may
request a technology assessment. The Notice indicates that both HCFA
and MCAC have the prerogative of requesting a technology assessment. We
are concerned that situations might arise where both HCFA and MCAC
might request assessments, or disagree with respect to the need for an
assessment. Our reading of the Notice is that MCAC might well request a
technology assessment during the course of its review of a technology,
and then resume review once a technology assessment has been completed.
Given the time that might be associated with such assessments, and
their impact on the time it might take to complete the coverage review
process, we request more clarity on the circumstances under which
referrals for technology assessments will take place.
HCFA should streamline the coding and payment processes
associated with the review of new technologies by assigning temporary
procedure codes (where no codes exist). For example, HCFA could assign
a code when a request for a national coverage decision is made and
accepted by the agency. HCFA's coverage, coding, and payment processes
are not coordinated, and their current operations slow the integration
of new medical technologies into the Medicare program. Assigning
temporary procedure codes (where none exist) at the start of the
national decision making process would eliminate one hurdle to speedy
implementation of coverage decisions. The Notice provides 180 days to
put in place systems to carry out coding and payment determinations
with respect to the newly-covered technology-effectively delaying
beneficiary access after a national coverage decision has been made. We
also have concerns that the separate processes by which HCFA makes
decisions on which procedure code is appropriate for a given
technology, and which payment level is adequate, are in need of
modernizing as well.
HFA should avoid unnecessary delay in making covered
technologies available to beneficiaries by eliminating the 180 day
period the Notice provides to implement national coverage decisions.
Coding and payment matters can be handled more expeditiously than
provided for in the Notice. There is no need to delay patient access to
a new medical technology for a period that will take more than six
months (and more likely eight or nine months) after the agency has
determined that it is ``reasonable and necessary'' and should be
covered. HCFA's coverage, coding, and payment regimes should be
streamlined, operate concurrently, and provide more timely beneficiary
access to covered services. Instead of delaying beneficiary access to
newly-covered technologies for 180 days to allow for new payment
systems to be put in place, HCFA has tools available to make the
covered items available as soon as the coverage determination has been
made. For example, HCFA could take action that would permit contractors
to hold claims for newly covered items and bill later when new payment
systems have been established. It could also make use of new methods
for determining interim payment amounts to reimburse providers (in
place of current inadequate methods which include gap fill and
arbitrary assignment into existing payment categories, like DRGs) until
final payment levels have been set. Further, it could require
contractors to accept temporary codes and process them manually until
new systems become available.
In addition, HIMA recommends that the coverage process described in
the April 27 Notice be amended to address the following:
HCFA should recognize that the descriptions set forth in
the April 27 Notice serve as a starting point for modernizing the
coverage process, and that revisions need to be made that make more
firm commitments to the public. The Notice contains a general
description of the coverage process, but does not really define it. The
Notice's descriptions of the coverage review process and its component
parts repeatedly use terms like ``generally,'' ``usually,'' or
``ordinarily'' to explain operational procedures. Firm commitments are
not made. We believe that the process should be made more certain and
predictable, and that the lack of commitment that characterizes the
April 27 Notice should be replaced with more certain processes as the
agency responds to comments, such as these, and as it gains experience.
HCFA should permit those requesting national coverage
decisions to meet early in the product development process to reach
collaborative agreements with the agency as a means to expedite
decision making. We believe that HCFA should build into the national
coverage process the opportunity for a product sponsor to meet with
coverage policy staff for the purpose of reaching agreement on the
requirements needed to secure Medicare coverage approval (e.g.,
requirements regarding the type of evidence the product sponsor may
develop, as well as protocol design). This meeting should be available
early in the product development process-prior to FDA approval or
clearance-in order to lay out the agency's requirements for securing
approval in the coverage review process. We recognize that these
meetings will require the agency to commit its resources, but we
believe those resources will produce savings down the road as the
agency reviews the information produced by the requestor.
Reforms in the coverage decision making process should be
made applicable to local medical review policies developed by local and
regional contractors (i.e., carriers, intermediaries, DMERCS, and
Medicare Integrity Program contractors). Medical device innovation is
characterized by continuous, incremental improvements, based on the
feedback of medical professionals who use these technologies in actual
clinical settings. The local coverage process is especially well suited
to evaluating innovative medical technology. While we recommend that
reforms be made at the local level, we need to emphasize that the
current ratio of local to national decisions serves the system well.
This emphasis on local decision making offers important flexibility to
the system that needs to be preserved. Further, local decision making
is in some ways more economical to administer and helps to ensure that
new technology does not diffuse until it is well accepted. We believe
that HCFA should require that reforms at the national level that are
designed to make the decision making process more open and
understandable to the public be implemented at the local and regional
levels as well. For example, the public should be able to make
suggestions for local coverage determinations, time frames for review
should be put forth, the review process should permit public
participation, and the rationale for decisions should be made available
(with contractors responsible for responding to public comments
received). In addition, meetings of local carrier advisory committees
should be opened to the public (including providing advance notice of
meeting dates and agendas). Further, in situations where some or all of
the contractor medical directors jointly create working groups, their
discussions should be open to the public. Any working groups should be
specifically identified on the agency's web site, and meeting agendas
for the groups should be posted as well. Proposed policies developed by
joint working groups should be taken through the local policy
development process. HCFA should require these openness, transparency,
and public participation objectives for the local and regional coverage
process as it negotiates and finalizes contracts with carriers,
intermediaries, and DMERCs each year. We would expect that contractors
would seek to achieve these objectives in equally effective--yet
diverse--ways, tailored to local conditions. We also believe that HCFA
should provide access to these contractors (and their procedures) on
its web site.
HIMA requests the following actions to clarify our
understanding of the Medicare coverage process:
HCFA should specify a time period-no longer than 60 days-
during which it will make a coverage decision after receiving a
technology assessment. The Notice specifies that HCFA will make a
decision within 60 days of receiving advice from MCAC; no comparable
time period is set out for decision making should HCFA request and
receive a technology assessment directly. We believe that this was an
oversight, and we suggest that HCFA clarify the time frame for making
coverage decisions after receiving a technology assessment.
HCFA should make it clear to its contractors that their
authority for making local and regional coverage decisions are not pre-
empted by the initiation at the national level of the coverage decision
making process. Most coverage decisions are made at the local and
regional levels. Current policy is that Medicare's local and regional
contractors have authority to make coverage decisions absent an extant
national policy. In order to avoid confusion and to guarantee that
contractors carry out their responsibilities in a timely way, HCFA
should make this policy clear to its contractors. Given the long times
associated with national decision making, it is important to ensure
that the local and regional processes remain responsive to requests for
coverage decisions.
HCFA should provide additional time for the public to
prepare evidence for MCAC. The Notice specifies that all evidentiary
presentations before MCAC must be submitted in writing at least 20 days
prior to MCAC meetings. MCAC meetings themselves are announced in the
Federal Register 30 days prior to meetings. This leaves only 10 days
for an interested party, who may be a product sponsor, to prepare and
submit material for MCAC consideration. We believe that this short time
period was unintended, and we urge HCFA to provide a more reasonable
time period in its place.
HCFA should provide further guidance to the public on how
to participate in the coverage process. In particular, HCFA should
consider expanding the Notice in the following areas:
Notice of a request for technology assessment. When HCFA
seeks a technology assessment, posting a notice on its web site would
allow interested parties to comment on the scope and direction of the
request, submit information that may be useful in the assessment, or
even conduct studies or investigations that will prove useful in
parallel to the assessment.
Notice of issues on which HCFA would like input. When HCFA
initiates its review of a service or item for coverage, it should do
more than acknowledge that it has received a request. Through a posting
on its web site, the agency should let the public know what data it
has, and where it has questions that it would like answered. By doing
so, interested persons will be able to help by supplying information
that addresses the agency's concerns.
The use of interactive techniques for collecting public
input. HCFA should describe its plans for using town hall meetings and
other techniques for encouraging interactive dialogue on the complex
issues that surround coverage decision making.
A commitment to respond to comments. Replies to comments
accomplish two objectives-they educate the public regarding how the
agency resolves the issues, and they encourage public participation by
showing that the agency is listening.
A description of the process HCFA plans to use to develop
guidance documents. While the agency may be planning to address the
process for developing guidance documents in another vehicle, we did
not want to miss the opportunity to observe just how important it will
be for the agency to spell out the public process it will use to
develop these documents. FDA has a good model, which it has published
(see 62 Federal Register 8961, February 27, 1997).
National Non-Coverage Decisions should be issued only
where clear evidence exists to support this action. HCFA should
understand that early in the life of a new technology, the quantity and
quality of information that is available regarding the technology may
be in short supply, and not sufficient to support a favorable national
coverage decision. HCFA should refrain from making a National Non-
Coverage Decision in these instances, because such a decision will
prevent local and regional contractors from covering the technology and
developing useful information concerning its impact on patient well
being. HCFA should only issue National Non-Coverage Decisions where it
has an adequate information base to support this course of action.
Thank you for considering these suggestions. We hope to see a revised
Notice published soon that reflects the comments you have received on
this important matter. In addition, we believe that HCFA should pursue
formal rulemaking on this matter, after a period of time-we suggest a
two-year period beginning with the date of publication of this Notice-
during which it gains experience managing this new national coverage
process.
Sincerely yours,
Ted R. Mannen
Executive Vice President
Health Care Systems
Oncotech, Incorporated
Irvine, California
October 14, 1999
Chairman Bill Thomas
House Ways & Means Subcommittee on Health
Longworth House Office Building
Washington, D.C. 20515
Dear Chairman Thomas,
As you recall, I was privileged to provide testimony at the hearing
which was conducted by the Ways & Means Committee on Health on April
22, 1999. Following the hearing, the Committee drafted and introduced
legislation, specifically HR 2356, to redress the issues raised during
the hearing. I have had an opportunity to review HR 2356 in detail and
wish to submit the following observations.
One of several issues addressed by the legislation relates to the
length of time required for a carrier denial to be reviewed by an
administrative law judge. Currently, an average of 564 days is
required. The legislation reduces this period to 90 days.
Substantively, this is a dramatic improvement in the timeliness of
decisions. Medicare patients should not be exposed to an inappropriate
denial of benefits simply by the length of time it takes to proceed
through the appellate process.
A second issue addressed by the legislation relates to the internal
bias found within the carrier in favor of the local medical director's
decision. Our experience, which has been shared by numerous other
companies, has found that the early phases of the appellate process
which are administered and implemented by carrier employees, are not
objective. This phenomenon is not substantially different from that
found within HMOs and other commercial carriers. As you know, within
the last 120 days, both the Senate and the House of Representatives
have passed legislation to provide independent, objective appellate
review of claims denials. HR 2356 provides Medicare patients with the
same access to independent review that the legislation mentioned above
provides to patients who are commercially covered. It does this by
allowing providers and beneficiaries to bypass the internally
controlled carrier appellate steps and go directly to an administrative
law judge. In our judgement, the ability to move an issue directly to
an administrative law judge ensures that patient care issues will be
determined in a fair and unbiased environment.
A third issue addressed by the legislation requires that a policy
decision made by a local medical director be subject to oversight,
review and change by an administrative law judge. Currently, local
medical directors are not required to acquiesce in the decision of an
administrative law judge vis-a-vis their local medical policy. Local
medical directors claim that an administrative law judge decision is
limited exclusively to the patient or patients upon which the ALJ is
reaching his conclusion, thereby placing their local medical policy
above appellate review. This practice leaves local medical directors in
a position of absolute power. HR 2356 vitiates this practice, removes
the absolute power exercised by local medical directors under the
current legal structure and prevents the burdensome and timely re-
litigation of inappropriate local medical policies.
For the reasons stated above, it is essential that HR 2356 be
enacted. Medicare beneficiaries have a right to independent review that
is characterized by objectivity, power to change errors and timeliness.
This bill clearly establishes these rights on a clear, legal
foundation.
Personal regards,
Frank J. Kiesner, J.D.
President & CEO
Oncotech
Statement of American Medical Association
The AMA and national medical specialty societies have
repeatedly advocated to HCFA that standards of openness,
accountability, timeliness, and evidence-based decisionmaking
be imposed on the local coverage policy development process to
ensure that local policies reflect the best available clinical
and scientific evidence.
The physician community has also repeatedly advocated to
HCFA that at both the local and national levels its coverage
policy process be separated from its fraud and abuse and
program integrity activities.
Also, we have advocated that the new process for making
national Medicare coverage decisions using the Medicare
Coverage Advisory Committee (MCAC) be set up to meet the needs
of practicing physicians and patients for clear guidance on
covered benefits, instead of being driven by the marketing
strategies of manufacturers and suppliers.
The HCFA Notice of April 27 announcing its new coverage
policy process falls short of these objectives in several
respects:
The Notice gives no attention to the problems with
local policies established by the Medicare carriers. HCFA
continues to promulgate a view that if it sets up an open,
accountable, timely, and evidence-based national coverage
process, then this will somehow ``trickle down'' to the local
level.
The MCAC process meets the objectives of openness,
timeliness, accountability, and evidence-based decisions in a
number of respects. The Notice strongly emphasizes the use of a
``formal reques'' process for getting topics before the MCAC,
however. The AMA has grave concerns that such a process, which
seems to be modeled after the Food and Drug Administration
(FDA) process, will ensure that large entities with significant
resources and FDA experience will dominate the Medicare
coverage agenda. Physician organizations and beneficiaries with
concerns about Medicare coverage of nursing home visits, mental
health care, lab tests, and palliative and end-of-life care,
for example, may have a difficult time getting HCFA's
attention.
The only avenue for physicians and patients to
pursue besides the new MCAC is the current Medicare appeals
process. Local determinations must be addressed through this
process one claim at a time, with no remedy for poorly
constructed local policies that are aimed more at preventing
fraud than ensuring delivery of necessary medical care. This
process is also outrageously lengthy and unfair to physicians
and patients.
Mr. Rosebrough. Thank you.
Dr. Plested. Thank you.
Mr. Kiesner. Thank you.
Chairman Thomas. Thank you, and the Subcommittee stands
adjourned.
[Whereupon, at 3:36 p.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Angela Loavenbruck, American Academy of Audiology, McLean,
Virginia
Mr. Chairman and Members of the Subcommittee, thank you for
the opportunity to submit the testimony of the American Academy
of Audiology for inclusion in the printed record of the Hearing
on Medicare Coverage Decisions and Beneficiary Appeals. I am
Angela Loavenbruck, D.Ed., Chair of the Government
Reimbursement Committee of the American Academy of Audiology
(AAA). With 7,000 members, the AAA is the major national
professional association representing audiologists in the
United States. We wish to submit this statement on behalf of
the 13,000 practicing audiologists and the 28 million Americans
who suffer from hearing disabilities.
The AAA would like to add its voice to the chorus of those
who believe that glaring inconsistencies in coverage decisions
between different regional and local carriers is a serious and
growing problem. The Health Care Financing Administration's
(HCFA) apparent acceptance of these inconsistencies is bad
policy and unfair to both Medicare beneficiaries and Medicare
providers.
The particular problem that audiologists face is the
refusal of some carriers to cover audiometric diagnostic tests
that result in identification of hearing loss for which there
is currently no medical or surgical treatment possible.
Medicare Part B covers diagnostic testing to determine the
cause of a hearing loss, but it does not cover ``hearing aids
and examinations therefor.'' 42 U.S.C. Sec. 1395y(a)(7); 42
C.F.R. Sec. 411.15(d). Thus, HCFA has determined that
diagnostic testing should be covered where it is needed to
determine whether medical or surgical intervention is called
for; it should not be covered where testing is performed solely
for the purpose of fitting a hearing aid. According to the
Medicare Carriers Manual, coverage should be denied where
``diagnostic services are performed only to determine the need
for or the appropriate type of a hearing aid'' and where ``the
medical factors required to determine the appropriate medical
or surgical treatment are already known by the physician or are
not under consideration.'' Medicare Carriers Manual Sec. 2070.3
(emphasis added).
Contrary to HCFA's announced policy, some carriers
routinely and automatically deny reimbursement for any
diagnostic testing that identifies hearing loss which can only
be treated with the fitting of an amplification device.
Coverage is denied even though the nature, extent and cause of
hearing loss is unknown prior to the tests. Just as some
carriers deny coverage of a prostate-specific antigen test (PSA
test) if the resulting diagnosis is an enlarged prostate rather
than cancer (See testimony of Dr. William G. Plested, III on
behalf of the American Medical Association), some carriers deny
coverage of audiometric diagnostic tests if the resulting
diagnosis cannot be treated with medical or surgical
intervention.
When a patient complains of hearing loss, the only way to
determine the nature, extent and cause of the hearing loss is
for a qualified audiologist to perform a battery of audiometric
diagnostic tests. Any reputable medical textbook will say that
there is simply no other way to make a sound diagnosis. This is
the standard of care for diagnosis of hearing loss. That
Medicare will cover a service that represents the standard of
care for some kinds of hearing loss but not for others seems
discriminatory. To reimburse for any medical test depending
upon the outcome also may create an incentive to skew the
results of that test. For audiologists, a carrier policy that
denies coverage of diagnostic tests if the tests do not
discover a medically or surgically treatable condition can have
a serious impact on their practice.
The AAA also agrees with other witnesses that Medicare
beneficiaries should be able to appeal carrier coverage
policies, not just individual denials of claims. The AAA
believes that HCFA must exercise some oversight over the policy
decisions of carriers. It is inconceivable to us that the
beneficiaries of one of the federal government's largest
programs should have no recourse to appeal policy decisions
made by private companies administering the program. In
addition, we believe that Medicare providers should also be
given the right to appeal carrier policy decisions.
Thank you for this opportunity to share our views. The
American Academy of Audiology would be pleased to answer any
questions you may have. We would also be glad to work with the
Subcommittee and with HCFA to develop a solution to the
specific problem of inconsistent carrier policies regarding
audiology diagnostic testing, as well as solutions to the
larger issues raised at the hearing.
Statement of American College of Physicians-American Society of
Internal Medicine
The American College of Physicians-American Society of
Internal Medicine (ACP-ASIM), representing over 115,000
physicians and medical students, appreciates the opportunity to
submit a statement for the record to the Committee on Ways and
Means Subcommittee on Health on how the Health Care Financing
Administration (HCFA) makes decisions regarding Medicare-
covered services and what opportunities exist for beneficiaries
and physicians to appeal those decisions. ACP-ASIM applauds the
Subcommittee for holding a hearing to analyze the processes
available to seniors and physicians to appeal coverage
decisions under Medicare, particularly those made by Medicare
carriers.
ACP-ASIM has reviewed the national coverage process
developed by HCFA and published as a notice in the April 27,
1999 Federal Register. ACP-ASIM will be glad to share any
comments it has regarding HCFA's national coverage process with
the Subcommittee.
However, HCFA's coverage process fails to address local
coverage decisions. This is especially noteworthy since HCFA
recently confirmed that approximately 90 percent of all
coverage decisions are made at the local Medicare carrier
level. HCFA currently allows its carriers broad latitude in
making local coverage decisions. While HCFA touts its national
coverage process as more ``open, understandable, and
predictable,'' the current process for making local coverage
decisions continues to be somewhat closed, ambiguous, and
unpredictable. ACP-ASIM believes that the process by which
Medicare carriers make local coverage decisions needs to be
reformed.
Local Coverage Decisions
Local coverage decisions take the form of local medical
review policies (LMRPs). HCFA requires that LMRPs be developed
in consultation with a local carrier advisory committee (CAC).
Each state maintains a CAC that is comprised of one physician
representative per each major medical specialty. A Medicare
carrier medical director (CMD) must distribute a proposed LMRP
to the CAC before implementing it as carrier policy. CAC
representatives have a minimum of 45 days to gather comments
from their respective specialties. The CMD has full discretion
in determining how to incorporate comments received from the
CAC during the comment period. The LMRP takes effect 30 days
after being published by the carrier.
Section 7501.2 of the Medicare Carriers Manual (MCM)
clearly states that it is the responsibility of the CMD to
determine when an LMRP is needed. The CMD is instructed, but
not limited to using the following sources:
Carrier data, such as reports identifying a
significant utilization of an item/service in the past year;
National claims history;
Information obtained from State medical and
specialty societies or individual physicians;
Recommended model policy developed by national or
regional medical director workgroups;
LMRPs established by other carriers in reaction to
abusive or aberrant practices, in order to proactively address
the potential migration of these practices;
Complaints from beneficiaries; and
Recommendations from other sources, such as Office
of Inspector General reports, fraud unit, etc.
The focus of LMPRs varies. A CMD can use an LMRP to
determine whether an item/service is a covered benefit by the
Medicare program. Further, an LMRP can determine the clinical
conditions under which a covered service will be paid for by
the Medicare program.
Problems with the LMRP Process
In reality, it is extremely difficult for physicians to
keep track of LMRPs. Requirements are communicated to
physicians in a disjointed and ineffective way. CMDs update
LMRPs that determine the conditions under which a covered
service is paid for by periodically publishing additions and
deletions to the list of acceptable clinical conditions,
usually in the form of diagnosis codes. Typically, only the
changes are listed. The original policy is rarely updated and
published in its entirety. The result is that individual
practices have to update the original policies in their files
to maintain accurate information, which makes it virtually
impossible for physicians to learn LMRPs. Even the most well-
informed physicians have difficulty keeping apprised of
changing LMRPs.
ACP-ASIM is not arguing that all coverage decisions and
policies should be national. The College supports local
physician input into LMRPs. CMDs, in conjunction with CACs,
play a key role in ensuring that local Medicare policies are
fundamentally related to what the local medical community views
as appropriate standards of medical practice. The LMRP process
should be reformed, however. This could be accomplished through
structural improvements to the CAC process and by identifying
``best practices'' of the existing State CACs.
Recommendations
1. HCFA Should Separate Local Coverage Decisions From Program
Integrity functions. HCFA's Office of Clinical Standards and
Quality should oversee carrier LMRP issues.
Section 7501.2 of the MCM states that ``LMRP(s) is
primarily a program integrity tool'' and that ``it is generally
developed to specify criteria that describes whether the item/
service is covered and under what clinical circumstances it is
considered to be reasonable, necessary, and appropriate.''
Further confirmation that LMRPs focus on program integrity is
that Section 7503 of the MCM, which pertains to CACs, instructs
the CAC co-chair to send copies of CAC meeting minutes to
HCFA's Program Integrity Group/Contractor Management Group with
the Office of Financial Management at the agency's central
office.
It is inappropriate for coverage decisions to be made based
on whether they save money. Denying a item/service as a covered
benefit or restricting it's a coverage to a limited number of
clinical conditions because of cost considerations and/or
because of perceived or potential overutilization is unfair to
beneficiaries. It is problematic that CMDs are primarily
accountable to the Program Integrity Group within HCFA's Office
of Financial Management when making coverage decisions.
Beneficiaries' interests would be best serviced if the office
within HCFA that focuses on quality of care was the one that
decides which items/services are reasonable, necessary, and
appropriate.
2. Carriers should provide a 60-day public comment period for
all proposed policy changes instead of the current 45-day
comment period.
The current comment period is too short for medical
societies to make informed judgments and comments on policy
changes. This is a problem particularly in rural states where
the size of the medical society staff may be limited.
3. At the conclusion of the comment period, the carrier should
state, in writing, its reasons for accepting or rejecting the
comments in framing the final policy.
All CAC members should receive the carriers rationale for
adopting policy changes, and the public should receive this
information on request. Just as the Administrative Procedures
Act requires HCFA and other federal agencies to respond to
comments made on its proposed rules, so too should carriers
have to provide an explanation of why they have adopted a
particular policy. In this way, the medical and patient
community will know why the carrier is pursuing a particular
course of action. In addition, educating physicians and their
staffs about the policy change would further the goal of
adopting correct policy and relieve carriers of administrative
burdens that result from physicians misunderstanding policy
changes.
4. HCFA should provide ``best practices'' guidelines to CMDs so
they can incorporate them into their CAC process.
ACP-ASIM is encouraged that HCFA has contracted with the
consulting firm of PricewaterhouseCoopers (PwC) to make
recommendations to improve the effectiveness and the efficiency
of the LMRP development process. As a part of its contract, PwC
is to identify ``best practices'' that could be used to improve
local policy development as HCFA attempts to standardize the
process nationwide.
ACP-ASIM informally polled its members involved in State
CACs to and came up with the following examples of effective
CAC processes:
The Wisconsin carrier continues to work with the
CAC member representing the specialty or specialties most
affected by a proposed LMRP after the conclusion of the 45-day
comment period and before implementing it by publishing it in
its Medicare Bulletin. This additional step in the decision-
making process enables the carrier to improve the proposed LMRP
by allowing further input from relevant specialties, without
occupying the time of the entire CAC. This type of increased
interaction results in more thoughtful LMRPs and is consistent
with the intent of the CAC process. Further, the carrier-
physician relationship is enhanced by carrier efforts to work
collaboratively with the physician community.
The CMD that co-chairs the California CAC extended
the comment period for 45 to 60 days.
The Rhode Island CMD sends draft LMRPs to CAC
members before the meeting but begins the 45-day comment period
on the meeting date (HCFA requires CACs to provide a 45-day
comment period that begins when the draft LMRPs are sent out to
CAC members).
At a minimum, each of these practices should be adopted
nationwide.
5. There needs to be a process for fine tuning LMRPs after they
are implemented. The lack of an established process to modify
existing LMRPs forces physicians to seek changes in a
disjointed manner.
There is no standard way for physicians to appeal LMRP
coverage decisions, both those that determine whether an item/
service is covered and those that indicate the clinical
circumstances in which an item/service is considered reasonable
and medical necessary. There needs to be a way to correct
misguided LMRPs that are hurried through a process that is not
conducive to broad input.
There should be a formal mechanism that allows physicians
(for themselves and on behalf of their patients) to recommend
changes to LMRPs--whether appealing a coverage decision or
altering an LMRP that restricts the conditions in which a
covered service will be paid. Recommended changes should go
back to the CAC. If the LMRP is further disputed, HCFA's Office
of Clinical Standards and Quality should intervene to ensure
that beneficiaries are not being denied medically necessary
services or being inappropriately forced to pay for them out-
of-pocket because of an incorrect LMRP.
Beneficiaries are often saddled with additional out-of-
pocket costs for items/services that are not covered and when
coverage is inappropriately restricted to a limited number of
clinical conditions. In cases were the item/service is covered
for only a specific conditions, the physician must find a
condition, indicated by a diagnosis code(s), that fits the
patient and will be covered. Physicians can currently ask the
CMD to expand the list of conditions that merit coverage.
Acceptance or rejection of these recommended policy changes is
left solely to the discretion of the CMD. The HCFA central
office generally stays out of this area. However, the Program
Integrity Group within the Office of Financial Management, and
not the physicians on the Office of Clinical Standards and
Quality staff, would intervene if HCFA got involved. Clearly,
the latter would be a more appropriate arbiter of these issues.
6. Carriers need to assess the financial/cost-benefit impact of
the LMRPs that they choose to implement in a systemic way.
Although LMRPs are generally implemented to restrict the
situations in which covered services are paid, carriers should
be able to determine the overall financial impact of an LMRP. A
carrier should collect data on the number of claims pertaining
to a denied service covered by an LMRP that are appealed and
how often denials are overturned on appeal. It is wasteful to
implement a restrictive LMRP that is to save money when the
cost of manually reviewing appealed claims outweighs any
savings generated by initial denials.
For example, Transamerica Occidental Life Insurance Co.,
the Medicare carrier for Southern California, maintains LMRPs
that limit coverage of laboratory tests such as blood counts,
blood glucose, and serum magnesium to a specific list of
conditions, indicated by diagnosis codes. Limiting coverage of
tests whose use is widely indicated and clinically accepted for
the purpose of program integrity is disruptive for physicians
and their patients. Adjudicating claims that are appealed after
originally being denied because of restrictive LMRPs is likely
to actually increase costs if a significant number of denials
are overturned on appeal.
7. HCFA has a responsibility to inform beneficiaries that LMRPs
that deny coverage of an item/service or restrict coverage to
specific patient conditions will cause their out-of-pocket
medical expenses to increase.
LMRPs with a program integrity bent have financial
implications for beneficiaries. Physicians are forced to strike
a balance between ensuring that their patients receive all
items/services that are medically necessary and minimizing
their patients' out-of-pocket costs.
The simple presence of a LMRP limiting coverage increases
the likelihood that patients will refuse items/services.
Physicians must ask patients to sign an advanced beneficiary
notification form (ABN), in which the patient agrees to pay for
the item/service if Medicare denies payment, if they are
uncertain as to whether Medicare will pay for the item/service
under the circumstances. Difficult-to-learn LMRPs frequently
prevent physicians from knowing when Medicare will cover an
item/service. Patients are further disadvantaged as those who
cannot afford to pay for an item/service out of pocket may
forgo the treatment.
Model LMRPs
Ideas for LMRPs are sometimes derived from ``model'' LMRPs
that are developed by working groups of CMDs. CMDs from around
the country periodically develop a policy template on an
issue(s) that a CMD(s) thinks needs to be addressed. HCFA only
reviews these model policies to make sure that they do not
contradict national Medicare policy. Individual CMDs can then
run the model or a variation of the model through its State CAC
for implementation. Currently, national medical specialty
societies and other interested parties are generally unable to
have input into the development of ``model'' LMRPs.
Recommendation
National medical societies should have input into ``model'' LMRPs
developed by ``working groups'' of CMDs for the purpose of being
implemented through local CACs.
A working group of CMDs should involve relevant medical societies
when formulating a model policy. This type of collaboration will result
in more suitable LMRPs and better prepare national medical societies to
target educational efforts toward members.
It is a disservice to beneficiaries and providers to allow model
LMRPs developed by a regional or national workgroup of CMDs to become
de facto regional or national policies. Model LMRPs have the potential
to become national policies if they are implemented throughout the
country, with the only difference being changes made by the State CAC.
It is inappropriate for HCFA to permit model LMRPs that are initiated
by a few CMDs whose focus is program integrity become the equivalent of
a national policy.
For example, a workgroup(s) of CMDs has drafted at least 15 model
LMRPs for clinical laboratory tests. Many of these models were
implemented by CMDs through their CACs because of perceived
overutilization or because of potential overutilization. As a result,
it is likely that a model(s), or a variation of that model(s), has been
implemented in many States. We cannot definitively say that every
carrier has an LMRP in place for a specific laboratory test or even
identify how closely the existing LMRPs track with the model because
HCFA currently fails to keep track of the LMRPs maintained by each
carrier.
The Balanced Budget Act of 1997 directed HCFA to convene a
negotiated rulemaking committee to develop uniform coverage and
administrative policies for clinical laboratory tests. HCFA's approach
to this committee provides some insight into agency's view of the model
LMRPs for laboratory tests. After the negotiated rulemaking committee
selected the laboratory tests for which it would develop national
coverage policies (now being called ``coverage determinations'' as they
were not derived from the national coverage process that HCFA published
in the April 27, 1999 Federal Register), some committee members
suggested using existing model LMRPs as a starting point. HCFA, a
member of the negotiated rulemaking committee, rejected that suggestion
stating that national coverage policies (determinations) needed to be
held to a higher standard of scientific evidence. If HCFA is not fully
comfortable with using CMD workgroup-developed model LMRPs as a
template for national policy, it is certainly inappropriate to allow
model policies to in effect become national, with only minor tinkering
by State CACs.
Conclusion
ACP-ASIM believes that adoption of the recommendations
included in this statement, and recapped below, will ensure
that beneficiaries receive all medically necessary services
that are provided under appropriate clinical conditions
1. HCFA Should Separate Local Coverage Decisions From
Program Integrity functions. HCFA's Office of Clinical
Standards and Quality should oversee carrier LMRP issues.
2. Carriers should provide a 60-day public comment period
for all proposed policy changes instead of the current 45-day
period.
3. At the conclusion of the comment period, the carrier
should state in writing, its reasons for accepting or rejecting
the comments in framing the final policy.
4. HCFA should provide ``best practices'' guidelines to
CMDs so they can incorporate them into their CAC process.
5. There needs to be a process for fine tuning LMRPs after
they are implemented. The lack of an established process to
modify existing LMRPs forces physicians to seek changes in a
disjointed manner.
6. Carriers need to assess the financial/cost-benefit
impact of the LMRPs that they choose to implement in a systemic
way.
7. HCFA has a responsibility to inform beneficiaries that
LMRPs that deny coverage of an item/service or restrict
coverage to specific patient conditions will cause their out-
of-pocket medical expenses to increase.
8. National medical societies should have input into
``model'' LMRPs developed by ``working groups'' of CMDs for the
purpose of being implemented through local CACs.
Thank you for the opportunity to submit this statement for
the record. We look forward to working with the Subcommittee to
ensure that HCFA addresses the deficiencies in the way local
coverage decisions are made by Medicare carriers.
Statement of American Gastroenterological Association, Bethesda,
Maryland
I. BACKGROUND
The American Gastroenterological Association (``AGA'') is an
organization of more than 10,000 physician clinicians, researchers and
educators who specialize in the treatment of digestive disorders. The
AGA serves its physician and scientist members and their patients
through advocacy; supporting members' practice and scientific needs;
and by promoting the discovery, dissemination and application of new
knowledge, leading to the prevention, treatment and cure of digestive
diseases.
The AGA appreciates this opportunity to offer the following
Statement to the House Ways and Means Subcommittee on Health, for
consideration at its April 22, 1999 Hearing on Problems with Medicare
Coverage Policy Decisions. The AGA Statement focuses on the following
two areas: ineffective Medicare coverage for colorectal cancer
screening; and inappropriate Medicare carrier interpretation of what
constitutes a physician ``consultation.''
II. SPECIFIC COMMENTS
A. Ineffective Medicare Coverage For Colorectal Cancer Screening
Colorectal cancer, or cancer of the colon or rectum, is the second
leading cause of cancer-related death in the United States--some 56,600
Americans will die of colorectal cancer in 1999. When skin cancer is
excluded, colorectal cancer is the third most commonly diagnosed cancer
for both men and women in the United States. Approximately 129,400 new
cases will be diagnosed during 1999. For men, colorectal cancer follows
prostate and lung cancers in frequency; for women, it follows breast
and lung cancers.
The risk of developing colorectal cancer generally increases with
advancing age. African Americans are more likely than whites to be
diagnosed with this disease and are more likely to die of it. Other
major risk factors include having inflammatory bowel disease, a family
history of colorectal cancer or colorectal polyps, and certain
hereditary syndromes. Additional conditions contributing to increased
risk for colorectal cancer include a personal history of colorectal
cancer or polyps or of ovarian, endometrial or breast cancers.
Currently, screening for colorectal cancer lags far behind
screening for other cancers, perhaps because the effectiveness of
colorectal cancer screening has only recently been documented. In a
1997 survey sponsored by the Centers for Disease Control, only 41% of
adults aged 50 and older had ever had a sigmoidoscopy or proctoscopy
(an earlier and now less frequently used procedure) for screening or
diagnostic purposes, and only 29% of respondents reported having had
one within the past 5 years. Of the survey respondents, 39% of adults
aged 50 and older reported ever having a fecal occult blood test using
a home kit, and only 19% reported having this test in the preceding
year.
Survival is greatly enhanced when colorectal cancer is detected
early and appropriate treatment provided. Despite the availability of
effective screening tests, colorectal cancer screening is underused.
Studies show that only 37% of colorectal cancers are diagnosed at a
localized stage. When colorectal cancer is diagnosed at a localized
stage, death rates are low: only about 9% of these patients will die
within 5 years. Once the disease has progressed to a regional stage,
about 34% of patients will die within 5 years. When the disease is
diagnosed at an advanced stage (has spread to distant sites), death
rates are high: about 92% of patients will die within 5 years. For
African Americans, 5-year survival rates are lower than those for
whites, and a smaller proportion of cases are diagnosed at an early
stage. Precancerous polyps may be present in the colon for years before
invasive cancer develops. Colorectal cancer can actually be prevented
by removing precancerous polyps. Reducing the number of deaths from
colorectal cancer depends on detecting and removing precancerous
colorectal polyps, as well as detecting and treating cancer in its
earliest stages.
AGA is greatly concerned that, because Medicare program carriers
are given enormous discretion in implementing the national coverage
policy on colorectal cancer screening, each individual who is at high
risk for developing this deadly disease, either because of family
history of familial adenomatous polyposis, hereditary non-polyposis
colorectal cancer and inflammatory bowel disease, may not be provided
the opportunity for adequate screening. AGA has received reports from a
number of its physicians indicating that coverage for colorectal
screenings is being denied by local carriers. Given the above, Congress
should urge the Department of Health and Human Services (``HHS'') and
the Health Care Financing Administration (``HCFA'') to monitor more
effectively the local carriers' implementation of the national coverage
policy for screening of colorectal cancer for high-risk individuals.
B. Inappropriate Medicare Carrier Interpretation Of What Constitutes A
Physician ``Consultation''
As part of the Medicare physicians' fee payment schedule, HCFA
established guidelines in the Medicare Carriers Manual (``MCM'')
regarding how local carriers should pay for ``consultations'' and ``new
patient visits.'' HCFA notes in the MCM that, for a consult, carriers
should pay for the initial consultation if the referring physician does
not transfer the responsibility for the patient's care to the receiving
physician until after the consultation is completed. However, the
appointment should be billed as a visit when the referring physician,
in the original written or verbal referral, transfers the
responsibility for treatment to the receiving physician via a request
to ``evaluate and treat.''
HCFA also states in the MCM that: ``a consultation is distinguished
from a visit because it is done at the request of a referring physician
(unless it's a patient-generated confirmatory consultation) and the
consultant prepares a report of his/her findings which is provided to
the referring physician for (his/her) use in treatment of the patient.
A consultant may initiate diagnostic and/or therapeutic services.
However, when the referring physician orally or in writing transfers
responsibility of treatment at the time of the request for consultation
or referral, the receiving physician may not bill a consult.''
(Emphasis added).
Several local Medicare carriers recently have tried to redefine
HCFA's definition of ``consult'' by restricting payment for the consult
fee if the receiving physician provided any treatment whatsoever to the
patient. In contrast, the carriers would pay for a consult only if the
specialist determined that no treatment was needed. One carrier
incorrectly tried to assume that, if the receiving physician follows
the patient after the initial encounter, it implies that he/she is
assuming part of the patient's ongoing care. These efforts thus far
have failed to succeed, largely due to input and pressure by physician
members of state American Medical Association (``AMA'') affiliates.
AGA believes that the local carriers' interpretations of what
constitutes a physician consult are faulty and contrary to the above-
noted HCFA definitions, as well as AMA's CPT-4 guidelines, which state
that ``a physician consultant may initiate diagnostic and/or
therapeutic services.'' AGA is greatly concerned that, because Medicare
program carriers are given enormous discretion in implementing health
care coverage policy, local carriers will continue to deviate from
accepted nationally established definitions that apply to physician
practice issues, such as what constitutes a consultation. Therefore,
Congress should urge HCFA to monitor more effectively how the local
Medicare carriers are implementing HCFA's definition of physician
``consultation,'' in order to ensure that any interpretation contrary
to the MCM is not permitted.
Finally, AGA members ardently wish to maintain their stellar record
of providing high quality services to their patients. They fear that,
taken together, over-burdensome paperwork requirements, fear of
unwarranted government intrusion into their practices, and ever-
decreasing reimbursements may combine to force AGA members to
reevaluate their ability to continue practicing at current levels of
care. Medicare beneficiaries should not be put at risk because of
excessive government intrusion into the practice of medicine in this
way. We urge Congress to impress upon HHS and HCFA that the unintended
consequences of their actions, as described above, could indeed achieve
this undesirable result.
For further information, please contact Michael Roberts, AGA Vice
President, Public Policy & Government Affairs, at 301-654-2055.
Statement of American Occupational Therapy Association, Inc., Bethesda,
Maryland
The American Occupational Therapy Association represents
60,000 occupational therapists, occupational therapy
assistants, and students of occupational therapy. AOTA's
mission includes promoting the interests of the profession and
its patients in access to quality services which meet social
and individual needs. AOTA submits this statement for the
record of the hearing on Medicare Coverage Appeals held April
22, 1999.
Occupational therapy is covered under Medicare Part A and
under Medicare Part B as an outpatient service. Under both Part
A and Part B, occupational therapy is provided based on
coverage criteria which allow for the provision of therapy
which is ``medically prescribed treatment concerned with
improving or restoring functions which have been impaired by
illness or injury or, where function has been permanently lost
or reduced by illness or injury, to improve the individual's
ability to perform those tasks required for independent
functioning.'' (Carriers Manual, Sec 2217, Intermediary Manual
(Sec. 3101.9) Further, occupational therapy is considered
reasonable and necessary only where an expectation exists that
the therapy will result in a significant practical improvement
in the individual'' level of functioning within a reasonable
period of time. Where an individual's improvement potential is
insignificant in relation to the extent and duration of
occupational therapy services required to achieve improvement,
such services would not be considered reasonable and necessary
and would thus be excluded from coverage by Sec. 1862(a)(1) of
the Social Security Act. (Ibid.)
While this of coverage criteria is established by the
Health Care Financing Administration (HCFA), their contractors
(e.g., fiscal intermediaries and carriers) have authority from
HCFA to develop more explicit local medical review policies
(LMRPs).
AOTA would like to concentrate this testimony for the
record on issues of coverage determinations, denials and
allowances based on the use of LMRPs. Created by HCFA
contractors with inadequate oversight and little public input
from the agency, LMRPs have caused considerable problems for
occupational therapy practitioners and their patients.
Variations in coverage, which result from the multiple
issuances of fiscal intermediaries, are unfair and unnecessary.
HCFA could oversee and regulate the activities of its
contractors in the medical review area far more than is
currently the practice.
AOTA's experience with the variability of these policies
and with the more important problem of the limited public
scrutiny of the development of these policies requires that we
urge the Subcommittee to consider requiring that HCFA provide
national coverage guidance which prevents the establishment and
use of LMRPs which unreasonably restrict or make unequal
beneficiaries' access to their rightful and appropriate
Medicare services.
In particular, HCFA should narrow the fiscal
intermediaries' latitude in cases where LMRPs contain
significant and unsupported deviations from the national
medical review guidelines contained in the Medicare
Intermediary Manual.
As witnesses before the Subcommittee on April 22 noted, the
Medicare contractors have considerable authority to interpret
and apply Medicare's requirements. Testimony before the
Subcommittee attributed the conveyance of this authority to
historical limitations in HCFA staffing and a view in HCFA that
there are regional differences in medical care that should not
be overruled by national coverage policy.
Based on AOTA's experience, this bow to regional difference
has not resulted in better care but rather has hindered
appropriate application of the laws, regulations and
professional standards which should guide authorization and
denial of care.
HCFA should be required to enforce the national standards
for these LMRPs to prevent their development and use in ways
that arbitrarily impede the ability of occupational therapists
to furnish skilled occupational therapy services based on an
evaluation of individual need and rehabilitation potential
within the reasonable and necessary guidance of the Social
Security Act.
AOTA has long been working to achieve consistency in the
many and varied LMRPs as well as to assure that the LMRPs are
based on standards of best practice and developed in
consultation with experts and authorities on the particular
benefit in question. HCFA has not, in our view, exercised
sufficient oversight and regulation of the activities of its
contractors in the medical review area. AOTA believes that the
authority and latitude of the fiscal intermediaries or other
contractors should be constrained. As AOTA has seen cases in
which the LMRPs contain significant and unsupported deviations
from the national medical review guidelines contained in the
Medicare Intermediary Manual. We believe the LMRPs should be
replaced with a broad and open public process to establish more
detailed national coverage criteria.
Such national coverage criteria would assure Medicare
beneficiaries equal access to services across the nation.
National coverage criteria would replace the current situation
wherein a ``national'' policy is sometimes developed by default
when contractors ``adopt'' other contractors' policies, even if
those policies conflict with overall Medicare requirements.
Thus, an erroneous and improper ``national'' policy can become
established merely by the spread of LMRPs from one contractor
to another, by entities that are not publicly accountable, with
limited public review and without sufficient intervention or
oversight by HCFA. While the Medicare Intermediary Manual does
provide LMRP development guidelines, which should include
stakeholder participation, AOTA's experience is that these are
not always followed.
Furthermore, while AOTA may be able to intervene in some of
these, many beneficiaries and beneficiary advocates find that
the existence of multiple LMRPs and standards hinder
appropriate access to services. We have also found that many
LMRPs, especially in the amount, frequency and duration
parameters, are so prescriptive as to impinge upon the ability
of professionals to provide care that addresses the medical
condition, functional level and rehabilitation possibilities of
individual beneficiaries.
A national solution is needed to address this national
interest.
AOTA understands that the fiscal intermediaries and other
contractors have the authority to develop LMRPs to describe
when and under what circumstances an item or service(s) will be
covered and to clarify or provide guidance on national coverage
guidelines. Conferring this discretion upon fiscal
intermediaries does not, we believe, vest them with the
authority to supplant pertinent statutory provisions,
regulations, and national coverage policies (which include
manual issuances) with informal presumptions. Yet HCFA's
oversight and willingness to overrule or moderate LMRPs of
fiscal intermediaries is limited. AOTA has had many discussions
and meetings with HCFA and its intermediaries over LMRPs to try
to assure that the process and resulting products adhere to the
overarching principles laid out in Medicare law for benefits
and coverage criteria. These interactions have met with limited
success.
Beneficiaries and providers deserve consistency in the
benefits and providers deserve fair guidance in all areas of
the country. The reasonableness and necessity of services
should not vary significantly from one region to another
At a minimum, HCFA should be required to oversee the
development and implementation of LMRPs to assure that coverage
policies are:
Based on practice standards validated by research;
Constructed and implemented without impinging upon
the professional judgement of therapists (or other
professionals) in the formulation of care plans tailored to
meet the unique needs of individual beneficiaries.
Lend constructive guidance and provide appropriate
information to beneficiaries and providers.
AOTA must also reference the payment limitation of $1500
annually for occupational therapy services imposed by the
Balanced Budget Act as another unreasonable and inappropriate
limitation on access to reasonable and necessary services by
Medicare beneficiaries. While this issue is not directly
related to the April 22 hearing agenda, it is another example
of policy developed and implemented by HCFA without adequate
consideration of current best practice and appropriate medical
standards.
AOTA is supportive of any efforts made by HCFA to address
coverage consistency. AOTA has nominated an individual to be a
member of the new Medicare Coverage Advisory Committee to
represent interests of the rehabilitation community in this
important area. We look forward to participating in the work of
this Committee, when it is constituted and working with HCFA as
they publish new guidelines on policy-making and the definition
of ``reasonable and necessary.''
But we urge the Subcommittee to consider the impact on
beneficiaries and on the Medicare program's integrity that
result from the failure of HCFA to constrain and oversee the
activity of contractors in this area. AOTA would urge
consideration of moving to national coverage criteria with all
due dispatch. LMRPs do not serve their purpose of providing for
local differences in medical care and approach. They create
multiple problems rather than multiple solutions.
AOTA urges Congress to require moving away from the
outdated approach of defining necessity in the current
haphazard, patchwork manner.
We would be pleased to work with the Subcommittee to
further address these issues.
Statement of Dwight S. Cenac, Chairman of the Board, Home Care
Association of America, Jacksonville, Florida
Section I--Introduction
Mr. Chairman and Members of the Committee,
Thank you for the opportunity to offer written testimony on
the critical subject of Medicare Coverage Decisions and
Beneficiary Appeals. My name is Dwight Cenac and I am the
Chairman of the Board of Home Care Association of America
(HCAA). HCAA represents several hundred freestanding home
health agencies across the United States.
Mr. Chairman, before I offer my written testimony about
coverage decisions and beneficiary appeals, let me urge you to
schedule hearings (in the next few weeks) on the issue of the
Interim Payment System for home health care. At last count,
over 2000 home health agencies have been forced out of
business, causing the patients of those agencies to be forced
into more costly nursing homes, more costly emergency rooms, or
worse, left at home without receiving necessary patient care.
While the GAO, MEDPAC and others are conducting studies
pertaining to access to home health services, this committee
must address the fact that the BBA of 1997 has placed an
unfunded mandate on the states. By the federal government
placing a per-beneficiary cap on home health care, agencies
across the U.S. are filing for bankruptcy and discharging their
patients. Clearly this was not the intent of Congress. Mr.
Chairman, you were recently quoted as saying that you were the
``Guarantor of small business.'' Mr. Chairman, the majority of
home health agencies being forced into bankruptcy are small
businesses. I encourage you to invite several home health
agency owners to testify before your committee in the near
future regarding the Interim Payment System.
In addition, due to recent press reports regarding privacy
issues pertaining to the OASIS data collection effort, it seems
possible that HCFA will not be able to comply with implementing
PPS for home health care as mandated on October 1, 2000. It is
imperative that you ask HCFA Administrator Nancy Ann Min-
DeParle if indeed HCFA will be able to implement PPS for home
health care on October 1, 2000. It would also be beneficial to
ask Administrator Min-DeParle how the implementation of PPS for
skilled nursing is progressing.
Mr. Chairman, I understand that your primary concern is
adequate access for doctor-certified Medicare beneficiaries,
however, it is important to understand that the most recent CBO
numbers show that home health care has been cut $48 billion
dollars over 5 years. This is far greater of a cut than
Congress intended. I believe you were recently quoted as saying
that Congress missed the mark regarding the cuts to home health
care. Mr. Chairman, statements are one thing, actions are
another.
On behalf of the members of HCAA, I urge you hold hearings
in the very near future on home health issues including the
viability of a co-pay on home health (which seems to be
included in the Breaux-Thomas legislation), the impact of the
IPS on home health agencies, and the recent data from the CBO
that $48 billion has been cut from the home health benefit.
Section II--TWO EXAMPLES WHERE THE APPEAL PROCESS FAILED
Example #1
In California, one of the first states targeted by Operation
Restore Trust, one home health agency attempted to stand up to HCFA,
and has apparently lost its battle to serve its patients. CSM Home
Health Services, Inc., is a 10-year-old Los Angeles agency, which has
spent more than $100,000 on legal and consulting services to fight its
improper Medicare decertification after an ORT survey.
History of the CSM Case
On March 1, 1996, HCFA and the California State survey agency
conducted a compliance survey of CSM. Based on that survey, CSM was
found not to be complying with eight conditions of participation. HCFA
and the California State survey agency conducted a second survey of CSM
which was completed on May 30, 1996. On June 26, 1996, HCFA notified
CSM that, based on the second survey, HCFA had determined that CSM was
not complying with four conditions of participation. On July 25, 1996,
HCFA terminated CSMs participation in Medicare.
The first judge in the CSM case, the Honorable John G. Davies (Case
No. CV 96-4651-JGD),United States District Court--Central District of
California, could find no legal grounds to grant CSM relief, although
he definitely wanted to. Judge Davies said of the ORT process, ``I
think the surveyors--I think CSM Home Services has a case. The evidence
that is before me that I have perused, read, considered, leads me to
those conclusions. The Surveyors, I had the Impression, were not
reticent to wear their power on their cuff and to manifest it and
exercise it in ways that are undesirable in today's society. The
bureaucracy overreacted once again. That is my view of this case. But,
what relief can I give you?''
After Judge Davies was unable to give relief to CSM, the case was
referred to Administrative Law Judge Steven T. Kessel. Judge Kessel
reviewed the case in which HCFA decertified CSM. In Judge Kessel's
October 11, 1996 ruling he stated, ``I decide that the Health Care
Financing Administration (HCFA) incorrectly determined to terminate the
participation in the Medicare program of Petitioner, CSM Home Health
Services, Inc. In this case, HCFA asserted that Petitioner failed to
comply with four conditions of participation in Medicare. I find that
the preponderance of the evidence is that Petitioner complied with all
of these conditions.'' In addition, Judge Kessel states, ``In many
instances, HCFA rests its allegations on characterization of facts
which are not supported by the evidence. In some instances, HCFA
asserts that nurses employed by Petitioner failed to discharge specific
directives in patients' plan of care when, in fact, the record proves
that they did precisely what they were ordered to do. HCFA asserts also
that Petitioner failed to conduct a required program evaluation despite
overwhelming evidence that Petitioner performed the evaluation.''
What follows is a portion of the sworn testimony of one of CSM's
key employees. It is given this Subcommittee as a reference point of
the type of agency being abused by the unbridled ORT process, as it
currently operates. ``I, Jean R. Murphy, R.N., have been a registered
nurse for over twenty years, a portion of which was served as an
officer and flight nurse in the United State Air Force. I have
approximately thirteen years of experience in home health care as an
administrator and/or consultant. I am currently administrator of CSM
Home Health Services, Inc. I have held this position for four years.
CSM has been serving Los Angeles' underserved minority communities
since 1985. These communities include the Rampart District, South
Central Los Angeles, Koreatown and other primarily minority
communities. CSM's clerical and field staff are also primarily
minority. CSM staff continued to serve their clients during the 1992
riots under security guards. During the Northridge earthquake, my staff
forsook their families to rush to the aid of their patients. One black
certified home health aide was present in a board and care facility
during the earthquake; and placed several residents under mattresses to
protect them as she, herself, braced and quieted their fears.
The CSM Director of Nurses stood in water without power using her
cellular phone to try to reach staff and patients to ensure their
safety, despite the fact that she, herself, was in peril because the
gas supply in her apartment had not been turned off and had been
evacuated for fear of explosion. One of CSM's clinical supervisors was
carjacked and robbed at gunpoint while she sat in her car solving a
patient crisis on her mobile phone.
Another registered nurse, whose husband had driven her to a
patient's home after the riots, was shot as they sped away to avoid
being carjacked or killed. CSM has undergone Medicare recertification
surveys annually since its founding. These surveys have been conducted
by the surveyors from the Department of Health Services, who have found
only minor deficiencies with CSM's compliance with Medicare Conditions
of Participation. CSM responded to these deficiencies with corrective
action plans; and there have never been any termination actions
initiated against CSM as a result of these minor deficiencies.''
HCAA asks this question: When two judges rule in favor of a home
health agency, should HCFA appeal the decisions?
HCFA has chosen to appeal Judge Kessel's October 11, 1996 decision.
Here is a letter dated January 31, 1997 to HCAA Chairman Dwight Cenac
from CSM owner Marianno Velez which states his thought about his
ordeal:
``These past few months have been terrible for me, and I fear the
burden has gotten the best of me, causing the worst case of depression
that I have encountered, so much so that I felt a deep sense of
fatigue, a loss of energy, as well as spirit, to continue living from
day to day. I share this with you because what happened to me should
not happen to anyone else. ... As you probably know already, HCFA has
filed their appeal to reverse the ALJ (Judge Kessel's) ruling on CSMs
case. And because of our outstanding debt to our lawyers, we have not
been able to reply to HCFAs appeal. I am afraid all is lost--for the
industry as well--if the ruling is reversed.''
Example #2
A recent issue of USA Today detailed the story of Home Health and
Hospice Care (HHHC) located in North Carolina. USA Today reported that
dozens of state and federal agencies were in on the bust at the eight
offices of HHHC on a January morning in 1995. USA Today reported that,
suspecting the North Carolina company of billing Medicare and Medicaid
services it wasn't providing, the agents seized everything, hauling off
5 million records in trucks borrowed from the local Post Office.
USA Today also reported in this article that fifteen months after
the raid, a federal magistrate killed the HHHC case, ruling that the
government misrepresented evidence to obtain it's warrants. Three
times, the government appealed, but each ruling mirrored the
magistrate's ruling: The government had pursued it's case with
``reckless disregard for the truth.''
Deputy Attorney General Eric Holder has been quoted as saying, ``I
recognize that at times our approach has been perceived to be heavy-
handed.'' This clearly is an understatement. HCAA suggests that you ask
Beverly Withrow, President of HHHC to testify before your committee
about this abuse of power.
These are but two examples of the failure of the current appeals
system. It is also troubling to me that when an Administrative Law
Judge (ALJ) rules in favor of the home health provider, the
Administrator of HCFA is given the power to overturn an ALJ ruling
(also at the PRRB level). It is imperative that the HCFA Administrator
honor the rulings of ALJ's. It is important to note that HCFA believes
that ALJ's are not trained or educated on Medicare policy. I urge this
committee to ask the HCFA Administrator is she thinks ALJ's are able to
render just decisions pertaining to home health care issues. YOU WILL
BE SURPRISED AT HER RESPONSE. ALJ's are legal professionals and they
clearly understand the issues brought before them. For HCFA to believe
that ALJ's are ignorant is just another glaring example of the
arrogance of HCFA.
Section III--One Positive Development regarding the Appeals Process
Currently, due to the Provider Reimbursement Review Board's
backlog of cases, it takes approximately three years for a case
to be scheduled for a hearing. Taking advantage of that fact,
some fiscal intermediaries make audit adjustments (some times
erroneously) to providers cost which result in recoupment of
Medicare dollars with the expectation that the provider will
not have the financial staying power to survive while the PRRB
case is pending. Subsequently, when the adjustment is reversed
by the PRRB, the provider has been forced to operate without
the capital of an otherwise reimbursable expense for at least
three years.
However, the Office of Hearings (in the Department of HHS)
in conjunction with the PRRB established an alternative dispute
resolution process for early resolution of pending cases.
Office of Hearings staff members were trained as mediators
through the HHS Departmental Appeals Board Shared Neutrals
program. The initial results of this project were promising,
and the mediation pilot will be expanded during f.y. 1999. HCAA
applauds HCFA for this cutting edge approach and we request
that HCFA invite HCAA to work closely together in the future on
this effort.
Section IV--Conclusion
On the issue of HMO's it is amazing to me that when HMO
profits are at stake, Senator Roth of the Senate Finance
Committee wrote a letter to Administrator Min-DeParle last year
regarding his concern; but with home health care, which is a
cost-based system, little is being said by the Chairman of the
Senate Finance Committee about the IPS for home health care
being an unfunded mandate on the states, forcing patients into
more costly nursing settings, or worse, patients being left at
home without receiving necessary care. I hope that Senator
Roth, in concert with Chairman Archer, passes meaningful
legislation this year to restore proper funding to the Medicare
home health benefit.
I am also concerned that the concept of ``reasonableness''
has evaporated from HCFA and the fiscal intermediaries. The
Provider Reimbursement Manual, Part I Section 2600 states,
``For cost reporting periods beginning after December 31, 1973,
reimbursement to providers for services to Medicare
beneficiaries will be based upon the lower of the reasonable
cost of providing those services or the customary charges for
the same services.''
Home health agencies across the U.S. have been under an
unrelenting attack by the fiscal intermediaries regarding
costs, but these same fiscal intermediaries are not using the
concept of reasonableness when auditing these home health
agencies.
HCFA must reinstate the ``waiver of liability'' to home
health agencies who are complying with laws and regulations.
Home health agencies are paid on a ``cost-based'' system. Their
is no profit in home health care. The ``us versus them''
mentality (at HCFA the intermediaries and the surveyors) must
be replaced by the concept of reasonableness between surveyors,
fiscal intermediaries, HCFA and home health providers when
dealing with audit and compliance issues.
In conclusion, I would appreciate the opportunity to
personally testify before this committee on home health issues
in the future. I look forward to that opportunity.
Statement of Medical Device Manufacturers Association
The Medical Device Manufacturers Association (MDMA)
appreciates this opportunity to submit comments for the record
of the subcommittee's April 22 hearing on Medicare coverage and
beneficiary appeals. MDMA is a national trade association based
in Washington, D.C. that represents nearly 130 independent
manufacturers of medical devices, diagnostic products and
health care information systems. As the national voice for the
innovators and entrepreneurs in the medical device industry,
MDMA seeks to improve the quality of patient care by
encouraging the development of new medical technology and
fostering the availability of beneficial innovative products.
Without question, decisions on what services will be
covered under the Medicare program are crucial to the health of
Medicare beneficiaries and to continued innovations in medical
technology. Medicare is the largest payer in the American
healthcare system, and private insurers often consider
Medicare's decisions as they make their own determinations
about covered services. For Medicare patients to benefit from
advances in medical technology, the Medicare program must have
processes and systems that allow for the adoption of these
advances in a timely manner.
MDMA applauds the Health Care Financing Administration
(HCFA) for publishing a notice that outlines, for the first
time, how HCFA makes national coverage determinations. Although
we believe the process set forth in the notice needs further
refinement, MDMA believes that the act of publishing this
notice is an important first step toward bringing much-needed
clarity and openness to the Medicare coverage process. We also
commend HCFA for considering the views of industry as HCFA
developed this notice.
MDMA hopes, however, that HCFA will entertain constructive
suggestions to improve the notice, even though HCFA has not
created a formal route for comments thereon. MDMA also looks
forward to working with HCFA to fulfill HCFA's promises to
develop specific criteria upon which coverage determinations
will be made, and to bring transparency and openness to the
local coverage policy process as well.
MDMA welcomes this subcommittee's attention to the Medicare
appeals process. Medicare should have an adequate and
streamlined mechanism to address the claims of beneficiaries
with unique circumstances that may necessitate the revisiting
of a Medicare coverage determination. Manufacturers should also
have a process through which they can challenge the actions of
HCFA and local Medicare contractors in cases in which HCFA
regulations, procedures, and policies were not followed
properly or in which HCFA and its local contractors fail to
consider or seriously misinterpret relevant data.
Since we are filing this statement following the hearing,
MDMA would like to focus particular attention on two of the
issues discussed during the session.
Local vs. National Coverage Decisions
First, with regard to the appropriateness of a role for
regional and local HCFA contractors in determining coverage
policy, MDMA firmly supports the decentralized nature of the
Medicare coverage process. As the subcommittee knows, most
coverage decisions are not made at national HCFA headquarters,
but by the regional and local carriers with which HCFA has
contracted to pay Medicare claims. Although this may seem (and
sometimes is) unwieldy, this decentralization has contributed
to the development and eventual nationwide adoption of advances
in medical technology.
For procedures or technologies upon which HCFA has not
issued a national coverage or non-coverage determination,
regional and local carriers may exercise discretion in the
payment of Medicare claims. HCFA authorizes these carriers to
develop ``local medical review policies'' that define what each
carrier considers to be a reasonable and necessary service.
These local medical review policies, by their nature, vary from
state to state.
Because the process is decentralized, medical device
manufacturers, in conjunction with health professionals and
patients, have opportunities to demonstrate the value of their
technology to local carrier medical directors. With initial
coverage in a number of states, manufacturers can then draw
upon the data developed during initial coverage to demonstrate
the value of their technology to HCFA. Since HCFA often wants
to see data on the clinical value of a technology in the
Medicare program before making a national coverage
determination, this decentralized process allows manufacturers
to work with amenable local carriers to develop this data in
``real-world'' medical settings. Without such decentralization,
and without general HCFA willingness to reimburse providers
broadly for studies aimed at demonstrating the clinical value
of a technology to the Medicare program and its beneficiaries,
manufacturers would be hard-pressed to develop a case for broad
coverage of their technology.
For these reasons, MDMA urges the subcommittee to maintain
a reasonable balance between local and national coverage
decision-making in the Medicare program. By creating a system
through which companies can petition HCFA for a national
coverage determination after amassing data at the local levels,
as HCFA has done in its coverage process notice, MDMA believes
that HCFA will now be able to make national decisions more
quickly with data developed locally.
FDA's Role in Medicare Coverage Decisions
As the subcommittee knows, the Food and Drug Administration
(FDA) currently plays no formal role in the Medicare coverage
determination process. HCFA recognizes FDA clearance or
approval of a medical device as evidence of the device's safety
and effectiveness. HCFA then focuses on determining whether
Medicare coverage of a service or a device is ``reasonable and
necessary.''
MDMA believes that ``reasonable and necessary'' should be
further defined by rule and through HCFA guidance to health
professionals, beneficiaries, and manufacturers. The phrase
``reasonable and necessary,'' set forth in Medicare law, is too
vague to provide manufacturers with any sense of how to develop
and demonstrate the value of a technology to the Medicare
program. HCFA has pledged to address this issue this year,
however, and MDMA looks forward to vigorous public debate on
the subject.
Over the years, some observers have suggested that HCFA
should not play a role in determining whether a technology
should be covered under the Medicare program. These observers
suggest that FDA clearance or approval of the technology should
translate into automatic Medicare coverage, with HCFA's role
limited to determining an appropriate level of payment for
services and devices. While this may seem on the surface to be
a common-sense solution to a difficult situation, the proposed
cure may in fact worsen the problem.
For years, the medical device industry has worked to ensure
that the FDA, in reviewing devices, adheres to its statutory
mission of providing the public with a ``reasonable assurance
of the safety and effectiveness of devices intended for human
use.'' 21 U.S.C. 393(b)(2)(C). MDMA and other groups have
challenged FDA attempts to extend the agency's authority to
reviewing the clinical utility, cost-effectiveness, or other
aspects of medical devices. These decisions, we have argued,
were expressly left by Congress to be decided by health
professionals and the marketplace.
This Congress would be making a grave mistake if it were to
give the FDA blanket authority to determine whether Medicare
should cover a device. First, this would implicitly force the
FDA to consider the cost of a device to the Medicare program
when considering whether a medical device should be cleared or
approved for marketing. Since the FDA's decisions apply beyond
Medicare, the FDA's denial of a marketing application could
prevent health professionals from using the technology in
question to benefit any American, whether covered by Medicare,
Medicaid, a private insurer, or his or her own personal funds.
To give the FDA the authority to determine what procedures
are available to Medicare beneficiaries would be to consolidate
far too much power in one set of hands. MDMA believes that
Congress acted appropriately when it determined that the FDA
should limit its reviews to safety and effectiveness
considerations, and leave the determination of a technology's
clinical utility and overall value to health professionals and
the marketplace. MDMA hopes that this subcommittee will not
seek to terminate this separation of power.
Thank you for your attention to Medicare's policies on
coverage of medical services and technology, and thank you for
the opportunity to share our viewpoint with the subcommittee.
Statement of National Association for Home Care
The National Association for Home Health Care (NAHC), the
largest trade association representing the interests of
thousands of Medicare participating home health agencies across
the nation, offer these comments in support of the efforts on
the Ways and Means Health Subcommittee to examine the Medicare
coverage and appeals process. Since its inception in 1983, NAHC
has strenuously worked with the Congress and the Health Care
Financing Administration (HCFA) to secure accurate and
consistent coverage determinations along with an efficient and
reliable appeals process. For the Committee's consideration, we
offer the following recommendations:
1. Medicare contractors should be prohibited from promulgating coverage
policy.
Over the years, HCFA has authorized its claims processing
contractors to develop local coverage policy in order to
administer prevailing community standards of practice. However,
the contractors, specifically the Regional Home Health
Intermediaries (RHHIs) have increasingly acted beyond the scope
of this authority in promulgating coverage policy in matters
unrelated to local professional practice standards. Often the
development of this policy has occurred without the knowledge
of HCFA.
A prime example of this unauthorized policymaking is the
home health benefit coverage standard which requires that a
patient must be ``confined to his home'' in order to establish
eligibility. The so-called homebound requirement has long been
a controversial aspect of the benefit. Most recently, Congress,
in the Balanced Budget Act of 1997, mandated that the Secretary
of Health and Human Services engage in a study of the homebound
requirement and issue a report with recommendations to Congress
by October 1,1998. This mandate was chosen as an alternative to
the Administration's proposal to set inflexible frequency and
duration limits on home absences into Medicare law.
Under the guise of local coverage policy authority, two of
the RHHIs, without HCFA's input or direction, embarked on an
effort to establish the inflexible limits with their
administration of Medicare claims review while the mandated
study and report was still in progress. These standards in no
way reflected local community standards of medical care.
Instead, these standards governed a technical coverage
requirement which should be implemented and administered
consistently throughout the Medicare program.
NAHC recommends that local coverage policy be limited to
those few circumstances where it is necessary to address
variations in professional standards of practice from one area
of the country to another. Medicare contractors should be
otherwise prohibited from establishing coverage policy. That
function is more properly the role of this Congress and HCFA.
2. The Medicare appeals system should guarantee determinations within a
reasonable time.
A significant portion of Medicare appeals relate to home
health and hospice benefit determinations. While the reversal
rates have been consistently high (reconsideration reversals at
30%-40%, administrative law judge (ALJ) hearing reversals in
excess of 80%), the time for completion of the appeals
continues to grow. When combined, the coverage length of time
for processing these administrative appeals is approximately
one year.
Both beneficiaries and providers of services are ill served
by a process which unnecessarily takes so long. For
beneficiaries, extended time with out of pocket expenditures
for health care services seriously jeopardizes continued access
to care. For home health agencies, the long delays increase the
cost of care, disrupt the fragile cash flow of the organization
and jeopardize its existence as the continued cost based
reimbursement provides no opportunity for financial reserves to
safeguard the provider during the appeal period.
NAHC does not support the Administration's consideration of
a specialized ALJ corps in the manner it has been historically
proposed. Over the years, HCFA has responded to concerns
regarding the high rate of appeal reversals and the extended
time for processing appeals by proposing to centralize hearings
and appeals within HCFA. At one point, HCFA proposed to create
a telephone based hearing system with the ALJs based at HCFA in
Baltimore. This effort was exposed as an attempt to control the
judge's decisions rather than to institute administrative
efficiencies.
It is essential that any changes in the appeals process
continue to guarantee the use of independent adjudicators who
bring no bias or prejudice into their deliberations.
3. Providers of service should be afforded their own rights of appeal.
A Medicare beneficiary has a right of appeal with any
adverse determination issued by Medicare and its contractors
(42 USC Sec. 1395ff). However, providers of services are
limited in their independent rights of appeal to only some of
the circumstances where the determinations have an adverse
effect on the entity (42 USC Sec. 1395 pp). For those instances
where the provider is adversely affected without a right of
appeal, the recourse for the provider is to pursue the matter
as the authorized representative of the beneficiary (42 USC
Sec. 1395 ff). This approach is an unnecessary intrusion on the
beneficiary.
Under 42 USC Sec. 1395 pp, a provider of services directly
can pursue an appeal where liability for the provision of non-
covered care rests with the provider. The non-covered care
circumstances are limited to those where the claim is denied on
the basis of lack of medical necessity, homebound status,
intermittent care or the conclusion that the care provided was
``custodial.'' However, there are numerous other bases for
claims denials which, while the liability rests with the
provider, are only subject to appeal by the beneficiary.
The most noteworthy example of such claim denials are those
based on technical conditions for payment such as requirements
for physician certification of medical necessity and timeliness
of Medicare billings. Where these conditions are allegedly
unmet, HCFA denies the claim, prohibits the provider from
charging the beneficiary, and yet allows for appeals only by
the beneficiary.
NAHC recommends that the Subcommittee consider revising 42
USC Sec. 1395 ff and 1395 pp to allow providers of services to
have an independent right of appeal in all circumstances where
the Medicare determination adversely affects its interests.
4. The HCFA Administrator should not have unilateral power to reject
appeal determinations.
The Medicare appeals system generally does not allow HCFA
to improperly interfere with the adjudicatory process. However,
with respect to reimbursement related appeals, HCFA maintains
an Administratively created power to disregard or reject
carefully crafted determinations issued in the appeals process.
By regulation, the HCFA Administrator is authorized to
unilaterally review and reject determinations issued by the
Provider Reimbursement Review Board (PRRB) pursuant to its
authority under 42 USC Sec. 1395 oo. Within the last several
years, the Administrator has increasingly engaged in such
action forcing providers to pursue these costly appeals in
federal district court. The HCFA Administrator exercises this
power to reverse PRRB decisions while acting as the real party
in interest that is on the losing side of a PRRB appeal. It is
unacceptable for one party to an appeal to possess the power to
unilaterally overturn and reject that appeal determination.
Such power disregards any semblance of due process.
NAHC recommends that 42 USC Sec. 1395 oo be amended to
prohibit the HCFA Administrator from maintaining unilateral
power to reverse PRRB decisions.
5. Care and services determinations by providers should not be subject
to Medicare appeals.
In the testimony of Vicki Gottlich of the National Senior
Citizens Law Center, it was proposed that Medicare
beneficiaries should have an expedited appeal to Medicare
whenever a fee-for-service provider denies services or reduces
care to a patient. However, this position ignores the private
relationship between the patient and the provider. It attempts
to equate the decisions made by a private entity to those made
by the government under the Medicare program.
Unlike managed care entities in a Medicare+Choice plan,
providers of services participating in the fee-for-service
plans are not surrogate Medicare administrators. In fact, these
providers of services can find themselves in an adversarial
relationship with Medicare. They do not control Medicare
determinations. Instead, they often appeal them on behalf of
beneficiaries as well as themselves.
To rewrite the principles of Medicare to subject a
provider's care decisions to Medicare appeals would abrogate
the insurance program concept and substitute a social program
philosophy. Most care decisions by providers are unrelated to
the Medicare coverage status of patients and should not be
subject to Medicare review.
Statement of Pharmaceutical Research and Manufacturers of America
The Pharmaceutical Research and Manufacturers of America
(PhRMA) is pleased to submit these comments on the important
issue of Medicare coverage. PhRMA represents the nation's
leading research-based pharmaceutical and biotechnology
companies, which discover and develop the majority of new
medicines used in the United States and around the world.
PhRMA's member companies will invest more than $24 billion this
year alone on research and development. Last year, the industry
brought 39 new prescription drugs and biologicals to market,
including new medicines to treat diabetes, cancer, heart
disease, Parkinson's disease, HIV/AIDS, asthma, and other
deadly and debilitating diseases. While Medicare does not
generally cover outpatient drugs, many of the medicines
discovered and developed by PhRMA member companies are
reimbursed by Medicare when used in an inpatient setting,
incident to physicians' services, or certain other situations.
The process and criteria for determining which treatments
are covered under the Medicare program are critically important
for ensuring that Medicare beneficiaries have access to high
quality health care. We are very pleased that the Ways and
Means Health Subcommittee, under the leadership of Chairman
Thomas, is urging the Health Care Financing Administration
(HCFA) to create an open and responsive process. For too long,
Medicare has made its coverage decisions without adequate
public input, timelines, or a process for appeals. We commend
the committee for bringing attention to these coverage issues.
Although HCFA's responses indicate a move in the right
direction toward a better process, we are still very concerned
about several issues concerning Medicare coverage of drugs and
biologicals. We believe that some recent and proposed actions
by HCFA and its contractors could inappropriately interfere
with the practice of medicine and deprive Medicare
beneficiaries of the most appropriate medical treatment.
As background for our more specific comments, the following
are six principles approved by the PhRMA Board of Directors
that the industry believes should guide Medicare coverage
policies affecting pharmaceuticals:
Physicians should have access to the full range of
approved products to treat Medicare beneficiaries. The clinical
of judgment of physicians should be respected and their
discretion preserved to allow them to prescribe the most
appropriate therapy for their patients.
Medicare should cover Food and Drug Administration
(FDA) approved pharmaceuticals and biologicals. There is no
need for Medicare to abandon its long-standing policy of
relying on FDA approval as the standard for determining which
medicines will be covered when prescription medicines are in a
category reimbursed by Medicare.
Medicare should cover off-label use of approved
pharmaceuticals if independent compendia or peer-reviewed
literature support such use. Long-standing HCFA policy is to
cover off-label uses contained in compendia or supported by the
peer-reviewed medical literature. HCFA policy should not be
changed to prevent or discourage these beneficial used.
FDA-approved labeling and off-label uses included
in independent national compendia or supported by peer-reviewed
medical literature should be the floor for local carrier
decisions. In addition, local carrier decisions should be no
more restrictive than any national coverage policy or
decisions. To ensure that Medicare patients, regardless of
where they live, receive high-quality health care, local
carriers should not restrict the use of prescription medicines
in any way that conflicts with (1) FDA-approved labeling, (2)
off-label uses included in independent national compendia or
supported by peer-reviewed medical literature, or (3) any
national policy or coverage determinations.
Medicare beneficiaries should have immediate
access to FDA-approved drugs. To promote better health, patient
access to effective new medicines should not be delayed.
Medicare reimbursement mechanisms should encourage
optimal drug therapy. Individual patients' medical needs vary
greatly. Thus, Medicare should reject reimbursement schemes
that encourage the use of less appropriate medications in the
name of cost containment.
Concerns with Current HCFA Policies and Practice
Our comments, based on the above Principles, focus on three
major areas: (1) Medicare's emerging practice of allowing
coverage decisions to limit the use of pharmaceuticals to less
than the labeled indications approved by the Food and Drug
Administration; (2) Medicare's proposed use of comparability
criteria in its coverage decisionmaking; and (3) problems in
the local coverage decisionmaking process employed by
Medicare's contractors.
Medicare Restrictions on Use of Drugs in FDA-Approved Indications
Long-standing Medicare policy relies on Food and Drug
Administration approval as the basis for Medicare coverage for
Medicare-eligible drugs.\1\ Since the inception of the program,
when FDA approves a drug that is reimbursable by Medicare,
physicians have been able to prescribe it and Medicare has paid
for it. When determining whether a drug is medically
``reasonable and necessary,'' current national Medicare policy
is to consider a drug ``reasonable and necessary'' when it is
used for one of the labeled indications approved by FDA. In
addition, Medicare carriers have discretion to cover other
medically accepted uses, as defined in major compendia, and
must cover certain anti-cancer drugs even when used for certain
off-label indications.\2\ This is an appropriate policy that
has worked well for years. Importantly, it has ensured Medicare
patients access to the FDA-approved drugs they need. (Of
course, a determination of whether a drug is reasonable and
necessary is made only if the drug meets other Medicare
coverage requirements such as, for most drugs, not being self-
administered.)
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\1\ Specifically, Sec. ``2049.4--Reasonableness and Necessity'' of
the Medicare Carriers Manual states that:
Use of the drug or biological must be safe and effective and
otherwise reasonable and necessary. . . . Drugs or biologicals approved
for marketing by the Food and Drug Administration (FDA) are considered
safe and effective for purposes of this requirement when used for
indications specified on the labeling. Therefore, you may pay for the
use of an FDA approved drug or biological. . . .
Moreover, this long-standing Medicare policy was adopted in all
recent HCFA attempts to publish a Medicare coverage regulation: it was
included in the 1989 Notice of Proposed Rulemaking as well as in both
the 1992 and 1996 drafts of the final rule that were never published.
\2\ The applicable manual provision states (Medicare Carriers
Manual, Sec. 2049.4 Reasonableness and Necessity):
An unlabeled use of a drug is a use that is not included as an
indication on the drug's label as approved by the FDA. FDA approved
drugs used for indications other than what is indicated on the official
label may be covered under Medicare if the carrier determines the use
to be medically accepted, taking into consideration the major drug
compendia, authoritative medical literature and/or accepted standards
of medical practice. . . Unlabeled uses of FDA-approved drugs and
biologicals used in an anti-cancer chemotherapeutic regimen [are
covered] if the use is supported by one of the approved medical
compendia.
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Deferring to FDA and medical compendia in determining
medically acceptable uses of pharmaceuticals and biologicals is
a sound policy in other respects. The FDA approval process is
thorough and meticulous. HCFA and its contractors, the carriers
and intermediaries, do not possess the expertise of the FDA,
nor do they have sufficient staff resources to attempt to
duplicate the FDA review process. In fact, to staff HCFA as
would be necessary to carry out a supplemental review would be
inefficient and wasteful of government resources. Medicare's
policy has always been to consider all uses of pharmaceuticals
and biologicals that fall within the FDA labeling to be
reasonable and necessary. In fact, this policy is one of the
very few Medicare coverage policies actually stated in program
rules.
Although the practice of deferring to FDA expertise in this
area is clear and has been HCFA policy for years, PhRMA and its
members are concerned that recent actions by several Medicare
carriers, as well as statements by HCFA program officials,
suggest that the agency's adherence to its long-standing policy
may be weakening. We strongly believe that HCFA should not
abandon this policy--or even consider modifying it--without
consulting the Congress prior to formal rulemaking and an
opportunity for public comment. A change in this policy would
pose serious threats to Medicare beneficiaries' access to FDA-
approved drugs. We would quickly note that the agency has not
initiated rulemaking to change the policy, and the Medicare
Carrier's Manual remains unchanged.
With the personnel and organizational changes that have
accompanied HCFA's reorganization, combined with new activity
on the part of some of the local carriers, HCFA needs to
reaffirm its long-standing policies concerning Medicare
coverage of pharmaceuticals with respect to labeled and off-
label indications. On several occasions, PhRMA and its members
have urged HCFA--unsuccessfully--to take this action. This
could be done simply--for example, through a Program Memorandum
or other formal communication to carriers and fiscal
intermediaries. In doing so, HCFA should state clearly that
FDA-approved labeling and medical literature are the basis for
determining when a drug is medically necessary, and that this
policy applies to both local and national decisions about when
the use of a drug is ``reasonable and necessary.'' It is
regrettable that the agency now seems willing to vacate a
policy that has been in place since the program's inception
that underpins the high quality of health care delivered to
Medicare patients. Strong and clear action is necessary to
ensure that Medicare beneficiaries have access to the full
range of approved drugs for all approved indications. HCFA
should continue to rely on the expertise of the FDA for
decisions regarding the appropriate use of drugs, and upon the
clinical judgment of physicians concerning their use for
individual patients. Medicare does not now, and will not in the
foreseeable future, have the expertise to make independent
medical determinations about the appropriate use of
pharmaceuticals. PhRMA and its members urge the Committee to
take legislative action, if necessary, to safeguard this
important policy.
Inappropriate Use of Comparability Criteria in Coverage Decisions
As part of its new coverage proposal, HCFA also is
considering establishing ``comparability'' as a new criterion
for Medicare coverage. Under this standard, if HCFA determined
two drugs or biologicals to be therapeutically equivalent, both
would be reimbursed at the level of the lower-cost medicine.
PhRMA and its members strongly oppose the application of
comparability or ``least costly alternative'' determinations.
We believe that, in decisionmaking about what medicines to use
to treat a specific individual, only physicians are qualified
to determine when two different medicines are likely to provide
equal therapeutic benefit. HCFA and its contractors should not
impose their views on these important doctor-patient decisions.
Moreover, if a physician determines that a specific drug is
best for the patient, whether or not that drug is the least
costly alternative, reimbursement should be based on the price
of that drug, not the price of the least costly alternative.
Allowing HCFA this comparability authority would lower the
quality of care provided to Medicare patients.
Implementation of a comparability criterion implicitly
assumes that two different chemical entities are essentially
the same. We would emphasize that a process currently exists
under which the FDA determines generic bio-equivalence of drugs
with the same active ingredient. In addition, special Medicare
rules are used to determine how much the program will reimburse
for generically bio-equivalent drugs. For HCFA to go beyond
these well established procedures for products that are not
identical has no basis in science, medical practice or law.
Moreover, we are concerned about the consequences for
patients of letting HCFA and its contractors run free with
comparability authority. Similar drugs can have very different
effects in different patients. A particular drug within a
multi-drug therapeutic class may be the best choice for one
patient, but not for other patients with the same condition.
These are exactly the decisions that should be reserved solely
for the physician charged with treating a patient. The
application of a comparability standard could lead to de facto
denial of coverage for many prescription medicines that
uniquely benefit Medicare patients. If Medicare reimbursement
of providers is set at the level of the least costly treatment,
payment policy--in conflict with best medical practice--will
create strong incentives for physicians and providers not to
use certain medicines, even when they are most appropriate for
their patients. Clearly physicians and other providers would be
inclined not to use medicines that cost them more than Medicare
reimburses, even when the more costly medicine is more
effective and more appropriate for the patient and, in many
cases, more cost-effective overall. Because of its potential to
lower the quality of patient care, we urge you to block HCFA's
use of a comparability standard for determining Medicare
coverage of drugs and biologicals.
Serious Problems in Local Coverage Process
We are particularly concerned that HCFA's current plan for revising
its coverage process appears to exclude local coverage decisions. The
overwhelming majority of Medicare coverage policies are local, not
national, and it is unlikely that this will change in the near future.
Our concern on this critical matter has been heightened by what our
members see as new restrictions being imposed by Medicare's local
carriers. There is a growing list of instances in which one carrier, or
a group of carriers (for example, those in a particular regional office
area), have established restrictive policies. We would note that these
actions appear to occur most frequently with newer, more expensive
drugs, raising the possibility that HCFA and its carriers are turning
their backs on long-standing Medicare policy strictly for budget-
cutting purposes. These actions already are depriving Medicare patients
in certain areas of beneficial drug treatments available to
beneficiaries in other areas and to patients enrolled in private health
plans.
Carriers' restrictive policies are taking many forms. Sometimes, as
noted, they deny coverage of drugs and biologicals for not being
reasonable and necessary even when they are used fully consistent with
FDA-approved indications or a listing in the medical compendia. Other
times, they make decisions not to cover a particular drug because they
consider it to be precluded from coverage by statutory restrictions on
preventive treatments or drugs that are self-administered. Thus, for
example, some carriers do not cover certain injectable drugs important
to many cancer patients undergoing chemotherapy because some patients
could administer the injections themselves--even though the usual means
of administration is not by the patient. In another situation, carriers
are withholding coverage because the drug can be used to reduce
complications from surgery, such as transfusions. The carriers
incorrectly and inappropriately deem this use to be preventive.
These brief examples are only illustrative of some of the
inappropriate and indefensible actions by Medicare carriers in recent
months. We are disturbed not only by the seriousness and prevalence of
these problems, but by the fact that HCFA continues to ignore them.
Despite pleas from PhRMA and its member companies and many other
associations representing patients, physicians, providers and
manufacturers, HCFA has continued to refuse to address these concerns
in its review of the coverage process. As we have already noted, in the
case of pharmaceuticals and biologicals, many of the inappropriate
carrier decisions could be avoided if HCFA were, with respect to drugs
and biologicals, to reaffirm the reliance on FDA labeling and the
medical compendia for Medicare coverage decisions. At a minimum, this
should be done, and done quickly. But this alone would not be
sufficient to address the many local problems restricting coverage of
pharmaceuticals, biologicals and other health services. Unlike the
national coverage process, which is not governed by any existing
regulations or other formal policy, at the local level, HCFA's carrier
manual requires a consultation process. In certain carrier areas, the
local process--a Carrier Advisory Committee (CAC)--appears to work
reasonably well. In other areas, the process is pro forma, at best.
Because HCFA has failed to do so, Congress should review and tighten
the requirements governing the local coverage process to ensure that
local decisions are made in an open and consultative manner, and in
full compliance with national policies. Moreover, given the importance
of local coverage decisions in determining what treatments are actually
available to Medicare beneficiaries, actions to improve the local
process must be initiated as quickly as possible, as part of current
reforms.
In conclusion, PhRMA believes that the current process for making
Medicare coverage decisions at both the local and national level is
closed and unresponsive to the public. The proposals that HCFA has made
thus far do not go nearly far enough to address these and other
problems. HCFA must publish both process and substantive requirements
for establishing Medicare coverage through notice and comment
rulemaking. HCFA's process for making coverage decisions should provide
for public input at all stages, must include mandatory time frames, and
must provide an opportunity for appeal. Moreover, the backbone of any
new HCFA process must be reliance on FDA approval and medical compendia
for coverage determinations, rejection of a comparability criteria, and
inclusion of local carriers in decisionmaking.
PhRMA believes that the proposed new process and criteria for
coverage, as currently conceived by HCFA, risk lowering the quality of
health care received by Medicare beneficiaries. We are particularly
concerned that, if HCFA places new restrictions on patient access to
pharmaceuticals and biologicals as planned, Medicare's elderly and
disabled beneficiaries may be harmed.
We thank you for the opportunity to submit these comments.
Statement of George A. Sample, MD, FCCP, Society of Critical Care
Medicine, Anaheim, California
I appreciate this opportunity to provide testimony on
behalf of the Society of Critical Care Medicine (SCCM) to the
Health Subcommittee of the House Ways and Means Committee with
respect to certain regulatory issues facing physicians who
provide critical care services to Medicare patients. In
existence since 1970, SCCM represents over 6,400 physicians
specializing in the delivery of medical care services to
critically ill or injured patients.
SCCM has previously has engaged in productive discussions
with HCFA on regulatory issues. For example, immediately after
the Physician Fee Schedule was implemented in 1992, SCCM was
engaged in extensive discussions with HCFA officials over the
significant undervaluation of critical care services. Critical
care services had been ignored in the establishment of the Fee
Schedule. During these conversations, there was agreement
between HCFA and SCCM that critical care services essentially
are medical management services whereby the critical care
specialist is evaluating and manipulating complex databases to
prevent or treat single or multiple vital organ system failure.
The exact procedures to be bundle into payment for the critical
care services were carefully negotiated in establishing an
appropriate fee. There was much discussion and agreement that
critical care services were not ``emergency'' or ``crash''
services. Moreover, the concept that these codes are only
``emergency'' codes is contrary to the entire approach of the
critical care physician as the manager of the care of these
patients.
In 1994, HCFA and SCCM coordinated national professional
critical care organizations to address carrier medical
directors' inappropriate interpretation of the critical care
codes as ``emergency'' services. HCFA formed a task force of
carrier medical directors to investigate the problem, with
Marjorie Kanof, M.D., then-carrier medical director from
Massachusetts chairing the task force. SCCM felt that the task
force meetings were very productive and that once again HCFA
officials and SCCM were in agreement as to the nature of
critical care services as medical management codes. Indeed, Dr.
Kanof clearly acknowledged that critical care services could be
provided to ``hemodynamically stable'' patients and wanted to
be informed of any carrier who was not adhering to this
standard. As a result of the task force meetings, HCFA issued a
program memorandum on February 10, 1995, signed by Elizabeth
Cusick (the ``Cusick memo'') clarifying that critical care
codes are management codes that could be used to describe
services provided to prevent a patient from experiencing a
single or multiple vital organ system failure. Moreover, the
Cusick memo acknowledged that some carriers had required there
to be a medical emergency for critical care to be billed but
``[s]uch an interpretation is too narrow and restricts the use
of the critical care codes inappropriately.''
Now, once again, carrier medical directors are applying
inappropriate, narrow interpretations to the critical care
codes in contradiction to the Cusick memo, even when it is
brought squarely to their attention. You will be receiving
testimony from individual critical care physicians who will
confirm that carrier medical directors are not abiding by the
Cusick memo. HCFA once again has formed a task force to
investigate the situation, and SCCM is working closely and
productively with this task force.
Just this past year, SCCM is aware of carriers covering the
states of Maryland, Delaware, D.C., Texas, Idaho, and Tennessee
attempting to implement local medical review policies (LMRPs)
on critical care services that were in direct contradiction to
the Cusick memo. At the very least, the LMRPs would have
limited the use of the critical care codes to medical
emergencies. Fortunately, when SCCM brought these LMRPs to the
attention of HCFA, agency officials instructed the carriers not
to implement LMRPs on critical care until the task force
concludes its work. We would be remiss if we did not
acknowledge the cooperation of Trailblazer's, which has worked
with us toward a common goal of improving the conditions for
carriers and physicians since that time.
What is even more confounding to the Society and to
practicing critical care physicians than the above mentioned
LMRPs and the carriers' use of inconsistent standards is the
fact that regardless of the standards that the carriers are
using, there is no attempt to communicate these standards to
critical care physicians until after an audit takes place and
the carrier is sometimes demanding reimbursement of a
significant overpayment. Many carriers are conducting ``post-
Cusick memo'' audits of medical records where it appears that
they are again interpreting the critical care codes as
``crash'' codes. In these audits, carrier medical directors are
alleging that a large percentage of critical care services are
``medically unnecessary'' by using criteria that had never been
communicated to the physicians.
Further, studies have shown that involvement of the
critical care specialist in a patient's care can reduce length
of stay in the ICU and the hospital, reduce patient mortality,
and reduce health care costs. Nevertheless, several carriers
are defining critical care services so narrowly that the
majority of the services provided by the critical care
physician would be deemed by the carrier as not medically
necessary for the Medicare patient. We are concerned that these
narrow carrier interpretations will produce a chilling effect
on the delivery of critical care services. The net result could
be that patient care will suffer and costs will escalate.
Some carriers are denying critical care services if the
medical record does not denote specifically the time spent
providing critical care services. In many of these cases, it is
absolutely clear from the substance of the physician note in
the medical record that over 30 minutes of care to the patient
was provided. While it is HCFA's view that the necessity of
actual time being documented in the physician note is required
in the Medicare carrier manual, it is not emphasized or clearly
written, and, more importantly, is not typically communicated
to physicians.
Not only are the practicing physicians unaware of this
rule, but some carrier medical directors are as well. In Idaho,
the carrier medical director stated in a letter to an audited
physician that ``. . . notation of time was not a necessity.''
Additionally, if the substance of the audited medical record
supports the fact that over 30 minutes of care was provided,
why should payment be denied just because actual time was not
recorded?
A 1995 letter from Celeste Kirschner, Secretary of the AMA
CPT Editorial Panel supports the position that the substance of
the note could act as a proxy for a listing of the exact time.
Despite the support of the AMA CPT Editorial Panel and some
carrier medical directors, other carrier medical directors will
deny critical care claims without a notation of exact time and
assess physicians hundreds of thousands of dollars through
claims extrapolation. At a minimum, physicians and carriers
should be thoroughly educated on proper documentation nuances
before a repayment is sought for services which were truly
provided.
Just as the absence of time notation is an automatic denial
of a claim, so is the presence of the word ``stable'' in the
minds of many chart reviewers. As an example, a critically ill
patient on the fifth day of his/her sepsis, receiving
vasoactive medication (Levophed, epinephrine) and on ventilator
support, would be considered ``stable,'' because no changes
were made in the patient's life sustaining support. In fact, no
changes are made because the patient remains too ill and too
tenuous to wean any support, yet not progressing or
deteriorating either. The purpose of the Cusick memo was, in
part, to inform carriers that critical care may be provided in
clinical situations such as mentioned above. Further, the
Cusick memo clearly states that critical care may be provided
to prevent a patient from having single or multiple organ
system failure.
Taken to its absurdity, a patient with a DNR order has been
deemed by a carrier medical director to be ineligible for
reimbursement of critical care services. To the carrier, a DNR
implies that the physician is either not actively managing that
patient's care or the patient's condition does not justify the
provision of critical care services. As you will hear, this is
not an appropriate conclusion.
Carriers also appear confused about critical care services
provided within a global surgery period. The carriers do not
appear to understand the concept of concurrent care that HCFA
resolved in 1992. The surgeon continues to provide standard
post-operative care to patients in the ICU, however, the
critical care physician is managing the care of a particular
problem or problems for the patient. Both the surgeon and the
critical care physician are providing medically necessary
services.
Most carrier medical directors are making no attempt to
consult with critical care physicians in their area to develop
reasonable criteria and documentation guidelines before these
carriers audit a critical care physician, and potentially seek
overpayment of assessments of hundreds of thousands of dollars.
The medical directors are either unaware or defiant of the
Cusick memo.
For example, the South Carolina carrier medical director
emphasizes in the Medicare Bulletin that the carrier physician
education function is critical and that the carrier notifies
doctors when their billing pattern varies substantially from
that of their peers. As you will see from testimony here today,
the South Carolina carrier made no attempt to inform critical
care physicians regarding the criteria that would be used to
audit critical care services in that state. Instead, the
carrier appeared to use an arbitrary standard. We are also
concerned that the medical director seemed to issue a
prospective announcement in the Medicare Bulletin that in 1997
he expected to recoup through audits $200 million.
While we are encouraged by the direction and tone of our
meetings with HCFA in developing further instructions to the
carriers on the proper interpretation of the critical care
services and the input from Trailblazer's, we have received
little or no relief from HCFA relative to our concerns about
how carriers currently are conducting audits of critical care
services with the wrong interpretation of these codes and
without providing physicians with any prior notice of their
standards.
Thus, we have the following recommendations for HCFA:
HCFA should issue another clarifying memorandum to
carrier medical directors explaining that the critical care
codes are not simply ``crash'' codes.
Carrier audits of critical care services, except
for egregious situations, should be suspended until this
clarifying memorandum can be issued.
Past audits where the carrier used standards in
contradiction to the Cusick memo should be reopened.
HCFA should require carriers to conduct
educational programs on critical care billing once the new
memorandum is issued. The education should be based on the
national standards. The professional critical care
organizations would like to be part of this process, working
closely with HCFA and the carriers.
Carriers who purposely disregard a HCFA standard
and subject physicians to erroneous reviews should be subject
to some type of sanction by HCFA. The carriers should not be
judged solely by how much money they recoup. There must be some
forum established within HCFA for HCFA to hear and act upon
complaints about carrier consistency with national standards.
Physician input should be considered in annual carrier
performance reviews.
Carriers should be more circumspect in their use
of extrapolation to levy six figure overpayment assessments.
Prior to proper educational programs, carriers should not use
extrapolation where audits reveal simply honest mistakes in
documentation or interpretation.
A claim should not be denied simply because the
exact time was not recorded, because the word stable was used,
because the words DNR appear, or because the patient is post
surgery. Auditors must have sufficient clinical knowledge and
must review the complete record so that they can determine from
the substance of a note that over 30 minutes of care was
clearly provided or that the patient's condition may have been
hemodynamically stable because the critical care physician was
closely monitoring the patient's condition. In addition, a
critical care physician can actively manage the care of a DNR
patient who requires critical care services and provide
medically necessary services to post surgical patients.
Billing patterns of critical care physicians
should be compared to other critical care physicians.
The system only works if physicians believe they are being
treated fairly. The members of the Society of Critical Care
Medicine would welcome an opportunity to work with the Health
Subcommittee to address these important issues. Thank you.
SunDance Rehabilitation Corporation
Dallas, TX 75240
May 6, 1999
A. L. Singleton,
Chief of Staff,
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20525
I would like to thank Congressman Bill Thomas for your most recent
efforts to provide reasonable time frames for the appeals of claims for
services provided to Medicare recipients. Denied claims may take over 4
years to be resolved through the various steps of the appeal process.
The process in question lacks fairness to the provider community.
Please consider the following points.
1. Services denied payment by Fiscal Intermediaries and
subsequently deemed payable by an Administrative Law Judge continue to
be denied payment when such services are provided. This creates great
frustration for the service providers and the Administrative Law Judge.
The appeals process becomes burdened with issues that have been ruled
on numerous occasions.
2. On average, I win 95% of the appeals that reach the
Administrative Law Judge level. I do not believe that this percentage
is significantly different than other providers. Based on this level of
claims being overturned, it would lead one to view the appeals process
as a system that delays payment for services not as a system that
determines the appropriateness of the service.
While your current legislation provides a much more reasonable time
frame for claims to reach the Administrative Law Judge level, without
similar time frames for this level, the backlog of claims will remain.
You may also wish to consider that part of a viable solution rests
in fewer claims needing the appeals process for resolution. This could
be accomplished by HCFA taking a clear position on services rather than
allowing the various Fiscal Intermediaries to create coverage policy. A
uniform approach to this issue ensures that a greater consistency of
the Medicare program for recipients, providers and regulators.
Another solution, in reducing the number of claims seeking
resolution through the appeal process, is the charging of interest on
the withheld payment. When claims are denied, payment is not made for
the service or goods the Medicare recipient has received. When the
claim is resolved, years later, payment is for the original billing
without any adjustment for interest. The impact of this practice is
clear. At the same time, when a provider owes money back to the
Medicare program, interest is charged on any unpaid balance, at an
interest rate of nearly 14%. I fail to see the fairness in this
approach.
When Fiscal Intermediaries are faced with the prospect of paying
interest for the abusive manner in which claims are denied, the process
will improve.
Currently, I have over $3,000,000.00 in claims at some step in the
appeals process. I will win 95% or more of these disputes. I also
realize that for every claim overturned in my favor I have lost the
cost of that money over the years. In addition to the cost of money,
are the expenses of the hearing process and the lost time of the staff
required to present the claims. I also realize that if I do not pursue
payment, I could be charged with fraudulent billing practices.
Sincerely,
David Kniess,
President
Transamerica Occidental Life Insurance Company
Transamerica Center
Los Angeles, CA 90015-2211
May 4, 1999
Congressman William Thomas
Committee on Ways and Means
1136 Longworth House Building
Washington D.C. 20515
Dear Congressman Thomas:
As the Chief Medicare Officer for Transamerica Occidental Life
Insurance Company, the Southern California Medicare Part B carrier, I
would like to respond to the testimony given by Frank J. Kiesner,
President and CEO of Oncotech Inc., to the House Ways and Means
Committee, Subcommittee on Health, on April 22, 1999.
Transamerica Occidental has been the Part B administrator in the
Southern California area since the inception of the Medicare Program.
Under our contract with the federal government, Transamerica Occidental
follows specific rules and regulations outlined by the Health Care
Financing Administration (HCFA) in processing Medicare claims. Our
Medicare area currently processes close to 28 million claims a year,
serving 1.2 beneficiaries and 25,000 providers. Many thousands of these
processed claims are for cancer tests and treatments.
Oncotech produces a cancer test called the Extreme Drug Resistance
(EDR) test that determines if a patient is extremely resistant to a
chemotherapy drug. While we are certainly eager to see effective, new
treatments and tests for cancer patients, as more fully discussed below
our opinion is that Oncotech's test is still considered experimental.
Therefore, the company's claims have been denied.
In certain instances, local carriers are given latitude in
determining whether new tests and treatments fall within the prescribed
HCFA guidelines. When this occurs, as is the case with the EDR test, we
rely upon independent, outside medical consultants to advise us about
the effectiveness of the test or treatment in question. These
consultants are licensed practitioners who are board certified in their
field of expertise. Their names are deliberately not revealed to avoid
external influences by product or pharmaceutical manufacturers.
Our discussions with these medical experts, along with our own
medical department's evaluation of current scientific literature, have
led us to conclude that the EDR test is virtually the same as a drug
chemosensitivity test. Drug chemosensitivity tests are still considered
``investigational'' by HCFA and not eligible for payment. At this time,
the scientific evidence does not prove EDR's effectiveness in the
diagnosis or treatment of the majority of oncology patients.
Oncotech was notified several times about our decision and the
rationale for it. In addition, all of Transamerica's decisions are
published in our Medicare newsletter that is distributed to all
providers. In the future, if HCFA determines that chemosensitivity and/
or EDR testing is reasonable and necessary and revises its national
policy, we would change our policy as well. In addition, if new,
scientific data leads our consultant experts to view EDR as a test
covered under Medicare, we would change our local policy. This change
would be communicated in our newsletter to providers.
In his testimony, Mr. Kiesner also makes a number of
recommendations regarding local Medicare processes and policies.
Although not addressed in this letter, we would be happy to discuss any
of the other points raised in his letter or to provide additional
specific information about how we arrived at our decision related to
the EDR test.
Sincerely,
George E. Garcia
Chief Medicare Officer