Medicare Managed Care

Medicare requires managed care plans to notify a beneficiary in writing of the reasons for denying to provide or pay for a service and to state the beneficiary's appeal rights. The beneficiary can appeal a denial, in writing, first to the plan, then to the Center for Health Dispute Resolution, then to an administrative law judge, and finally to a U.S. District Court. Beneficiaries are entitled to expedited decisions on their appeals if the standard time for making decisions could endanger their health or life. Between January 1996 and May 1998, health maintenance organizations reported an average of nine appeals per 1,000 Medicare members (this number may be rising) and reversals of 75 percent of the original denials. However, the number of appeals may understate beneficiaries' dissatisfaction with the plans' initial decisions: (1) some beneficiaries switch out of their plans rather than appeal and (2) some receive notices that fail to state reasons for a denial or to explain their appeal rights or they receive no notices at all. Furthermore, plans sometimes give beneficiaries little advance notice when they decide to discontinue paying for services. The Health Care Financing Administration (HCFA) does not determine whether beneficiaries who were denied services but did not appeal were informed of their appeal rights. HCFA does not monitor the provider groups to whom issuing denial notices and deciding whether to expedite initial decisions are delegated. HCFA also has not issued specific criteria for expedited cases. HCFA is implementing or planning initiatives to better protect beneficiaries' rights.

GAO noted that: (1) Medicare beneficiaries enrolled in managed care plans have the right to appeal if their plans refuse to provide health services or pay for services already obtained; (2) upon receipt of the written denial notice, the beneficiary may appeal and the health plan must reconsider its initial decision; (3) if the plan's reconsidered decision is not fully favorable to the beneficiary, the case is automatically sent to the Center for Health Dispute Resolution (CHDR) to review the decision; (4) CHDR may overturn or uphold the plan's decision; (5) a beneficiary is entitled to an expedited decision from the plan, both on the initial request and on appeal, if the standard time for making the decision could endanger his or her health or life; (6) a beneficiary who is dissatisfied with CHDR's decision may appeal further to an administrative law judge and then to a U.S. District Court provided certain requirements are met; (7) health maintenance organizations (HMO) reported an average of approximately 9 appeals per 1,000 Medicare members annually between January 1996 and May 1998; (8) HMOs reversed their original denial in about 75 percent of appeal cases; (9) the number of appeals may understate beneficiaries' dissatisfaction with the initial decisions by HMOs for two reasons: (a) some beneficiaries may disenroll and switch to another plan or fee-for-service Medicare instead of appealing; and (b) some beneficiaries may not appeal because they are unfamiliar with their appeal rights or the appeals process; (10) GAO found that beneficiaries frequently received incomplete notices that failed to explain their appeal rights, and some beneficiaries did not receive any notices; (11) notices often do not state a specific reason for the denial; as a result, beneficiaries may be uncertain as to whether they are entitled to the requested services and thus discouraged from appealing; (12) GAO also found that beneficiaries may receive little advance notice when plans decide to discontinue paying for services, which places these beneficiaries at financial risk should they decide to continue treatment during their appeal; (13) beneficiaries who lose their appeals are responsible for the treatment costs incurred after the date specified in the denial notice; (14) the agency does not determine whether beneficiaries who were denied services but did not appeal were informed of their appeal rights, nor does it monitor provider groups that contract with health plans; and (15) HCFA has not used available information to develop more effective plan oversight strategies.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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