Medicare

Medicare--the federal health insurance program that covers the nation's elderly and disabled--annually processes over 1 billion medical claims for services provided to beneficiaries. The Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), administers the Medicare program with the assistance of its claims administration contractors. These contractors are charged with processing and paying claims that are properly submitted and that are for medically necessary and covered services. The contractors also deny payment for claims considered invalid, incomplete, or otherwise improper. Medicare beneficiaries and providers have the right to appeal denied claims through a multilevel administrative process that includes a decision by an administrative law judge (ALJ). In fiscal year 2004, CMS's contractors denied over 158 million Medicare claims, about 5 million of which resulted in the initiation of appeals. In the same year, about 113,000 denied claims were appealed to ALJs. Two federal agencies--HHS and the Social Security Administration (SSA)--play a role in resolving Medicare appeals, but neither agency manages the entire process. In recent years, the Medicare appeals process has been the subject of widespread concern because of poor coordination between HHS and SSA and the time it takes to resolve appeals. In December 2000, the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) was enacted. It mandated appeals reform, including stricter time frames for processing Medicare appeals. Additional changes were required 3 years later by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). MMA mandated that SSA transfer its Medicare appeals workload to HHS, between July 1, 2005, and October 1, 2005--in effect, consolidating Medicare appeals within a single federal agency. In October 2004, we noted that transferring the Medicare appeals workload from SSA to HHS posed a complex challenge, requiring careful preparation and precise implementation of many interrelated tasks. We also reported that the plan that HHS and SSA jointly developed to transfer this workload lacked sufficient detail on how the transfer would be accomplished. We concluded that the absence of this information seriously jeopardized a successful and timely transition and threatened to compromise service to appellants. In light of our concerns, Congress asked us to monitor the transfer of the appeals workload from SSA to HHS. Specifically, our objectives were to (1) assess the agencies' progress in preparing to implement the transfer and (2) determine how HHS spent funds appropriated for transferring the appeals workload from SSA to HHS and related activities in fiscal year 2004 and the first half of fiscal year 2005.

In summary, we found that, although HHS and SSA have taken steps to prepare for the required transfer of the appeals function as required by MMA, some of the concerns we cited in our October 2004 report continue. With the July 1, 2005, implementation of the transfer plan quickly approaching, we identified three areas of concern. First, ensuring sufficient appellant access to hearings will be challenging. HHS has severely limited access to in-person hearings by establishing 4 hearing offices, in contrast to the 141 maintained by SSA. HHS will have to make special arrangements to obtain hearing space in other locations to ensure that appellants have adequate and timely access to in-person hearings. Despite its heavy reliance on videoconferencing (VTC) technology, HHS has not provided convincing evidence that appellants generally consider VTC hearings an adequate substitute for in-person hearings. HHS also faces a complex logistical task in arranging for thousands of VTC hearings, but has not estimated its needs based on SSA's recent hearing experience or another reasonable surrogate. Instead, HHS plans to tap these resources on an asneeded basis, providing little assurance that VTC hearings can be scheduled and completed within the stricter time frame. Second, HHS is facing tight time frames to hire and train ALJs to hear Medicare appeals. HHS has not yet hired its Chief ALJ, and, although 23 individuals have accepted offers to fill the 49 open positions for ALJs who are expected to hear appeals, HHS's hiring and training timetable is extremely ambitious and provides little margin for error. Third, HHS continues to face operational challenges that have not yet been resolved, such as implementing its new Medicare appeals case-tracking system at all levels of the appeals process. We are also concerned that, with such an enormous task still in front of it, HHS has not developed a specific contingency plan for processing appeals if for some reason it does not meet its October 1, 2005, deadline.