Report to Congress
Plan for the Transfer of Responsibility for Medicare Appeals
Developed under section 931 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), Pub. L. No. 108-173, 117 Stat. 2066 (2003)
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This plan was developed in response to section 931 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), Pub. L. No. 108-173, 117 Stat. 2066 (2003) (Appendix A) and includes information as compiled and agreed upon by the Social Security Administration (SSA) and the Department of Health and Human Services (HHS).� The plan is designed to describe the process through which HHS and SSA will accomplish the transfer of responsibility for the functions of administrative law judges (ALJs) responsible for hearing Medicare appeals under title XVIII of the Social Security Act (the Act).� The Secretary of HHS and Commissioner of SSA are committed to working together to ensure a successful transition and the availability of an efficient and effective appeals process both during the transition process and after the transfer of responsibility over these appeals to HHS is complete.1
SSA was originally a part of HHS.� Historically, ALJs in the SSA Office of Hearings and Appeals (OHA) provided hearings on behalf of the Secretary of HHS on some but not all types of Medicare appeals, and the SSA Appeals Council provided the final level of review.� In the 1980s and early 1990s, the Secretary transferred some types of Medicare cases from OHA to ALJs at the Departmental Appeals Board (DAB) and provided that the DAB would issue the final decision on behalf of the Secretary in those cases.2
In 1994, the Social Security Independence and Program Improvements Act (Independence Act), Pub. L. No. 103-296, 108 Stat. 1464 (1994), established SSA as an independent agency.� Section 105(a)(2)(A)(i) of the Independence Act stipulated a shared responsibility for the Medicare appeals process in which SSA would continue to perform the hearings function for those Medicare appeals that SSA was hearing in 1994.� Section 105(a)(2)(B) provided that SSA "shall perform" this function in accordance with the same financial and other terms in effect on the date of the Act, except to the extent the Commissioner of SSA and the Secretary of HHS "agree to alter such terms pertaining to any such function or to terminate the performance by the Social Security Administration of any such function."� Pursuant to these provisions, SSA continues to hear certain Medicare appeals on behalf of HHS.� Specifically, these cases include:
In this plan, the terms “Medicare hearing” and “Medicare appeals” refer only to these categories described above.4
To facilitate the continued performance of the Medicare hearings function by SSA after it became an independent agency, SSA and the Health Care Financing Administration (HCFA) [now the Centers for Medicare & Medicaid Services (CMS)] entered into a Memorandum of Understanding (the Umbrella MOU), effective March 31, 1995 (Appendix B).� The Umbrella MOU was designed to ensure that both parties continued working cooperatively to maximize program efficiency, effectiveness and service to the public.� In addition, Article V, Section 9, of the Umbrella MOU detailed the parties’ commitment to "further discussions regarding the potential transfer of" the Medicare hearings function and related resources to HHS.� The parties also agreed that the ultimate transfer of the ALJ hearings function was in the best interest of the public inasmuch as HHS has administrative responsibility for the Medicare program.
On October 20, 1995, HHS and SSA signed a second agreement (Supplemental Agreement—Appendix C), which transferred to HHS the Medicare appellate review functions performed by the SSA Appeals Council.� This body, now called the Medicare Appeals Council (MAC), is housed within the DAB and reviews ALJ decisions in the types of cases detailed above.5
�The Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) Pub. L. No. 106-554, 114 Stat. 2763 (2000) amended section 1869 of the Social Security Act by creating new appeal rights and requiring major revisions to the Medicare appeals process.� In anticipation of the implementation of BIPA, HHS and SSA then began negotiating the potential transfer of the Medicare hearings function.� As a result of these negotiations, it was tentatively agreed that, pending budget approval, responsibility for Medicare hearings would be transferred beginning October 1, 2003.� Accordingly, SSA did not request the resources needed to process the Medicare workload in its fiscal year (FY) 2004 budget.� In the meantime, Congress was considering Medicare reform legislation that would significantly impact the processing of Medicare appeals.� Specifically, the legislation would delay the transfer of the appeals function to not earlier than July 1, 2005, and not later than October 1, 2005, and it would require that the ALJs hearing Medicare appeals be organizationally and functionally separate from CMS.� To ensure continuation of the Medicare hearings function pending the transfer, HHS and SSA entered into a Reimbursable Agreement in December 2003 under which SSA would be reimbursed by HHS for continuing to perform the Medicare hearings function in FY 2004 (Reimbursable Agreement—Appendix D).� Pursuant to the Reimbursable Agreement, it is anticipated that SSA will complete up to 50,000 "units of service" at a cost not to exceed $50 million during FY 2004.6� The Reimbursable Agreement may be renewed by mutual consent of the agencies.
The MMA was enacted on December 8, 2003.� As anticipated, section 931 of the MMA requires the transfer of responsibility for the Medicare appeals function to HHS and provides that the ALJs performing this function be organizationally and functionally separate from CMS and report to, and be under the general supervision of, the Secretary.� Accordingly, HHS assumed overall responsibility for negotiations with SSA.� Section 931 also requires the Commissioner and the Secretary to develop and transmit to Congress and the Comptroller General of the United States a plan to transfer responsibility for the functions of ALJs hearing cases under title XVIII of the Social Security Act (and related provisions of title XI of such Act).� This plan must be submitted to Congress not later than April 1, 2004.� As specified in section 931(b)(1) of the MMA, “Not earlier than July 1, 2005, and not later than October 1, 2005, the Commissioner of Social Security and the Secretary shall implement the transition plan under subsection (a) and transfer the administrative law judge functions described in such subsection from the Social Security Administration to the Secretary.”
This plan is organized to address the subject matter areas outlined in section 931(a)(2) of the MMA.
Approximately 41.6 million Americans receive Medicare benefits.� On an annual basis, carriers and intermediaries process approximately 1 billion claims, with carriers processing Medicare Part B claims and intermediaries generally processing Medicare Part A claims.7� Of this amount, carriers and intermediaries (Parts A and B) approve payment for approximately 900 million claims, with denials accounting for approximately 10 percent of total claims.
Claims submitted for Medicare items and services are denied for a variety of reasons.� The most common reason for denying a claim is that the services provided were determined not to have been medically necessary for the beneficiary.� Other reasons for denials include that Medicare did not cover the services or that the beneficiary was not eligible for services.� Generally, beneficiaries, providers and suppliers have the right to appeal denied claims if appeals are filed within the required timeframes and satisfy the amount in controversy requirements.� This appeal, called a redetermination, is heard by the appropriate carrier or intermediary.� A beneficiary’s appeal right may be assigned to the provider or supplier that furnishes the item or service in question.� As a result, the current appeals process is dominated by provider or supplier appellants with a smaller subset of beneficiaries bringing appeals on their own behalf.� Therefore, the actual number of individual beneficiaries involved in a specific appeal varies since a specific provider or supplier may group appeals or beneficiary appellants may aggregate their claims to meet dollar thresholds.�
A majority of all denials are for Medicare Part B claims processed by the Medicare carriers.� Approximately 14 percent of all Medicare Part B claims are denied at the initial level.� Of these, less than 1 percent is forwarded to the ALJ hearinglevel.� Medicare Part A claims account for 16 percent of the total claims processed.� Approximately 8 percent of all Medicare Part A claims are denied at the initial level.� Of these, less than .06 percent make it to the ALJ hearing level.
Under BIPA, if the carrier or intermediary renders a decision upholding the denial of payment, the provider, supplier or beneficiary may then request a second level appeal.� The second level appeal, called a reconsideration, will be conducted by the qualified independent contractors (QICs).8 Should the denial again be upheld at the second level, the provider, supplier or beneficiary may then submit an appeal at the third level of the appeals process, the ALJ level.� In FY 2003, approximately 122,500 claims9 were appealed to the ALJ level.
OHA has approximately 950 available ALJs and 5,200 support staff located nationwide (10 regional offices, 139 field offices and 4 satellite offices).� The ALJ workload is dispersed throughout OHA's hearing offices with many ALJs spending some portion of their time on Medicare appeals.� In FY 2003, an average of 46.18 ALJs were used to adjudicate Medicare appeals each month.� While SSA does not have a dedicated ALJ corps or support staff for Medicare appeals, a cadre of 34 ALJs with Medicare hearings experience and expertise conducts hearings for “big box”10 cases that result in a substantial portion of Medicare dispositions.� Demographic patterns, location of large providers and suppliers, and variations in the practices of state governments and CMS contractors account primarily for the distribution of the SSA appeals workload.� Workload distribution has been affected in a few instances by assignment of cases to the office where a cadre ALJ is located.� The following data were taken from SSA’s Hearing Office Tracking System (HOTS) regarding the Medicare appeals workloads:
SSA/OHA Medicare Appeals Workload
*Includes 75% Medicare Part B, 24 % Medicare Part A, and 1%
Medicare+Choice/Medicare Advantage (managed care)
The above data addressing ALJ appeals filed show a 5 percent increase of appeals receipts between FY 2002 and FY 2003.� It is still too early in FY 2004 to determine appeals receipts for the entire fiscal year, and first quarter receipts are traditionally lower than those throughout the remainder of the year.� However, the opening pending workload for FY 2004 was 35,193 appeals.� Pursuant to the Reimbursable Agreement entered into in December 2003, it is anticipated that SSA will complete up to 50,000 "units of service" during FY 2004 at a cost not to exceed $50 million dollars.� The Reimbursable Agreement may be renewed by mutual consent to include Medicare hearings performed by SSA in future years.� The agencies have agreed on a definition of a "unit of service" in the Reimbursable Agreement.� The definition of "unit of service" (See footnote 6) is for reimbursement purposes only and does not indicate any changes in functions performed by staff in processing Medicare cases.� The data above do not reflect the definition of "unit of service" in the Reimbursable Agreement.
Section 521 of BIPA included major revisions to appeals procedures at the ALJ level for the original Medicare plan beneficiaries.� It imposed a 90-day time limit for conducting ALJ appeals, lowered the amount in controversy, and allowed appellants to escalate an appeal from the QIC to the ALJ level if the QIC did not meet its 30-day timeframe for issuing a determination.
The MMA included reforms to the Medicare appeals process regarding presentation of evidence, notice requirements and requirements for QICs.� Additionally, the new law reduces the minimum number of QICs from 12 to 4.� The MMA also extends the timeframes for carriers and fiscal intermediaries to issue redeterminations and for the QICs to complete their reconsiderations from 30 days to 60 days.� The new law also requires the dollar amounts in controversy to be adjusted annually by the percentage increase in the medical care component of the consumer price index for all urban consumers.
The MMA also establishes a prescription drug benefit for Medicare beneficiaries under title I that allows exceptions and appeals for enrollees in Prescription Drug Plans (PDPs) to be able to obtain (1) formulary drugs at a lower tiered cost sharing amount than originally established under the plan and (2) plan coverage for non-formulary drugs.� Determinations made under these exceptions would be subject to appeal procedures similar to those under the Medicare + Choice/Medicare Advantage program, which includes appeal to an independent review entity and subsequently to an ALJ.� Depending upon the policies announced in the final rule, these appeals may have some impact on the volume of claims submitted.� Given that the final policies have not been announced and that the prescription drug benefit is a totally new benefit affecting 41.6 million eligible beneficiaries, the exact impact in terms of numbers of appeals to ALJs is unknown at this time.
HHS Projected Future Staffing Requirements:
The FY 2005 President’s Budget projects that the claims volume will increase by 4 percent.� While this is likely to impact the ALJ appeals volume, an increase in claims volume brought about by legislative and regulatory changes may further increase the number of Medicare appeals.� Taking into account the SSA experience and the Medicare claims information coupled with new legislative requirements in BIPA and MMA, including the prescription drug program, HHS has developed the following plan for the staffing of Medicare appeals:
II. COST PROJECTIONS AND FINANCING
From the beginning of the Medicare program, SSA has been responsible for most ALJ hearings arising from Medicare.� SSA’s annual appropriation included funds to carry out this activity. � Through cost allocation, the cost of conducting ALJ hearings was charged to the Medicare Trust Funds.� The administrative costs for Social Security are appropriated as a “limitation account” which sets the total amount SSA can obligate for the programs it administers.� The mix of actual work processed in a particular fiscal year determines the amount charged to each funding source; i.e., the various trust funds or the general fund for Supplemental Security Income (SSI) work.� SSA's cost allocation methodology determined the cost of conducting Medicare hearings that were charged to the Medicare Trust Funds.�
Since the President’s Budget for FY 2004 assumed the transfer of responsibility for providing Medicare administrative hearings and related functions from SSA to HHS, SSA’s budget request for FY 2004 did not include the resources to process the Medicare workload.� Instead, Congress provided funding for processing ALJ level appeals in CMS’ discretionary Program Management account.� HHS and SSA agreed that SSA would continue to process the Medicare workload under the Reimbursable Agreement previously described, which provides that HHS will reimburse SSA $1,000 per unit of service up to $50 million in FY 2004.� The definition of a "unit of service" agreed to by HHS and SSA in the Reimbursable Agreement is for reimbursement purposes only in FY 2004 and in any subsequent reimbursable agreements.� Therefore, historical data do not provide a comparable basis for projecting future resource needs.� Consequently, in order to determine the resources HHS will need for the ALJ hearings function, SSA will provide HHS with quarterly reports of the number of units of service completed throughout FY 2004.� These data will enable HHS to make the best projection of the hearings workload it will have to process and to re-assess its future resource needs.
Both the FY 2004 and FY 2005 President’s Budgets requested $129 million in the CMS discretionary budget for appeals reform, which includes funds for HHS start up costs, funds to reimburse SSA for continuing to process Medicare cases in FY 2004 and FY 2005, and funds for CMS to implement other BIPA reforms, as amended by the MMA.� The FY 2005 request assumes that HHS will enter into another Reimbursable Agreement or similar arrangement with SSA to continue to handle Medicare appeals through the end of that year.
Start up costs included in the FY 2005 request allows HHS to begin hiring ALJs, attorneys, paralegals, and clerical support staff.� As noted earlier, HHS will need to hire additional ALJs and support staff to process the Medicare appeals workload when the responsibility for the ALJ function is fully transitioned to HHS.� Due to the advent of the new prescription drug benefit established by Medicare Part D during calendar year (CY) 2006, as well as an expected shift of Medicare beneficiaries into managed care from fee-for-service, it is difficult to predict the number of ALJ level appeals HHS can expect in the future.� HHS will include projections for workloads resulting from the new prescription drug benefit and other MMA changes in its estimates of resources needed to perform the ALJ hearings function.�
HHS will request funding in the FY 2006 budget to perform the complete ALJ Medicare hearings function.� Before Congress receives the FY 2006 President’s Budget request, HHS will work with SSA, the Office of Budget and Management (OMB), and other entities involved in the process to develop a comprehensive estimate of future funding needs and a budget strategy.� This estimate depends on many factors, including: when and how many ALJs and support staff HHS hires, geographic dispersion, and the new and pending workload estimates.� Among other things, HHS will use the data reported in SSA’s FY 2004 quarterly reports to formulate future funding requests and a comprehensive budget strategy.
III. TRANSITION TIMETABLE
SSA and HHS have agreed on a plan for the phased transfer of the Medicare hearings function. The intent of the plan is for SSA to complete its performance of the Medicare hearings function on October 1, 2005, and for HHS to begin to perform the Medicare hearings function without a pending workload transferred from SSA.� The plan provides for CMS' contractors, beginning July 1, 2005, to send to HHS all Medicare appeals that would otherwise have been sent to SSA.� SSA will complete processing its pending Medicare workload (appeals received by SSA prior to July 1, 2005) by September 30, 2005.� HHS will begin handling the workload of cases sent to it after June 30, 2005, without an SSA pending workload.� The agencies are developing a joint strategy to enable SSA to complete processing its pending workload by September 30, 2005.� The strategy requires a set of complementary initiatives to be undertaken by each agency to increase the units of service SSA can provide and the commitment of sufficient additional resources to reimburse SSA, and revising the FY 2004 Reimbursable Agreement, if necessary, to ensure all pending cases are completed.
In order to process all cases, SSA and HHS will implement initiatives to increase the efficiency of Medicare appeals processing.� These include:
The following is the plan for the phase in of new Medicare appeals to HHS:�
With HHS beginning to exercise adjudicative authority over Medicare ALJ appeals on July 1, 2005, it estimates the following with respect to hiring and training ALJs and support staff:
In addition, HHS will begin to receive and track all Medicare Part A and Part B appeals received on or after July 1, 2005, and Medicare Part C appeals received on or after September 1, 2005.� SSA will continue to provide information regarding the status of Medicare appeals being adjudicated by SSA until all Medicare appeals retained by SSA are completed.
Section 521 of BIPA made comprehensive changes in the Medicare claims appeal process.� In compliance with the MMA as well as the statutory mandates of BIPA, HHS envisions implementing the following regulations.
As an initial step after the passage of BIPA, CMS issued a Ruling on October 1, 2002, that established interim administrative procedures for CMS contractors, ALJs, and the DAB to follow in processing Medicare claims appeals.� This Ruling and related instructions will be followed until CMS finalizes comprehensive regulations implementing BIPA section 521.
CMS published proposed regulations on November 15, 2002, (CMS-4004-P) "Changes to the Medicare Claims Appeal Procedures," that comprehensively addressed the overall changes to the Medicare claims appeal process required by BIPA section 521. 67 Fed. Reg.69312.� The proposed regulations reflect the BIPA requirements by proposing to establish a uniform process for handling both Medicare Part A and Part B appeals; revise the timeframe for filing appeals; reduce the time limits for decision-making at all levels of the Medicare administrative appeals process; allow appellants to escalate appeals if the pertinent appeals body does not meet mandatory deadlines; implement the new appeals entities known as QICs; and establish the right to an expedited determination regarding a decision to discharge or terminate services to an individual.
The proposed regulations also included provisions related to the processing of BIPA section 521 Medicare appeals by ALJs.� The existing ALJ regulations are quite voluminous and are intended primarily to apply to appeals of SSA disability cases, rather than to Medicare appeals.� The need for the Medicare program to establish its own regulations for these upper level appeals has been widely recognized, including most recently by the Office of the Inspector General in its January 2002 report: "Medicare Administrative Appeals—The Potential Impact of BIPA,” (OEI–04–01–00290).� Moreover, the statutory timeframe for ALJ and DAB decisions and the opportunity for escalation of appeals apply only to Medicare appeals, and not to SSA disability appeals.� Accordingly, HHS believes that these differences in the appeals procedures present another compelling argument in support of codifying the ALJ and DAB requirements for Medicare administrative appeals within the Medicare regulations at Title 42 of the Code of Federal Regulations.� Thus, the regulation will codify the key rules governing all aspects of Medicare claims appeals, beginning with the statutory requirements that apply to initial determinations and proceeding through all four levels of the administrative appeals process.�
As noted in the Workload section of this report, the MMA sets forth further changes to address evidence requirements for providers and suppliers, notice requirements at all levels of the appeals process, timeframes for redeterminations and reconsiderations, and a number of requirements related to QICs.� HHS intends to carry out the necessary rulemaking to implement these changes concurrently with the other changes required by section 521 of BIPA.� Additionally, regulations regarding the prescription drug plan, electronic filing of appeals and the use of VTC for Medicare appeals will be issued at a later time.�
V. CASE TRACKING
When discussions first began regarding the transfer of the appeals workload, each agency's technical teams immediately began communicating regarding the data requirements and functional needs of the system in order to develop a solution that supported a smooth transition of the workload.
A two-pronged approach was chosen.� First, an interim solution would be developed to meet short-term needs.� This interim system, called the Medicare Case Tracking System (MCATS), was expected to be operational by the original October 2003 proposed transfer date.� Its design focused on tracking the receipt of appeals and the minimum data necessary to track appeals throughout their life cycle, that is, through the issuance of the ALJ decisions.� In order to meet the original timeframe, CMS staff modified the HOTS, which is the system SSA currently uses in support of its processing of the Medicare appeals workload.� The MCATS became available in December 2003.
Medicare Appeals System
In order to achieve a more robust and enduring technical solution to all the appeals processing needs, the Medicare Appeals System (MAS) was awarded to a contractor in September 2003.� The MAS design is intended to support a unified case tracking system that will facilitate maintenance and transfer of case specific data with regard to fee-for-service and managed care appeals (Medicare + Choice/Medicare Advantage) throughout the four levels of the appeals process, i.e., level 1 appeals: affiliated contractors, level 2 appeals: QICs, level 3 appeals: ALJs, and level 4 appeals: the DAB.� In developing the MAS, HHS and SSA will work together to capitalize on SSA’s knowledge and experience in developing the case processing management system (CPMS) and avoid unnecessary duplication.
In addition to basic case tracking across all levels of Medicare appeals in a unified system, the MAS also will provide the capability to report on appeals data, enable more accurate and expedient responses to Congressional questions, and provide more precise data for assessment and policy-setting.� MAS will fulfill these business needs by focusing on data collection, data analysis, and workflow management.� The MAS will be capable of docketing/calendaring hearings, scheduling expert witnesses for testimony, and providing information on the Medicare appeals workload as it relates to the number of ALJs and support staff required to process appeals.� Moreover, the MAS envisions a future environment in which all of the management of the appeal files will be handled electronically.� Specifically, the ALJ would have electronic access to all necessary documents, prior decisions, and other relevant information.�
Implementation of the MAS is set to occur incrementally.� The strategy of incremental development and deployment supports the flexibility necessary in accommodating the requirements for all levels of Medicare appeal processing based upon the priority of the stakeholders while also limiting associated risks. The incremental approach also will ensure that the MAS is aligned with critical business drivers.� For example, the MAS is designed in a manner that will enable it to accommodate new legislative developments, such as the new appeals workload associated with the new drug benefit.� The specific tasks associated with each increment of the MAS deployment are as follows:
Transfer of Data
Prior to enactment of the MMA, CMS and SSA technical staff worked together to develop a process to transfer all data from HOTS to CMS.� The transfer capability designed will accomplish the transfer of all data regarding the level 3 appeals from SSA to HHS – i.e., all data regardless of whether the appeal has been completely adjudicated or is in process.
VI. FEASIBILITY OF PRECEDENTIAL AUTHORITY
Currently, final agency decisions issued by the MAC of the DAB do not generally constitute binding authority, which decision-makers (ALJs and contractors) at lower levels of the Medicare appeals process must follow in rendering decisions.� After a thorough consideration of the Medicare administrative appeals process, HHS has determined that it is neither feasible nor appropriate at this time to confer binding, precedential authority upon decisions of the MAC.�
A decision of the MAC arises from an adjudication of the rights of a single appellant or group of appellants with respect to a particular claim or group of claims, and the adjudicatory process is open only to the parties to the appeal.� Although in its proposed rule implementing section 521 of BIPA, CMS has proposed to authorize the agency to participate as a party in some appeals, at the present time the agency cannot participate directly in administrative appeals.� See 67 Fed. Reg. 69312, 69332 (Nov. 15, 2002).� As a result, it is often difficult for the agency to ensure that all relevant issues and authorities are presented to the MAC for consideration before it makes a final determination in a particular case.� Moreover, the agency is not able to appeal adverse or erroneous rulings by the MAC.� Affording precedential authority to decisions where a particular legal argument has not been raised or thoroughly considered may result in an inaccurate or incomplete interpretation of an agency regulation or ruling, and may ultimately result in greater problems and uncertainty in subsequent cases when the issue is raised more clearly or in different factual circumstances.
Although the HHS Office of the Inspector General Report, entitled “Medicare Administrative Appeals – ALJ Hearing Process” (OEI-04-97-00160) (Sept. 1999) noted that the lack of precedent may contribute to “inconsistencies and other problems in the appeals process,” HHS believes there are steps that can be taken, short of granting binding, precedential authority to decisions of the MAC, to improve the consistency of administrative decisions.� For example, the internet has greatly enhanced the MAC’s ability to circulate its decisions, and electronic search tools are now available, which make it easier to locate decisions on particular issues.� The MAC also posts some key decisions on its website in order to provide guidance to ALJs on complex issues and in areas in which ALJs commonly make procedural errors.� In addition, other changes mandated by BIPA and MMA are expected to help improve the uniformity and consistency of decision-making at the lower levels of the administrative appeals process.� Accordingly, HHS has determined that, at this time, any problems that may arise from the possibility of inconsistent ALJ rulings are outweighed by the difficulties that could result from conferring binding, precedential authority upon decisions of the MAC.�
HHS will, however, undertake to reevaluate the merits of granting binding, precedential authority to some or all decisions of the MAC within a reasonable time after the full implementation of the changes to the Medicare administrative appeals process mandated by both BIPA and MMA.
VII. ACCESS TO ADMINISTRATIVE LAW JUDGES
Filing Appeals with ALJs Electronically
CMS has begun work on a beneficiary portal to allow the Medicare beneficiary population to access their own personal Medicare data using the internet.� While internet access to personal data is becoming commonplace in our society, as stewards of the data, the federal government must develop appropriate security to protect data covered by the Privacy Act of 1974, Pub. L. No. 93-579, 88 Stat. 1897 (1974) and the Health Insurance Portability and Accountability Act of 1996, (HIPAA) Pub. L. No. 104-191, 110 Stat. 1936 (1996).� The CMS beneficiary portal is currently in a pilot implementation for a limited community. Based upon the assessment of that pilot, decisions will be made to expand functionality to allow beneficiaries to perform internet-based transactions.� Through this web-based system, CMS anticipates developing a mechanism for beneficiaries to file appeals electronically, and CMS will then develop the necessary regulations.� Results of the assessment are not available at this time.
Conducting Hearings Using Tele- or Video-Conference Technologies
The availability of video-teleconferencing (VTC) and telephone hearings as service delivery options creates the opportunity to conduct hearings more efficiently.� Unlike SSA disability hearings, where in- person hearings may be needed in order to evaluate credibility, Medicare hearings are less dependent on the physical presence of the appellant and other witnesses and accordingly, are more suited to video hearings.� Consequently, HHS plans to adopt wider use of VTC.� This will still allow for face-to-face hearings but would significantly reduce the time and expense involved in travel by both appellants and ALJs.�
VIII. INDEPENDENCE OF ADMINISTRATIVE LAW JUDGES
SSA has a long history of maintaining independence of ALJs and the Secretary will consult with the Commissioner in order to adopt procedures and policies to maintain such independence upon the transfer of the Medicare hearings function.� Consistent with MMA and the Administrative Procedure Act (APA), the Secretary will establish a new organizational entity within HHS to ensure the judicial independence of ALJs.� This organizational structure will place ALJs in an administrative office that is organizationally and functionally separate from CMS.� The ALJs will report to, and be under the general supervision of, the Secretary.� ALJs will not report to, or be subject to supervision by, another officer of the HHS.�
IX. GEOGRAPHIC DISTRIBUTION
A central hearing support office will be located in the Baltimore/Washington area and will be responsible for strategic direction, liaison, budget support and human resource management of the Medicare hearings function nationally.�� HHS also anticipates a regional presence by creating a regionally located field structure.� The size and location of this field structure will be determined after an analysis of allocation to regional sites of positions and resources, including staff, IT systems, VTC equipment, etc.
HHS intends to develop a process to determine the size and location of the field structure based on, among other considerations, its hearings workloads and origination, Medicare contractor jurisdictions, costs, and other factors that will maximize its services to its beneficiaries and providers.� By the end of CY 2004, utilizing this process, a final decision will be made.
When hiring newly appointed ALJs, the law requires agencies to use the Office of Personnel Management’s (OPM) ALJ register.� OPM has the non-delegable statutory authority to administer the ALJ exam and establish an ALJ hiring register.� In the process of preparing this plan, OPM has advised HHS and SSA of the following information regarding the status of the ALJ register.� The current ALJ exam opened on a continuous basis in 1993.� New ALJ applications were accepted and added to the ALJ register from September 1993 through April 1999, when the ALJ examination was suspended due to the class action litigation filed with the Merit Systems Protection Board (MSPB).� The suspension was lifted briefly in early 2001, during which time OPM provided SSA with a certificate of eligibles to fill more than 120 positions, but the MSPB imposed a new stay in April 2001.� That stay prevented OPM from issuing any new certificates and prevented SSA from using its certificate.� OPM convinced the MSPB to briefly lift the stay in the fall of 2001 to allow SSA to use the certificate issued in March.� In February 2003, the U.S. Court of Appeals for the Federal Circuit issued a decision in favor of OPM's use of the 1996 scoring formula.11� As a result, the stay ceased to be operative in July 2003, and OPM reactivated the ALJ register and updated scores based on the 1996 scoring formula in August 2003.� Since that time, OPM resumed processing applications that were pending during the stay (OPM is not accepting new applications except from 10-point preference eligibles), which has resulted in adding another 84 individuals to the register.� In addition, eligibles already on the register were permitted to submit updated resumes for use by agencies.� As of now, there are a total of 1,620 eligible candidates on the register.� Another 50 plus applicants have nearly completed the process and will be added to the register.� In December 2003, OPM provided SSA with a certificate of eligibles that was drawn from the existing register.� SSA is currently planning to hire an additional 50 ALJs.� Besides the certificate issued to SSA in December 2003, OPM has issued five other certificates to requesting agencies.�
OPM is currently working on the development of a new ALJ examination.� At this point, the completion date of that process is unknown.� When the new ALJ examination is completed and announced, the current register will be terminated.� Any individual on the existing register who wishes to remain an ALJ candidate will have to re-apply and participate in all parts of the new examination.� OPM will, however, continue to use the existing ALJ register until an ALJ register based on the new exam is developed.
HHS plans to explore all hiring options for ALJs.� Options include hiring from the existing OPM register, hiring reemployed annuitants and making selections from the existing ALJ corps.� HHS will consider those judges with Medicare experience in making selections.
At the present time, OPM has committed to working closely with HHS to enable it in FY 2005 to hire an outstanding corps of ALJs from the register as well as from the alternative programs listed below.��
HHS expects to carry out support staffing functions at a slightly lower level of support staff to ALJ staff, in part, because the staff will be handling only the Medicare appeals, rather than both the disability and the Medicare appeals.� HHS estimates a 4:1 ratio of support staff per ALJ hired.� This may include an attorney advisor, paralegal and support staff.� Included in support staff is central administrative support for the new hearing offices.� This support will include, but not be limited to, personnel services, training, IT, VTC services, and the overall management of the Medicare hearings workload.
HHS plans to explore and consider all hiring options with respect to acquiring ALJ support staff, e.g. current or new full-time and part-time federal employees as well as contract employees.
XI. PERFORMANCE STANDARDS
In considering the appropriateness of establishing performance standards for administrative law judges with respect to timelines for decisions in cases under title XVIII, a significant amount of research was conducted regarding the current state of the law under the APA.� Based on this research, both SSA and HHS believe that under the APA an agency has the right and the duty to ensure that ALJs issue decisions in a timely manner.� The issuance of timely decisions is an important agency objective and is essential to the delivery of "first class" service.� The agency may establish reasonable administrative practices and programming policies that ALJs must follow, as long as the agency takes no actions which abridge, directly or indirectly, the duty of impartiality an ALJ owes the claimant when hearing and deciding cases.�
Currently, ALJs are excluded from the definition of "employee," set forth in 5 U.S.C. section 4301, and this exclusion prohibits an agency from establishing performance appraisal systems for the periodic appraisal of an ALJ's job performance and using the results of performance appraisals as a basis for training, rewarding, reassigning, promoting, reducing in grade, retaining, and removing ALJs. 5 U.S.C. section 4302.� The exclusion of the ALJs from the coverage of chapter 43 further supports the insulation of ALJs from agency involvement in pay, classification, and tenure decisions.� However, this does not preclude an agency from considering performance deficiencies under 5 U.S.C. section 7521, and a blanket exemption of ALJs from all performance-based actions could easily erode public confidence in the appeals process. HHS v. Goodman, 19 M.S.P.R. 321 (1984).�
Under 5 U.S.C. section 7521, an agency may take disciplinary action against an ALJ for “good cause.”� The courts and the MSPB have interpreted this “good cause” standard to include “appropriate administrative supervision . . . required in the course of general office management,” so long as such supervision does not interfere with the ALJ’s performance of a “quasi judicial function.”� Brennan v. HHS, 787 F.2d 1559, 1562 (Fed. Cir. 1986).� “Good cause” may be based on performance, or unacceptably low productivity, and it is not unreasonable to expect that ALJs will perform at a minimally acceptable level of efficiency.� Nash v. Bowen, 869 F.2d 675, 681 (1989).
The tribunals have consistently held that agencies have broad authority to establish and enforce substantive and procedural standards for its ALJs, so long as the agency takes no actions to compromise an ALJ’s ability to act as an impartial arbiter in a particular case or class of cases.� Sannier, 931 F.2d 856, 858-859 (Fed. Cir. 1991); Goodman v. Svahn, 614 F.Supp. 726, 730 (1985); HHS v. Manion, 19 M.S.P.R. 298, 303 (1984).�
In light of the established timeframe for processing appeals mandated by BIPA and MMA, it is important that ALJs adhere to the new timeframe when processing appeals.� Medicare beneficiaries have a right to expect that their disputes will be adjudicated accurately, fairly, reliably and timely.� It is also important that all levels of the appeals process operate in an efficient manner to meet the needs of Medicare beneficiaries.� HHS will continue to work with the appropriate bodies to ensure any steps we take facilitate adherence to BIPA timeframe and do not interfere with the impartiality of ALJs.
The agencies agree to consider opportunities for sharing resources consistent with the efficient and effective accomplishment of each agency’s mission.� One such resource sharing opportunity involves the use of VTC.� HHS recognizes the potential benefits of using VTC in its delivery of service to Medicare appellants.� In order to provide increased access to appellants and their representatives, HHS intends to use VTC hearings to the greatest extent possible.� SSA is aggressively expanding its network of VTC equipment to improve the efficiency of its hearings process and to meet increased demands for future service.� SSA has offered the use of its VTC network, which is being expanded to over 278 sites through FY 2006.� If HHS uses this service, SSA will charge HHS on a per hearing actual cost basis, including the cost of contract hearing monitors, digital recording equipment and joint scheduling software.� SSA will have priority for use of VTC facilities, but will accommodate HHS requests based on availability.� If HHS uses the VTC facilities, HHS and SSA will enter into a reimbursable agreement setting forth the terms for shared use.
SSA and HHS will also work to develop a joint case tracking capability to facilitate the orderly transition of workload, movement of case files, and provision of accurate information to appellants about their cases.� If additional shared resource opportunities are identified and agreed upon by the parties, SSA and HHS will enter into reimbursable agreements setting forth the terms for shared use and the amount of any reimbursement.
HHS recognizes that a structured and well-defined training plan is essential to the successful administration of its programs. In order to fully and successfully implement the transition of the ALJ function from SSA, HHS must design and develop a comprehensive training plan that is structured to meet the unique needs of ALJs and their appeals support staffs.�
Initial and ongoing training will be structured and delivered in a manner that will facilitate learning and promote a greater understanding of the practices and principles of the Medicare program and the adjudicative process.� To address Medicare coverage, operational and process issues, HHS is developing short and long-term strategies to provide training, improve decisional accuracy, and accountability at every step in the process.� HHS’ short-term ALJ training strategy consists of four major elements. The elements are:
While HHS is concentrating on developing and implementing the short-term training strategy in FY 2005, it also recognizes the need for ongoing and focused ALJ training once the transition occurs.����
XIV. ADDITIONAL INFORMATION
At this time, neither the Secretary nor the Commissioner anticipates a need for changes to, or modifications of, current statutory requirements associated with the Medicare hearings process.
This report describes the commitment of SSA and HHS to work together to ensure a smooth transition and an efficient and effective appeals process.� The actions described in this plan will serve well the present and future Medicare beneficiaries and the public.
The Secretary and the Commissioner look forward to receiving comments from the Congress and GAO on this plan and pledge to work cooperatively to achieve the goals established by the Congress in the MMA.
Appendix A—Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), Pub. L. No. 108-173, 117 Stat. 2066 (2003), Section 931.
Appendix B— Memorandum of Understanding entered into between the Health Care Financing Administration (now the Centers for Medicare & Medicaid Services) and the Social Security Administration, effective March 31, 1995.
Appendix C—Supplemental Memorandum of Understanding entered into between the Department of Health and Human Services and the Social Security Administration, effective October 20, 1995.
Appendix D—Reimbursable Agreement entered into on December 3, 2003, between the Department of Health and Human Services and the Social Security Administration.
1 In developing this plan, HHS and SSA considered the information and recommendations contained in the report prepared by the General Accounting Office (GAO), dated September 2003 (GAO-03-841), Medicare Appeals, Disparity between Requirements and Responsible Agencies’ Capabilities.
2 Specifically, transferred cases included:� 1) program exclusions and civil money penalty cases brought by the HHS Office of the Inspector General or Centers for Medicare & Medicaid Services (CMS) [then the Health Care Financing Administration] under various fraud and abuse authorities; and 2) CMS provider and supplier certification and enforcement actions.� See 42 C.F.R. Parts 1005 and 498.
3 The Act refers to Peer Review Organizations (PROs) as opposed to QIOs.� All references to PROs have been changed to QIOs pursuant to Federal Register notice, 67 FR 36539.
4 The transferred cases also do not include any matters currently heard by either the Provider Reimbursement Review Board or the Medicare Geographic Classification Review Board.� These cases concern matters such as appeals of payments to hospitals, based on a review of hospital cost reports, and hospital wage index appeals.
5 The Supplemental Agreement covers the ". . .appellate review of all pending and future cases, including hearings where appropriate, in disputes involving: 1) Medicare entitlement/entitlement-related issues, and 2) Medicare coverage, claims reimbursement, and denial of service issues."
6 In accordance with the Reimbursable Agreement, a "unit of service" is the adjudication of request(s) for hearing on one or more claims involving one or more beneficiaries that are properly disposed of by a single decision or dismissal.� Request(s) for hearing may involve multiple units of service and be assigned multiple docket numbers only when a beneficiary's claim or claims require unique findings of fact and/or application of law to fact, e.g., individual medical necessity determinations.�
7 Medicare fee-for-service consists of two parts—A and B.� Part A claims cover inpatient hospital, skilled nursing facility, hospice, and certain home health services.� Part B claims cover physician services, diagnostic tests, and related services and supplies.
8 The process described here is that required under section 521 of BIPA.� Prior to BIPA, the second level of appeal was heard by the carrier for Part B cases only.� There was no second level of appeal for claims arising under Part A.� Once the BIPA section 521 regulations are implemented, these reconsiderations will be heard for both Part A and Part B cases by the QICs.
9 Numerous claims can be associated with one case or one hearing.
10 A big box case is defined as consolidated cases containing 30 beneficiaries or more and $40,000 or more in controversy, as well as appeals where sampling is used by the contractors to calculate an overpayment.
11 Azdell v. OPM, 87 M.S.P.R. 133 (2000), adhered to on recons., 89 M.S.P.R. 88 (2001), rev'd, Meeker v. MSPB, 319 F.3d 1368 (Fed. Cir. 2003), reh'g en banc denied (July 3, 2003), cert. denied, Azdell v. Meeker, ___ S. Ct. ___, 72 U.S.L.W. 3310, 2004 WL 368117 (U.S. Mar. 1, 2004).
Last revised: March 26, 2004