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1.Senate Finance Committee Addresses Medicare Appeals System

On previous Alliance calls, we have discussed that through the Center’s extensive experience with the Medicare administrative appeals process, we continue to find that:

  1. The success rates for beneficiaries at the initial levels of Medicare appeal are dismal; and
  2. The average wait for a decision at the Administrative Law Judge (ALJ) stage, where chances of success improve dramatically, far exceeds the 90-day built-in timeframes.

As discussed below, the Senate Finance Committee (SFC) recently held a hearing to discuss Medicare audits and appeals, and subsequently marked-up legislation that would significantly alter the Medicare appeals process.

Hearing on April 28, 2015 re: Audits and Appeals

On April 28, 2015, the SFC held a hearing entitled “Creating a More Efficient and Level Playing Field: Audit and Appeals Issues in Medicare.”  Chairman Hatch, in his opening statement, noted that Medicare’s hiring of contractors to conduct audits of claims submitted to Medicare “has led to a seemingly insurmountable increase in appeals, with a current backlog of over 500,000 cases … [which] has resulted in long delays for beneficiaries and providers alike.”  The Chairman also noted that “large portions of the initial payment determinations are reversed on appeal” and “[s]uch a high rate of reversals raises questions about how the initial decisions are being made and whether providers and beneficiaries are facing undue burdens on the front end.”  Ranking Member Wyden, in his opening remarks, highlighted the experience of Stephen Lessler, lead plaintiff in the Center’s lawsuit challenging delays in Administrative Law Judge (ALJ) hearings beyond the statutory 90-day limit for a decision. 

Testimony was provided at the Senate hearing by Diversified Service Options, Inc., a company that serves as a Part A and B Medicare Administrative Contractor (MAC) for the first level of the Medicare administrative appeals process for several regions across the country. Maximus Federal Services, a company that serves as the Qualified Independent Contractor (QIC) for the second level of appeal also testified.  The final witness was Chief Administrative Law Judge Nancy Griswold of the Office of Medicare Hearings and Appeals (OMHA), which administers ALJ hearings, the third level of Medicare appeal.

The witnesses’ testimony focused on the dramatic increase in the volume of appeals.  Little if any attention was given to the stunning denial rate at the first two levels of appeal and the high rate of reversals at ALJ.  A number of proposals were offered to address the appeals backlog, most of which would do so by reducing access to hearings.  Proposals from OMHA included establishing a refundable filing fee; remanding cases to the first (Redetermination) level of appeal upon introduction of new evidence; increasing the minimum amount in controversy for ALJ appeals; and establishing a new corps of “ALJ Magistrates” to handle certain claims.

Audit and Appeal Fairness, Integrity and Reforms in Medicare Act of 2015 (AFRIM Act)  

In an effort to address both the audits that have led to the dramatic increase in appeals filed the resulting backlog of cases, the Committee marked up a bipartisan bill entitled the Audit & Appeal Fairness, Integrity, and Reforms in Medicare Act of 2015 (AFIRM) on June 3, 2015.  The bill was approved by voice vote, and legislative language will now be drafted. 

In developing the AFIRM Act, the Committee considered a number of proposals that would significantly alter access to ALJ hearings, including those offered in the President’s FY 2016 budget and subsequently offered by OMHA at the April 28, 2015 hearing. The Committee significantly improved the OMHA proposals by dropping a refundable filing fee provision, and exempting Medicare beneficiaries from a provision that would remand appeals to a lower level when new evidence is introduced.  However, the AFIRM Act retains two of the proposals about which the Center has raised concerns:

  • Increases the amount in controversy (AIC) for ALJ hearings (the 3rd stage in the appeals process) to equal the amount required for judicial review in federal court (the 5th and final stage in the appeals process).  The ALJ AIC would increase almost ten-fold (from $150 to $1,460 in 2015).   If this change is made, only beneficiaries at significantly higher financial risk will be allowed access to the level of review where they have the most thorough and fair review of their claim, greatly diminishing the chances of success for all who fail to meet this higher threshold.
  • Establishes a new review process, creating “Medicare Magistrates” (attorney adjudicators) who would hear claims below the new higher Amount in Controversy threshold. These Magistrates would likely have less experience and training than ALJs, which could compromise the quality and thoroughness of review at this level.  This would also create an entirely new set of bureaucratic issues and expense.

There are other provisions in AFIRM that advocates will want to monitor, including:

  • Expediting procedures for claims with no material fact in dispute;
  • Authority to use sampling and extrapolation methodologies to consolidate appeals;
  • A study to assess increasing participation at ALJ/Magistrate hearings by CMS and its contractors;
  • Establishing an alternative dispute resolution process, including mediation;
  • Efforts to promote transparency and consistency in Medicare payment and coverage policy as applied by review entity contractors, including review guidelines and methodologies.

In crafting various changes to both the Medicare audit and appeals systems, the Act, including through amendments offered by Senator Sherrod Brown, reiterates that efforts to streamline Medicare policies, claims reviews and audits shall not be construed to undermine the crucial independence of Medicare Magistrates, ALJs and the Departmental Appeals Board (the fourth level of review). 

2.Ways & Means Committee Mark-Up June 2, 2015

On June 2, 2015, the House Ways & Means Committee marked-up 10 health-related bills, all of which were favorably reported out of the Committee. The following is a list of the bills, along with a brief description of selected bills:

  • H.R. 160, “Protect Medical Innovation Act of 2015.”
    • Repeals the medical device tax imposed by the Affordable Care Act
  • H.R. 1190, “Protecting Seniors’ Access to Medicare Act of 2015.”
    • Repeals the Independent Payment Advisory Board (IPAB) created by the Affordable Care Act
  • S. 984, “Steve Gleason Act of 2015.”
    • See discussion below
  • S. 971, “Medicare Independence at Home Medical Practice Demonstration Improvement Act of 2015.”
  • H.R. 2580, “LTCH Technical Correction Act of 2015.”
  • H.R. 2505, “Medicare Advantage Coverage Transparency Act of 2015.”
  • H.R. 2506, “Seniors’ Health Care Plan Protection Act of 2015.”
    • Delays CMS’ authority to terminate Medicare Advantage plans for failing to achieve minimum quality ratings (through the end of 2018)
  • H.R. 2507, “Increasing Regulatory Fairness Act of 2015.”
  • H.R. 2579, “Securing Care for Seniors Act of 2015.”
  • H.R. 2581, “Preservation of Access for Seniors in Medicare Advantage Act of 2015.”
    • Creates a value-based insurance design (VBID) demo in Medicare Advantage
    • Restores the Open Enrollment Period (OEP) for Medicare Advantage plans which was removed by the Affordable Care Act
      • The OEP provided Medicare beneficiaries with one opportunity to enroll in, disenroll from, or change a Medicare Advantage plan between January 1 and March 31 each year.

For a text of all of the bills, see the Committee’s website:

3.Senate Finance Committee Chronic Care Workgroup

On May 22, 2015, the Senate Finance Committee issued the following press release (available on the Committee’s website at:

Hatch, Wyden Launch Working Group to Seek Input and Explore Chronic Care Solutions

Chairman and Ranking Member Appoint Senators Isakson and Warner to Lead Bipartisan Effort

WASHINGTON – In a letter (see today sent to health care stakeholders, Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) announced the formation of a bipartisan working group in an effort to begin exploring solutions that will improve outcomes for Medicare patients requiring chronic care. The Chairman and Ranking Member announced the initiative following a May 15th Finance hearing (see on the issue and have appointed committee members Johnny Isakson (R-Ga.) and Mark Warner (D-Va.) to lead the effort, which will include seeking input from health care stakeholders.

“As the Finance Committee looks to develop solutions that improve health outcomes for Medicare patients with chronic conditions, we intend to proceed carefully. Stakeholder input is critical for the committee to work toward its goal of producing bipartisan legislation that can be introduced and marked up later this year. To aid the Finance Committee in bipartisan chronic care reform policy development, we request all interested public and private sector stakeholders submit their best ideas on ways to improve outcomes for Medicare patients with chronic conditions,” the Senators wrote.

Submissions can be made at the Senate Finance Committee chronic care reform mailbox at  The deadline to respond is Monday, June 22, 2015.  All submissions will be considered part of the public record.

Specifically, the Senators are seeking input regarding the following issue areas:

1.Improvements to Medicare Advantage for patients living with multiple chronic conditions;

2.Transformative policies that improve outcomes for patients living with chronic diseases either through modifications to the current Medicare Shared Savings ACO Program,   piloted alternate payment models (APMs) currently underway at CMS, or by proposing new APM structures;

3.Reforms to Medicare’s current fee-for-service program that incentivize providers to coordinate care for patients living with chronic conditions;

4.The effective use, coordination, and cost of prescription drugs;

5.Ideas to effectively use or improve the use of telehealth and remote monitoring technology;

6.Strategies to increase chronic care coordination in rural and frontier areas;

7.Options for empowering Medicare patients to play a greater role in managing their health and meaningfully engaging with their health care providers; and

8.Ways to more effectively utilize primary care providers and care coordination teams in order to meet the goal of maximizing health care outcomes for Medicare patients living with chronic conditions.

9.A signed copy of the letter can be found at:


As discussed on previous Alliance Calls, over the last couple of years CMS has made changes to its coverage rules concerning speech generating devices (SGDs) that have presented significant barriers for Medicare beneficiaries who need access to such devices.   As discussed below, these harmful coverage changes are being reversed both by CMS and through legislation.

  1. Steve Gleason Act (S. 984)

The Steve Gleason Act of 2015 would improve access to Medicare coverage of eye tracking and gaze interaction accessories for Speech Generating Devices, and remove the rental cap that prevents SGD users from taking their communication devices into care settings such as long term care hospitals, skilled nursing facilities or hospice.  On April 22, 2015, the Steve Gleason Act passed the Senate.  As noted above, on June 2, 2015, the House Ways and Means Committee favorably reported the bill out of committee.  It is expected to go before the full House in the next few weeks.

  1. CMS’ Draft National Coverage Determination (NCD)

On April 29, 2015 the Centers for Medicare and Medicaid Services (CMS) proposed changes to the National Coverage Determination (NCD) for SGDs.  In an eloquently written analysis, CMS moved from a narrow interpretation of coverage as “the generation of audible speech communications with someone in close proximity who can hear the speech generated by the device,” to a broader interpretation “to cover speech generating devices that allow for more remote speech in the form of both audible and written communications…we believe that a device that generates speech for a patient with severe speech impairment and is also capable of generating written messages or phone messages to allow the patient to communicate remotely with individuals still meets the definition of DME.” [emphasis added]

Internet, phone service, and patient home modifications would still not be covered by Medicare. CMS has proposed to allow the capability of these features on the SGDs so that beneficiaries will be able to access them, while remaining liable for the expense of using those features. 

The proposed revisions to the NCD do not include allowing SGDs to go into care settings such as skilled nursing facilities, long term care hospitals, or hospice.  Nor does the NCD address problems with access to eye gaze/tracking technology.  Resolution of those barriers must be made legislatively through Congress in the form of the Steve Gleason Act of 2015. 


  1. Recent Litigation Victories
  • Bagnall v. Sebelius (Observation Status) No. 3:11-cv-01703 (D. Conn., filed 11/3/2011). In November 2011, the Center for Medicare Advocacy and Justice in Aging filed a class action lawsuit on behalf of individuals who have been denied Medicare Part A coverage of hospital and nursing home stays because their care in the hospital was considered "outpatient observation" rather than an inpatient admission. When hospital patients are placed on observation status, they are labeled "outpatients," even though they are often on a regular hospital floor for many days, receiving the same care as inpatients.  Because patients must be hospitalized as inpatients for three consecutive days to receive Medicare Part A coverage of post-hospital nursing home care, people on observation status do not have nursing home coverage.  They must either privately pay the high cost of nursing care or forgo that skilled care.  The number of people placed on observation status has greatly increased in recent years.

As previously reported, on September 23, 2013, a federal judge in Connecticut granted the government’s motion to dismiss the lawsuit.  Plaintiffs appealed, but limited the appeal to the issue of the right to an effective notice and review procedure for beneficiaries placed on observation status. 

On January 22, 2015, a three-judge panel of the U.S. Court of Appeals for the Second Circuit decided that Medicare patients who are placed on “Observation Status” in hospitals may have an interest, protected by the Constitution, in challenging that classification.  The panel held that the district court erred when it dismissed the plaintiffs’ due process claims, and it sent the case back to that court for further proceedings.

Update: On April 6, 2015, a status conference was held with Judge Michael P. Shea of U.S. District Court in Hartford, CT. The parties are now working out a schedule for discovery and briefing of the issues as directed by the Second Circuit. The law firm of Wilson Sonsini Goodrich & Rosati, which has helped the Center in previous litigation, will be providing pro bono assistance, in particular with the discovery process.

On August 26, 2014, the Center filed a nationwide class action lawsuit in United States District Court in Connecticut: Lessler v. Burwell, No. 14-1230 (D.Conn.). The five named plaintiffs, from Connecticut, New York and Ohio, have all waited longer than the statutory 90-day limit for a decision on their Medicare appeals. The current average wait time is over five times the Congressionally-mandated time limit.  The complaint is available here:

On January 29, 2015, defendant’s motion to dismiss was denied.

Update:  The parties have engaged in discovery and anticipate filing cross motions for summary judgment by June 1, 2015.  In the meantime, the court will hear oral argument on plaintiffs’ pending motion for class certification on April 22, 2015.

  1. Update on Other Litigation
  • Jimmo v. Sebelius (Improvement Standard) No. 11-cv-17 (D.Vt. filed 1/18/11).  As reported during previous Alliance calls, the Settlement in Jimmo was approved on January 24, 2013 during a scheduled fairness hearing.  As previously discussed, CMS has issued revisions to its Medicare Benefit Policy Manual to ensure that Medicare coverage is available for skilled maintenance services in the home health, nursing home and outpatient settings.  CMS also implemented a nationwide education campaign for all who make Medicare determinations to ensure that beneficiaries with chronic conditions are not denied coverage for critical services because their underlying conditions will not improve. Pursuant to the Settlement, counsel for the parties are meeting twice a year to discuss problems with implementation and possible solutions, and are in regular contact between meetings.
  • For more information, see the Center’s website at:
  • Haro v. Johnson (Medicare Secondary Payer) No. 09-cv-134-TUC-DCB (D.Ariz.), filed March 10, 2009.  Appeal filed June 30, 2011 (No. 11-16606, 9th Cir.).  The issue in Haro was whether the Secretary's aggressive methods for attempting to collect payments under her Medicare Secondary Payer (MSP) program, directed at beneficiaries and their attorneys, violates the Medicare statute and the Due Process Clause.  Plaintiffs sought declaratory and injunctive relief prohibiting defendant's MSP recovery practices, including termination of Social Security benefits before there has been resolution of an administrative appeal of the MSP claim or waiver of recovery request, and requiring attorneys to withhold liability proceeds from their clients.

Update: On November 18, 2014, the court approved the parties’ stipulation of voluntary dismissal.  The stipulation was filed December 1, 2014, and the case was dismissed on January 28, 2015.  The government will be making revisions to the Medicare Secondary Payer Recovery letters it uses by May 17, 2015. It has already revised language on its website to clarify that “lien” is not the proper term for a Medicare recovery claim.

  • Hull v. Sebelius, No. 14-801 (D.Conn.) (Lower level Medicare appeals) On June 4, 2014, the Center filed a complaint in United States District Court in Connecticut against Kathleen Sebelius, Secretary of Health and Human Services (at that time), on behalf of plaintiffs who have been denied a meaningful review of their Medicare claims at the first two levels of appeal. The case was brought as a class action on behalf of Connecticut Medicare beneficiaries seeking home health care coverage, and the four named plaintiffs represent the thousands of beneficiaries who cannot get a meaningful review of their cases. Instead, Medicare beneficiaries receive almost automatic denials of coverage, which is essentially “rubber stamped” at both the Redetermination and Reconsideration levels. The problem persists throughout the country.

Update:  On December 8, 2014, the court granted the government’s motion to dismiss on the grounds that the named plaintiffs lack standing.  A motion for reconsideration of the dismissal is fully briefed and currently pending.

On December 19, 2014, the Center for Medicare Advocacy and Vermont Legal Aid filed a class action lawsuit against Sylvia Mathews Burwell, the Secretary of Health and Human Services, to stop Medicare’s practice of repeatedly denying coverage for home health services for beneficiaries on the basis that they are allegedly not homebound, when Medicare has previously determined them to be homebound. (Ryan v. Burwell). The lawsuit was filed in the United States District Court in Burlington, Vermont on behalf of two Vermont residents, Marcy Ryan and John Herbert, as a regional class action lawsuit covering New England and New York.

Update: On March 25, 2015, the government filed a motion to dismiss on the grounds that plaintiffs lack standing, that the court lacks subject matter jurisdiction, and that plaintiffs have failed to state claim on which relief may be granted.  The plaintiffs will be filing their opposition soon.  The government will file its opposition to plaintiffs’ motion for class certification by April 20, 2015.

This appeal filed in federal court, District of Connecticut, presents an opportunity for the court to review whether surgical treatment to a Medicare beneficiary’s teeth damaged by radiation therapy to the head and neck was 1) properly characterized by an Administrative Law Judge as a covered physician service medically reasonable and necessary as a part of an overall plan of care for cancer or 2) improperly characterized by the government contractor as excluded dental services.  These competing interpretations depend upon how the specific treatment is characterized.

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