Appeals in Medicare

An appeals system is essential for correcting coverage and payment errors. Medicare provides its beneficiaries with a number of protections that may be enforced through the appeals process. In most cases, beneficiaries must initiate the appeal. For example, a beneficiary may appeal the denial of a claim for payment by a Medicare administrative contractor such as the Part A intermediary, Part B carrier, or Medicare Advantage plan.

Medicare has several appeal processes. If a Medicare contractor denies a claim for arbitrary reasons—either as the result of incentives created under their contracts with the Centers for Medicare & Medicaid Services (CMS) or because they have not followed proper procedures—an appeal may be made at several levels, up to a federal court of appeals. Medicare beneficiaries may request a second look, or redetermination, by the contractor that made the initial denial decision. An adverse finding is sent to a review organization known as a “qualified independent contractor.” If this contractor also denies the claim, the decision may be appealed to an administrative law judge (ALJ), then to the Department of Health and Human Services (HHS) Departmental Appeals Board, and finally to federal court, depending on the disputed amount. The results of an appeal, unlike a coverage determination challenge, apply only to the individual beneficiary’s claim.

The right to challenge broad coverage decisions is distinct from the right to appeal for individual claims that are denied on the grounds of lack of medical necessity.

A beneficiary may also challenge coverage decisions about items and services that beneficiaries and their physicians believe are medically necessary but that the contractor or CMS says Medicare does not cover at all. The right to challenge coverage decisions involves reviewing the entire coverage policy. This may lead to changes that affect other beneficiaries. An adverse decision on a Medicare coverage issue may be taken to the Medicare Appeals Council and then to federal court.

Decisions by Medicare contractors and the Medicare Appeals Council typically favor the government, in part because they follow CMS statements of Medicare policy. Decisions by ALJs and federal courts, which are not bound by CMS policy and thus may overrule it, tend to be more balanced because they provide independent interpretations of Medicare rules.

Finally, a Medicare beneficiary may file a complaint about service quality with a Quality Improvement Organization. The claim may be further appealed to the HHS Departmental Appeals Board. Beneficiaries who have been harmed by treatment may file a civil suit for malpractice against the provider or physician in state or federal court.

The Medicare appeals process itself is complicated and lengthy. Many beneficiaries find the process confusing. They do not always receive information about the reason for a coverage or claim denial or understand it. Often, they are unaware of their appeal rights.

Regulations relating to appeals, including rules pertaining to the Part D drug benefit, were issued in 2005. But they do not provide adequate beneficiary protections. Drug plans, for example, are not required to automatically forward adverse decisions for independent review.

Formerly employed by the Social Security Administration, ALJs who hear Medicare cases now work for HHS. The agency has made a number of changes in the status of ALJs and the rules under which they decide cases, limiting their independence and potentially their impartiality. In another change, HHS adopted the use of videoconferencing instead of in-person hearings for most ALJ cases.

The Affordable Care Act requires commercial insurers and managed care plans to have an effective internal appeals process for claims and coverage determinations. It also requires an external review process under state law or federal standards.