Special Report – Independence of Medicare Administrative Law Judges Threatened by Office of Inspector General’s RecommendationsPosted in Article
In November, the Office of Inspector General (OIG) issued a report entitled, "Improvements are Needed at the Administrative Law Judge Level of Medicare Appeals." The report can be found at https://oig.hhs.gov/oei/reports/oei-02-10-00340.pdf. In the report, the OIG interprets the overall percentage of fully favorable decisions awarded to appellants by Administrative Law Judges (ALJs) as evidence that the ALJs are performing inadequately. The report, however, fails to seriously consider the low percentage of fully favorable decisions awarded by the ALJs to Medicare beneficiaries. Based on these and other findings, the OIG made recommendations that if implemented will threaten the independence of the ALJs and further hinder beneficiary access to Medicare coverage for reasonable and necessary medical care, and to meaningful review of unjust coverage denials.
The OIG Report
The OIG believes improvement is necessary because in the year 2010: ALJs decided in favor of appellants 56% of the time; ALJs interpreted Medicare policies less strictly than other adjudicators; favorable rates differed widely by ALJ; and when the Centers for Medicare & Medicaid Services (CMS) participated in appeals, ALJ decisions were less likely to be favorable to appellants. Based on these findings the OIG recommends that the Office of Medicare Hearings and Appeals (OMHA) and CMS: (1) develop and provide coordinated training on Medicare policies to ALJs and Quality Improvement Contractors (QICs); (2) identify and clarify Medicare policies that are unclear and interpreted differently; (3) standardize case files and make them electronic, (4) revise regulations to provide more guidance to ALJs regarding the acceptance of new evidence, and (5) improve the handling of appeals from appellants who are under fraud investigation and seek authority to postpone these appeals when necessary. The OIG also recommends that OMHA: (1) seek authority to establish a filing fee; (2) implement a quality assurance process to review ALJ decisions; (3) determine whether specialization among ALJs would improve consistency and efficiency, and (4) develop policies to handle suspicion of fraud appropriately and consistently and train staff accordingly. Finally, the OIG recommends that CMS increase its participation in ALJ appeals.
The Center for Medicare Advocacy agrees that the Medicare appeal system should be improved, but strongly disagrees with the OIG's assessment regarding the nature of the problem and how to make improvements.
Recent History of Medicare Appeals
Medicare is health insurance. It pays for health care that is medically reasonable and necessary for the individual, falls within a Medicare benefit category, and is not otherwise excluded by statute or rule. In 2005, the Medicare appeal system was dramatically overhauled. In compliance with section 521 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, (Pub. L. 106-554) (BIPA), which amended section 1869 of the Social Security Act, CMS established a uniform process for handling Medicare Part A and Part B appeals, including the introduction of a new level of appeal for Part A claims; revised the time frames for filing a request for Part A and Part B appeals; imposed a 30-day time frame for certain "Redeterminations" made by contractors; established a new appeals entity, the Qualified Independent contractor (QIC), to conduct "Reconsiderations" after the Redetermination; allowed appellants to escalate cases to an ALJ hearing, if Reconsiderations were not completed within 30 days; established a uniform amount in controversy threshold for Part B appeals; imposed 90-day time limits for conducting ALJ and Medicare Appeals Council (MAC) appeals and allowed appellants to escalate cases to the next level of appeal if ALJs or the MAC did not meet the 90-day deadline; and imposed "de novo" review when the MAC reviews ALJ decisions.
Also in 2005, pursuant to section 931 of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) (Pub. L. 108-173), the Administrative Law Judge function was transferred from the Commissioner of the Social Security Administration (SSA) to the Secretary of the Department of Health and Human Services (DHHS). Importantly, under this new arrangement, the ALJs were mandated to be "organizationally and functionally independent from CMS" and were to "report to and fall under the general supervision of the Secretary of DHHS." In a report submitted by the Secretary of HHS and the Commissioner of SSA to Congress in March of 2004, entitled, "Plan for the Transfer of Responsibility for Medicare Appeals", HHS planned to develop short-term ALJ training strategy for four areas of knowledge: ALJ Hearings Adjudication Procedures; ALJ Claim Review; Medicare Program and Coverage Issues; and Workload Management and Administrative Procedures. The report states, "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."
Overall Appellants' Rate of Success Deemed Problematic
In its report, the OIG found that in 2010, ALJs granted fully favorable decisions for appellants in 56% of appeals. The OIG compared this to the QIC rate of fully favorable decisions during this same period of time, which was only 20%. As evidence that the QIC was deciding decisions correctly, the OIG quoted one QIC decision standard whereby there was an expectation that prior-level decisions would be upheld unless the evidence to reverse was "compelling."
According to the report, it was problematic that "ALJs often decided in favor of appellants when the intent, but not the letter, of a Medicare policy was met." QIC's on the other hand, were to be commended because they "strictly" followed CMS policy. To decrease the number of fully favorable ALJ decisions, that is to make them more like QIC decisions, the OIG recommended that CMS and OMHA identify and clarify Medicare policies that are unclear and interpreted differently and develop and provide coordinated training on Medicare to ALJs and QICs.
Also of note, after finding that when CMS participated in hearings, the ALJ decisions were less likely to be favorable to appellants, the OIG recommended increased participation by CMS. In other words, the OIG wants CMS to redirect, reeducate, and decrease the flexibility of ALJs –and increase its overall supervision of the ALJs. The Center for Medicare Advocacy objects to these recommendations. If implemented, they will greatly undermine the independence of the ALJs required by Medicare law, and thus further undermine the efforts of beneficiaries to obtain fair access to Medicare coverage and to meaningful administrative appeals.
Medicare is a remedial law and one the courts have held should be "broadly construed" so as not to infringe on the rights of Medicare beneficiaries to obtain payment for covered care. Further, the regulations implemented in 2005 explicitly give the ALJs discretion regarding whether to follow certain Medicare policies. Of note, they also give the QICs discretion. This discretion is necessary as it preserves the independence of the adjudicators and allows them to disregard CMS policy when it conflicts with Medicare law and regulations. For example, for many years CMS has instituted policies requiring beneficiaries to "improve" in order to receive Medicare covered services. This "improvement standard" is not supported by the Medicare statute and bars many eligible beneficiaries from coverage of medically reasonable and necessary care. However, because the ALJs can disregard this illegal policy and, instead, follow the Medicare statute and regulations, it is possible for beneficiaries to obtain coverage for their care through the administrative process if they finally get to the ALJ level of review.
In the report the OIG also criticized the ALJs for giving deference to the opinion of treating physicians. In fact, in the Second Circuit, this is exactly what the ALJs are supposed to do. The judges are not allowed to substitute their own unsupported judgment for that of the treating physician and, further, the ALJs are required to give extra weight to the opinion of the treating physician or to supply a reasoned basis for declining to do so.
The law is clear; ALJs must be independent from CMS. The OIG's recommendations increasing CMS's oversight of the ALJs would decrease the percentage of fully favorable decisions. In other words, the ALJs would interpret Medicare law and policy more consistently with CMS. This might make the system run more smoothly, but at the expense of justice and fairness. CMS would essentially have the last word on Medicare coverage, whether or not its interpretation of the law was legally correct. This result is unacceptable as it is contrary to law and to basic tenets of due process. Rather than assuming that the ALJ fully favorable rate requires remediation, the OIG should be investigating why the QIC fully favorable rate is so low and what needs to be done to ensure that the contractors are appropriately distanced from CMS so that they have the independence to fairly review Medicare claims.
Low Rate of Beneficiary Success
According to the report, in 2010 Medicare beneficiaries filed 11% of the appeals heard by ALJs and received fully favorable decisions 28% of the time. The win rate for providers was 61%. The Center for Medicare Advocacy often represents individual beneficiaries through the administrative process. For cases in 2010, the Center received fully favorable decisions for these cases 72% of the time. There is a dramatic difference between the Center's success rate, the success rate of providers, and that of unrepresented beneficiaries. The OIG should have asked why unrepresented Medicare beneficiaries fare so poorly at the ALJ level of appeal. Ordinary people should be able to obtain reviews as meaningful as those obtained by providers and lawyers.
Instead, the OIG concluded that Medicare beneficiaries had a low rate of success because they appealed Medicare Part C (Medicare Advantage) and D (Prescription medications) denials. The explanation given was that the ALJs "typically [had] less discretion when deciding Parts C and D appeals because the beneficiary has agreed to contract with a private plan that covers or does not cover the specific service or drug." This reasoning fails to recognize that like CMS, Medicare Advantage plans have a history of imposing illegal rules in violation of Medicare law and that Medicare beneficiaries enrolled in Medicare Advantage plans are, in fact, entitled to the same basic Medicare coverage as those who are in traditional Medicare. The OIG also fails to acknowledge that Part D plans must have exceptions for their rules regarding medication coverage and that ultimately the prescription drug benefit was designed to ensure that Medicare beneficiaries have access to the medications they need. It should not, therefore, be a foregone conclusion that Medicare beneficiaries cannot succeed when appealing the decisions of Medicare Advantage and Part D plans.
Given the disparity between provider and beneficiary success at the ALJ level of appeal, it is shocking that the OIG failed to consider potential barriers to beneficiary success. The regulations give beneficiaries robust rights. Examples of these rights include: the right to review case files; the right to supplement case files, the right to have witnesses testify, and the right to an in-person hearing. The OIG failed to evaluate whether beneficiaries were apprised of their rights and/or given the opportunity to exercise them. The OIG also failed to consider whether the insurance companies that administer the Part C and D programs regularly participate in Medicare hearings and in so doing influence the outcomes of the hearings. For instance, to what extent are they permitted to "educate" the ALJs about Medicare coverage? It is certainly possible that a well-spoken insurance representative might tilt the judicial balance against coverage for an unrepresented Medicare beneficiary.
Given that Medicare is intended to help the elderly, those with disabilities, and individuals with certain serious illnesses, their concerns should be paramount when evaluating the appeal system. The OIG should make recommendations that guarantee fair access to a meaningful, independent administrative review process. For instance, changes should be made to ensure that beneficiaries are fully apprised of their legal rights prior to ALJ hearings and that they are given the opportunity to exercise those rights before independent ALJs. And since many beneficiary appeals are also necessary because of Part C and D denials, recommendations should be made to prevent the ALJs from being inappropriately biased by the testimony of Part C and D plan representatives.
Quality of ALJ Decisions
The report found that in 2010, the percentage of fully favorable decisions granted by each ALJ ranged from 18 to 85%. Of the 66 judges, about two-thirds had fully favorable rates between 41 and 70 percent, 8 had fully favorable rates higher than 70 percent and 13 had fully favorable rates below 40 percent. The report indicated that the ALJ's were guided by different "philosophies" with one quoted as stating, "I go towards protecting the Medicare Trust Fund[s]."
Of course a certain amount of discretion and disparity is expected when adjudicators are independent; however, when a judge indicates that his guiding principle is protecting the solvency of Medicare, there is reason for concern. That is not the role of an Administrative Law Judge. ALJs are to apply the facts of each case to the law and make a reasoned decision regarding each individual beneficiary's right to Medicare coverage. In other words, they are to be independent judges.
Timeliness of ALJ Decisions
In 2005, the ALJs were charged with the responsibility of issuing decisions within 90 days of receiving the request for hearing. According to the OIG report, during the first 13 months of operation, the ALJs were not meeting this requirement, but that "timeliness improved by [the] third year of operation." In may be true that for a time in the third year of operation, ALJs were meeting the 90 day deadline, but currently they are not. However, a review of cases filed by the Center for Medicare Advocacy for beneficiaries since September 1, 2010, found that the ALJs missed their deadlines 82% of the time.
This inability to meet deadlines imposed by law is a serious due process violation and one the OIG should certainly address as soon as possible. Given the OIG's finding that QICs only grant coverage 20% of the time, one key place to start would be to evaluate the quality of the QIC review. If the QIC's did a better job of evaluating cases, far fewer appellants would be forced to continue their cases through to the ALJ level; reducing the ALJ case load. Currently, the ALJs are several months behind schedule, leaving beneficiaries uncertain as to whether they can continue to get needed care. Due to their advanced age and illness, many never have an opportunity to exercise their right to an administrative hearing.
It is true there is significant room for improvement at the ALJ level of appeal. The Center for Medicare Advocacy is concerned about the ALJ's inconsistent preparation, decision-making, and coverage standards. We are equally concerned about the disproportionately low rate of success for Medicare beneficiaries throughout the appeal system. Having represented Medicare beneficiaries since 1986, we have seen the dramatic increase in coverage denials at the lower levels of appeal, and the reduction in overturned denials by ALJ's. We are, therefore, extremely disappointed with the tenor and findings of the OIG report.
Improvement in the Medicare administrative appeal system will not be accomplished by compromising the independence of ALJs, but by insisting that beneficiaries are afforded the right to timely, fair reviews at all levels of appeals in compliance with Medicare law and regulations.
For more information, contact Senior Attorney Terry Berthelot (firstname.lastname@example.org) or Executive Director Judith Stein (email@example.com) in the Center for Medicare Advocacy's Connecticut office at (860) 456-7790.
 70 Fed. Reg. 11420-499 (March 8, 2005)
 Id., at 11422 and 5 U.S.C. § 554(d)
 “The Medicare statute, remedial in nature, is to be broadly construed.” Hirsch v. Bowen, 655 F. Supp. 342 (S.D.N.Y., 1987) (citing Gartman v. Secretary of U.S. Depart. Of Health and Human Services, 633 F. Supp. 671 (E.D.N.Y., 1986). Furthermore, “exclusions from coverage should be narrowly construed lest they inadvertently encompass the qualifications for benefits.” Tiunan V. Weinberger, Civ. No. 74 – 4091 (D. Mass. Aug. 23, 1979) (citing Coe v. Secrtary of Health, Educ. and Welfare, 502 F.2nd 1337, 1340 (4th Cir. 1974).
 “ALJs and the MAC are not bound by LCDs, LMRPs, or CMS program guidance, such as program memoranda and manual instructions, but will give substantial deference to these policies if they are applicable to a particular case.” 42 C.F.R. § 405.1062(a).
 42 C.F.R. § 405.968
 For more information about the improvement myth and recent historic settlement, Jimmo v. Sebelisus, see http://cma.benfredaconsulting.com/hidden/highlight-improvement-standard/.
 In a recent district Court case, the Judge held “an ALJ may not substitute his or her own unsupported judgment for that of a physician.” Office of Vermont Health Access v Sebelius, 698 F.Supp.2d 436, 453(D.Vt.), 2010 WL 997386, Med & Med GD (CCH) P 303,313 (March 15, 2010) citing Kertesz v. Crescent Hills Coal Co., 788 F.2d 158, 163 (3d Cir. 1986). This recent decision states unequivocally, “it is clear that Second Circuit case law requires ALJs to give some extra weight to the opinion of a treating physician’s opinion, or supply a reasoned basis for declining to do so.” Id., at 453 citing Bergeron v. Shalala, 855 F. Supp. 665, 668, (D.Vt, 1994) Smith ex rel. McDonald v. Shalala, 855 F.Supp. 658, 664 (D.Vt 1994).
 “When a request for an ALJ hearing is filed after a QIC has issued a Reconsideration, the ALJ must issue a decision, dismissal order, or remand to the QIC, as appropriate, no later than the end of the 90-day period beginning on the date the request for hearing is received by the entity specified in the QIC’s notice of Reconsideration…” 42 C.F.R. § 405.1016(a)