Table Of Content

MEDICARE COVERAGE DECISIONS AND BENEFICIARY APPEALS HEARING BEFORE THE SUBCOMMITTEE OX HEALTH OF THE COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTH CONGRESS FIRST SESSION APRIL 22, 1999 Serial 106-23 Printed for the use of the Committee on Ways and Means U.S. GOVERNMENT PRINTING OFFICE 59-614CC WASHINGTON : 2000 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice.Washington.DC 20402 ISBN 0-16-060213-0 COMMITTEE ON WAYS AND MEANS BILL ARCHER, Texas, Chairman PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York BILL THOMAS, California FORTNEY PETE STARK, California E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania AMO HOUGHTON, New York SANDER M. LEVIN, Michigan WALLY HERGER, California BENJAMIN L. CARDIN, Maryland JIM McCRERY, Louisiana JIM McDERMOTT, Washington DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia JIM NUSSLE. Iowa RICHARD E. NEAL, Massachusetts SAM JOHNSON, Texas MICHAEL R. McNULTY, New York JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana MAC COLLINS, Georgia JOHN S. TANNER, Tennessee ROB PORTMAN, Ohio XAVIER BECERRA. California PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida WES WATKINS, Oklahoma LLOYD DOGGETT, Texas J.D. HAYWORTH, Arizona JERRY WELLER, Illinois KENNY HULSHOF, Missouri SCOTT McINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida A.L. Singleton, ChiefofStaff Janice Mays, Minority ChiefCounsel Subcommittee on Health BILL THOMAS, California, Chairman NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California JIM McCRERY, Louisiana GERALD D. KLECZKA, Wisconsin PHILIP M. CRANE, Illinois JOHN LEWIS, Georgia SAM JOHNSON, Texas JIM McDERMOTT, Washington DAVE CAMP, Michigan KAREN L. THURMAN, Florida JIM RAMSTAD, Minnesota PHILIP S. ENGLISH, Pennsylvania Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process ofconverting betweenvariouselectronicformatsmayintroduceunintentionalerrorsoromissions. Suchoccur- rences are inherent in the current publication process and should diminish as the process isfurtherrefined. ii ~~ c"is Library ~ 1 | C2-07-13 7500 Security llvd. I BaltimorJ^ifVMnd 31344 [ CONTENTS Page Advisory ofApril 12, 1999, announcingthe hearing 2 WITNESSES Health Care Financing Administration, Michael Hash, Deputy Administrator; accompanied by Jeff Kang, M.D., Director, Office of Clinical Standards and Quality 21 American MedicalAssociation, William G. Plested III, M.D 90 Coleman, Terry, Fox, Bennett & Turner 56 Health Industry Manufacturers Association and Hill-Rom Company, Walter M. Rosebrough, Jr 79 Kinney, Eleanor D., Indiana University School of Law, and Center for Law and Health 46 National Senior Citizens Law Center, Vicki Gottlich 64 Oncotech, Incorporated, Frank J. Kiesner 86 SUBMISSIONS FOR THE RECORD American Academy of Audiology, McLean, VA, Angela Loavenbruck, statement 106 American College ofPhysicians-American Society ofInternal Medicine, statement 107 American GastroenterologicalAssociation, Bethesda, MD, statement Ill AHmoemreicaCnarOeccuAspsaotciioantailonTheofraApmyeArsiscoac,iatJiaocnk,soInnvci.l,lBee,thFeLs,da,DwMiDg,htstaS.temCeenntac,.. 113 statement 115 Medical Device Manufacturers Association, statement 118 National Association forHome Care, statement 120 Pharmaceutical Research and Manufacturers ofAmerica, statement 122 Society of Critical Care Medicine, Anaheim, CA, George A. Sample, M.D., statement 126 SunDanceRehabilitation Corporation, Dallas, TX, David Kniess, letter 129 Transamerica Occidental Life Insurance Company, Los Angeles, CA, George E. Garcia, letter 130 iii MEDICARE COVERAGE DECISIONS AND BENEFICIARY APPEALS THURSDAY, APRIL 22, 1999 House of Representatives, Committee on Ways and Means, Subcommittee on Health, Washington, DC. The Subcommittee met, pursuant to notice, at 1:11 p.m., in room 1100, Longworth House Office Building, Hon. Bill Thomas (Chair- man ofthe Subcommittee) presiding. [The advisory announcing the hearing follows:] (l) — 2 ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON HEALTH FOR IMMEDIATE RELEASE CONTACT: (202) 225-3943 April 12, 1999 No. HL-4 Thomas Announces Hearing on Medicare Coverage Decisions and Beneficiary Appeals Congressman Bill Thomas (R-CA), Chairman, Subcommittee on Health of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on how the Health Care Financing Administration (HCFA) makes decisions regarding Medicare covered services and what opportunities exist for seniors to appeal those decisions. The hearing will take place on Thursday, April 22, 1999, in the main committee hearing room, 1100 Longworth House Office Building, begin- ningat 1:00 p.m. In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, anyindividual ororganization not scheduled for an oral appearance may submit a written statement for consider- ation bythe Committee and forinclusion in the printed record ofthe hearing. BACKGROUND: Coverage is an important concept in understanding Medicare benefits: the Social SecurityAct requires that all medical services be "reasonable and necessary" for the treatment of an illness or injury. HCFA and its private-sector contractors (known as fiscal intermediaries and carriers) have broad discretion to make Medicare coverage decisions. In some cases, the agency makes sweeping National Coverage De- terminations (NCD). Undercurrentlaw, beneficiaries can appeal many Medicare de- cisionsbut they are largelyforeclosed from appealingNCDs. The current Medicare appeals system can best be characterized as a patch-work a large number ofindependent appeal processes addressing a multitude ofdiverse issues. Medicare appeals are divided into three distinct parts: Medicare PartA (generally hospital inpatient stays), Medicare Part B (generally physician services), and Medicare managed care. Each ofthese three parts is, in turn, broken into distinct sub-parts, one for beneficiaries seeking covered services and others for medical providers seeking reimbursement for services. HCFA uses a number oflevels ofreview, including governmental contractors (fiscal intermediaries and carriers), review pan- els (Provider Reimbursement Review Board, Peer Review Organizations, Depart- mental Appeals Board) and judicial officers (Administrative Law Judges and Fed- eral U.S. DistrictCourts). The current appeals processes stem from the Omnibus Budget Reconciliation Act of 1986 (OBRA86) in wnich Congress made several important reforms to the Medi- care appeals system. Since then, the appeals process has become increasingly com- plex and time-consuming. An increase in the numberand complexityofappeals calls into question the adequacy ofthe current system. Many Supreme Court and Federal court decisions concerning the Medicare appeals system have raised basic questions aboutits fundamental fairness tobeneficiaries and providers. 3 In announcing the hearing, Chairman Thomas stated: "At a time when the Ad- ministration is seeking swifter appeals in private health plans, it is only fitting that we consider how various appeals are handled in governmental programs like Medi- care. There are too many people, including Federal bureaucrats and governmental contractors, making coverage decisions without being held accountable. America's seniors deserve a meaningful opportunity to question these decisions." FOCUS OF THE HEARING: This hearing will analyze the processes available for seniors and medical providers to appeal payment and coverage determinations under Parts A and B of the Medicare program. DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: Any person or organization wishing to submit a written statement for the printed record ofthe hearing should submit six (6) single-spaced copies oftheir statement, along with an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, with their name, address, and hearing date noted on a label, by the close of business, Thursday, May 6, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. Ifthose filing written statements wish to have their statements distributed to the press and interested public at the hearing, they may de- liver 200 additional copies for this purpose to the Subcommittee on Health office, room 1136 Longworth House Office Building, by close ofbusiness the day before the hearing. FORMATTING REQUIREMENTS: Each statement presented for printingto the Committee by a witness, any written statement or exhibit submitted for the printed record or any written comments in response to a request forwrittencomments mustconform to the guidelines listed below. Any statementorexhibit not incompliancewiththeseguidelineswillnotbeprinted,butwillbemaintainedintheCommittee files forreviewandusebytheCommittee. 1. All statements and any accompanying exhibits for printing must be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, typed in single space and may not ex- ceed a total of10 pages including attachments. Witnesses are advised that the Committee will relyonelectronicsubmissionsforprintingtheofficialhearingrecord. 2. Copies ofwhole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use bytheCommittee. 3. Awitness appearing atapublichearing, orsubmittinga statementforthe recordofapub- lic hearing, or submitting written comments in response to a published request for comments by the Committee, must include on his statement or submission a list ofall clients, persons, ororganizationsonwhosebehalfthewitnessappears. 4. Asupplemental sheetmust accompanyeach statement listingthename, company, address, telephone and fax numbers wherethewitness orthe designatedrepresentative maybereached. Thissupplementalsheetwillnotbeincludedintheprintedrecord. The above restrictions and limitations apply only to material being submitted for printing. Statements and exhibits or supplementary material submitted solely for distribution to the Members, the press and the public during the course ofa public hearing may be submitted in otherforms. Note: All Committee advisories and news releases are available on the World Wide Web at"http://www.house.gov/ways means/". The Committee seeks to make its facilities accessible to persons with disabilities. Ifyou are in need ofspecial accommodations, please call 202-225-1721 or 202-226- 3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including avail- ability ofCommittee materials in alternative formats) may be directed to the Com- mittee as noted above. 4 Chairman Thomas. The Subcommittee will come to order. As we begin this hearing on Medicare coverage, I am pleased to announce that the Health Care Financing Administration has finally been able to publish, very coincidentally today, a regulation which sets forth the administrative process for Medicare coverage. I really do not think it is mere coincidence that HCFA published this on the same day as this Subcommittee's hearing. If I had known that was the operating procedure, I would have scheduled this hearing a month earlier. One year ago this week, the Ways and Means Subcommittee on Health convened a hearing to examine the rights of patients to appeal benefit decisions in both the private and the public health programs. Since that time, appeals decisions have been monitored by Members ofthis Subcommittee, and we have drafted various pieces of legislation to improve the way patients' appeals are heard in both the fee-for-service and the managed care area. One legislative proposal, H.R. 4250, the Patient Protection Act, was passed by the House in July oflast year. My colleagues on the other side the aisle declined to support that bill based in part, I believe, on arguments that they presented that the bill did not provide speedy enough access to judicial review. And yet if I have learned anything over the last year it is that private health insurance even under current law allows for quicker access to judicial review than does the Medicare Program. Today, we are going to examine the patient appeals process within the Medicare Program, and I will direct your attention—you may or may not be ab—le to see it; my assumption is that we have copies available to you on the Medicare appeals process, and what this schematic chart basically shows you is that Medicare requires an individual to run a gauntlet of administrative appeals, first, to a government contractor, then to an agency advisory board, then to an administrative law judge, then to the Department Appeals Board, and then only after a "final decision" by the Secretary is there a limited court orjudicial review. As I said a year ago at our first patient appeals hearing, due process means many things. To legal scholars, it is term of art meaning the technical process by which legal rights are enforced, but in a larger sense, when we use the term "due process," it means simply the opportunity to be heard; the chance to air grievances objectively, get on the record so that you can let people see what has been happening. Today, we will examine the opportunity seniors have to challenge decisions made in the Medicare Program. I would like to note that the administration has had, in my opinion, difficulty in wrestling with this decision. The best example of this is the administration's handling of a Federal circuit decision known as the Grijalva case. The 9th circuit decided that the rights of seniors were not being given sufficient weight in Medicare HMOs. The administration, I think, to say the least, was split as evidenced by an article in the New York Times on January 22 over whether the administration should challenge the court's decision to improve rights for seniors. 5 One internal administration memo, quoted in the paper, said, "The Department's position, challenging the court order, could be seen as inconsistent with the administration's stated policy of expanding consumer protections." Today, we will also be examining the Medicare coverage process. Appeal rights within Medicare are inextricably intertwined with the Medicare coverage process. Coverage is an important concept in understanding Medicare benefits. The Social Security Act, section 1862 says that Medicare covers only medical services that are "reasonable and necessary" for the treatment of an illness or an injury, and yet the definition of reasonable and necessary is left largely to the Health Care Financing Administration and its private sector contractors, known as fiscal intermediaries and carriers. Together, they have broad discretion to make Medicare coverage decisions. It has been indicated to me that the vast majority of the decisions, upward of 90 percent, are made locally by contractors. In all other cases, the Health Care Financing Administration makes national coverage determinations usually involving access to very expensive high-tech medicine. Under current law, beneficiaries may appeal local Medicare decisions, but they cannot generally appeal HCFA's national coverage decisions, and I am interested, if at all possible today, in learning why that is the case. As many of you know, Members of this Subcommittee have played a leading role in prodding the Health Care Financing Ad- ministration to develop a more deliberative coverage process. In 1997, this Subcommittee learned, as a result of a congressional in- vestigation, that HCFA's Technology Advisory Committee, or TAC, was meeting in closed-door sessions in violation of Federal statute. Since then, HCFA has dumped TAC and revamped its advisory committee process, and yet the current HCFA coverage decision- making process is still made with little input from seniors, physi- cians, medical technology manufacturers; in short, those directly af- fected by those decisions. I understand that the private sector is, in many instances, such as pharmaceuticals, becoming much more efficient in Medicare in approving access to the most advanced care. While HCFA's proposal for a new coverage process is, in effect, a good system, the new proposal will still not address the local coverage process. In- stead, the new proposal focuses exclusively in improving the national coverage process, and I am interested in learning more about this new coverage regulation which we just received. I tried to read briefly through it, and I did note that on page 10, it was reinforce- ment ofthe carrier or the intermediary making local decisions. As we prepared for this hearing, I have heard a great deal of frustrations from constituents about the current Medicare appeals and coverage process. I continue to believe that this is an overly muddled process. I do hope that we can look at fundamental reforms. Medicare commission, premium support model, and others would be the best way to free ourselves from this hopelessly muddled structure, but, until then, we will work to improve the current process. — Let me end befor—e I hand off to my colleague from California, my friend, Mr. Stark a concern that he and I share since we both signed the letter that was addressed to the Administrator on Feb- 6 ruary 2, 1999 in which we were concerned about the fact that contractors have the authority to enforce coverage policy and that they are also being given the authority to establish the very policy that they enforce and that, at the very least, establishing and enforcing coverage policy should be separate. I—n a letter in —answer to that February 2 letter, received April 20 2 days ago the administrator, in responding to our letter, said "In the long run, I believe the best way to administer local coverage is to separate the devel- opment of the coverage decisions or policies." I guess they are for agreeing with the concern that the Ranking Member and the Chairman showed but that I don't see any evidence of that re- flected in the proposal or the notice that has been submitted, and I would also look forward to some indication, then, about what the Administrator may have meant, to the best of anyone's ability to interpret, what "in the long run" means. [The opening statement follows:] OpeningStatement ofHon. Bill Thomas, a Representative inCongressfrom the State ofCalifornia As we begin this hearing on Medicare coverage, I am happy to announce that the Health Care Financing Administration (HCFA) has finally been able to publish today a regulation which sets forth the administrative process for Medicare coverage. I do not think it is mere coincidence that HCFA published this on the same day as this Subcommittee's hearing. IfI had known that a hearing was all it would take to get this regulation published, I would have scheduled the hearing a month ago. One year ago this week, the Ways & Means Subcommittee on Health convened a hearing to examine the rights ofpatients to appeal benefits decisions in both private and public health programs. Since that time, Members of this subcommittee have been vigorously drafting various pieces oflegislation to improve the ways pa- tientappeals are heardin both fee-for-service and managed care. One legislative proposal, H.R. 4250, the Patient Protection Act was narrowly passed by the House in July 1998. My colleagues on the aisle opposite declined to support that bill, based largely on the belief that the bill did not provide speedy enough access tojudicial review. And yet, what I have learned in the past year is that private health insurance, even under current law, allows for quicker access to judicial review than does the Medicare program. Today, we are going to examine thepatientappeals process withinthe Medicare program. I direct your attention to this enlarged schematic which shows the current Medi- cal appeals processes. As you can see, Medicare requires an individual to run an entire gauntlet ofad- ministrative appeals, first to a government contractor, then to an agency advisory board, then to an Administrative Law Judge, then to the De—partmental Appeals Board, and then—only after a "final decision by the Secretary is there limitedju- dicialreview. As I said one year ago, at our first patient appeals hearing, "due process means many things." To legal scholars, it is a term of art meaning the technical process by which legal rights are enforced. In a larger sense, due process means simply the opportunity to be heard, the chance to air grievances, objectively and on-the-record. Today, we will examine the opportunities seniors have to challenge decisions made in the Medicare program. I would like to note that the Administration has had greatdifficultywrestlingwith this issue. The best example of this is the Administration's handling of a Federal Circuit Court decision known as Grivalja (pronounced: GRA-val-ha). The Ninth Circuit decided that the rights ofseniors were not bei—ng given sufficient weight in Medicare HMOs. TheAdministration—was bitterly split asevidenced by an article in the New York Times on January 22 over whether the Administration should challenge the Court's decision to improve rights for seniors. One internal Administration memo quoted in the paper said, "The Department's position [challenging the Court order] could be seen as inconsistent with the Administration's stated policy of expanding consumerprotections...." Today, we will also be examining the Medicare coverage process. Appeal rights within Medicare are inextricably intertwined with the Medicare coverage process. Coverage is an important concept in understanding Medicare benefits. Social Secu-