Medicare Appeals

There are five levels in the Medicare claims appeal process:

• Level 1: Your Health Plan. If you disagree with a Medicare coverage decision, you may request your health plan to redetermine your claim.
• Level 2: An Independent Organization. If you disagree with the decision in Level 1, you may request a reconsideration by an independent organization.
• Level 3: Office of Medicare Hearings and Appeals (OMHA). If you disagree with the Level 2 decision or dismissal, you may request that an OMHA adjudicator review the action.
• Level 4: The Medicare Appeals Council. If you disagree with the OMHA adjudicator’s decision, you may request the Medicare Appeals Council review the decision.
• Level 5: Federal Court. If you disagree with the Medicare Appeals Council decision, you may seek a review of your claim in Federal District Court.

Medicare does not cover “expenses incurred for items or services which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member[.]” 42 U.S.C. § 1395y(a)(1)(A). The HHS Secretary implements this rule through CMS—the agency that administers Medicare more generally. See id. § 1395b-9. CMS in turn delegates some of its responsibilities to private Medicare Administrative Contractors (“MACs”). See id. §§ 1395(u), 1395kk-1. Under this scheme, a healthcare provider who seeks payment for an item or service provided to a Medicare beneficiary submits a claim for reimbursement to the MAC authorized in the provider’s region. See id. § 1395kk-1(a). The MAC then assesses whether the item or service is covered by Medicare, including whether the item or service is “reasonable and necessary” under § 1395y.

The Secretary has significant control over these MAC coverage determinations. He may promulgate binding regulations regarding which items or services are covered by Medicare. See id. §§ 1395hh, 1395ff(a)(1). He may also issue binding national coverage determinations, or “NCDs,” that reflect his determination that an item or service is covered under designated medical circumstances on a nationwide basis. See id. § 1395ff(f)(1)(B); 42 C.F.R. § 405.1060(a)(4). Additionally, if coverage is initially denied by a MAC, a Medicare beneficiary may appeal the MAC determination to an administrative law judge (“ALJ”) housed within the Secretary’s Office of Medicare Hearings and Appeals. See id. § 1395ff(b)(1)(E), (d)(1)(A); see also Am. Hosp. Ass’n v. Burwell, 76 F. Supp. 3d 43, 46 (D.D.C. 2014), rev’d on other grounds, 812 F.3d 183, 421 U.S. App. D.C. 123 (D.C. Cir. 2016) (describing this process).

In the absence of such direction from the Secretary, MACs may either make initial coverage determinations on a claim-by-claim basis or, in the interest of efficiency, MACs may develop their own guidelines for coverage determinations, known as local coverage determinations (“LCDs”). See 42 U.S.C. § 1395ff(f)(2)(B). LCDs are limited in scope, applying only on an “intermediary-or carrier-wide basis.” Id. They are meant to guide MAC administrators in determining whether an item or service is “covered . . . in accordance with § 1395y(a)(1)(A)”—in other words, that an item or service is “reasonable and necessary” as required for Medicare coverage—within the MAC’s designated service area. Id. §§ 1395y(a)(1)(A); 1395ff(f)(2)(B). Individuals who believe their claim was wrongly denied pursuant to an LCD can appeal their individual coverage determination to an ALJ, and if that appeal is unsuccessful, to the HHS Departmental Appeals Board (“DAB”). Id. at § 1395ff(b)-(e); 42 C.F.R. §§ 405.900 et seq.

In the event that a MAC makes an initial coverage determination denying Medicare coverage for a particular claim, the provider that submitted the claim typically bears financial responsibility for the items or services at issue, unless the provider has previously given the Medicare beneficiary or enrollee (who are generally referred to throughout this opinion as “Medicare recipients”) an “advance beneficiary notice” or “ABN” stating “that Medicare will likely deny payment for the service or item to be furnished.” CMS, Medicare Claims Processing Manual, Ch. 30 § 40.1.1. The ABN is, in essence, a cost-shifting mechanism: if the provider gives a Medicare recipient such advance notice, then instead of the provider bearing the cost of the denial of the service, the recipient “is held liable for the denied services or items[.]” Id.; see also Int’l Rehabilitative Scis. Inc. v. Sebelius, 688 F.3d 994, 998 (9th Cir.2012) (citing 42 C.F.R. § 411.404) (explaining that Medicare providers bear the financial risk of coverage denials in absence of written advance beneficiary notices shifting financial responsibility to Medicare recipients).

Neither the ALJ nor the DAB is bound by LCDs, but they cannot invalidate or set aside the LCD in its entirety. See 42 C.F.R. §§ 405.1062(a), (c); see also Cal. Clinical Lab’y, 104 F. Supp. 3d at 72. To challenge the validity of the LCD itself, a Medicare beneficiary must utilize a different complaint process, appealing to an ALJ and the DAB via 42 U.S.C. § 1395ff(f)(2). If there are “no material issues of fact in dispute” and the “only issue of law” is the validity of the LCD, the Medicare recipient may also side-step the usual administrative review process and file a complaint directly with “a court of competent jurisdiction.” Id. § 1395ff(f)(3). Under section 1395ff(f)(3), a Medicare recipient “may seek review [of an LCD] by a court of competent jurisdiction without filing a complaint under [section 1395ff(f)(2) ] and without otherwise exhausting other administrative remedies [,]” but only if “there are no material issues of fact in dispute, and the only issue of law is . . . that a regulation, determination, or ruling by the Secretary is invalid.” Id. § 1395ff(f)(3); see also Bailey v. Mut. of Omaha Ins. Co., 534 F. Supp. 2d 43, 51 (D.D.C. 2008).