Medicare: Concerns Regarding Plans to Transfer the Appeals Workload from SSA to HHS Remain

Medicare--the federal health insurance program that covers the nation's elderly and disabled--annually processes over 1 billion medical claims for services provided to beneficiaries. The Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), administers the Medicare program with the assistance of its claims administration contractors. These contractors are charged with processing and paying claims that are properly submitted and that are for medically necessary and covered services. The contractors also deny payment for claims considered invalid, incomplete, or otherwise improper. Medicare beneficiaries and providers have the right to appeal denied claims through a multilevel administrative process that includes a decision by an administrative law judge (ALJ). In fiscal year 2004, CMS's contractors denied over 158 million Medicare claims, about 5 million of which resulted in the initiation of appeals. In the same year, about 113,000 denied claims were appealed to ALJs. Two federal agencies--HHS and the Social Security Administration (SSA)--play a role in resolving Medicare appeals, but neither agency manages the entire process. In recent years, the Medicare appeals process has been the subject of widespread concern because of poor coordination between HHS and SSA and the time it takes to resolve appeals. In December 2000, the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) was enacted. It mandated appeals reform, including stricter time frames for processing Medicare appeals. Additional changes were required 3 years later by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). MMA mandated that SSA transfer its Medicare appeals workload to HHS, between July 1, 2005, and October 1, 2005--in effect, consolidating Medicare appeals within a single federal agency. In October 2004, we noted that transferring the Medicare appeals workload from SSA to HHS posed a complex challenge, requiring careful preparation and precise implementation of many interrelated tasks. We also reported that the plan that HHS and SSA jointly developed to transfer this workload lacked sufficient detail on how the transfer would be accomplished. We concluded that the absence of this information seriously jeopardized a successful and timely transition and threatened to compromise service to appellants. In light of our concerns, Congress asked us to monitor the transfer of the appeals workload from SSA to HHS. Specifically, our objectives were to (1) assess the agencies' progress in preparing to implement the transfer and (2) determine how HHS spent funds appropriated for transferring the appeals workload from SSA to HHS and related activities in fiscal year 2004 and the first half of fiscal year 2005.