MEDICARE COVERAGE DETERMINATIONS:
EFFECTS ON BENEFICIARY CLAIMS AND APPEALS
Copyright © 2002 Arizona Center for Disability Law.  All rights reserved.

Sally Hart
Center For Medicare Advocacy
Arizona Center For Disability Law

Introduction

        The Medicare program has developed a myriad of rules specifying medical items and services that will or will not be covered for beneficiaries. Most of these coverage rules are not found in the Medicare statute and regulations, but are set out in program manuals or sporadic publications of local carriers.

        A. National Coverage Determinations (NCDs) are specific rules that have been adopted by the Medicare administration (now CMS) concerning items and services that will or will not be covered.

1. NCDs are initiated by carriers, intermediaries, CMS staff, members of the public, providers, and suppliers.

2. CMS consults with medical specialists, literature, health policy analysts.

3. The Medical Advisory Committee (MCAC) provides input from public experts re: evidence-based medicine standard for coverage.

4. Criteria for coverage (Notice of Intent, 65 Fed.Reg. 31124 (May 16, 2000): service has "medical benefit" defined as outcome better than customary treatment; or, service has "added value" meaning it is cost effective compared to other treatment. Clinical trials required to provide scientific evidence.

        B. NCDs can be found by going on the CMS website, where they are indexed. See www.hcfa.gov/coverage. or www.hcfa.gov/pubforms/progman.htm. A particular NCD can also be obtained by request in an individual appeal. The CCH Medicare & Medicaid on line service has the manuals available, including the Coverage Issues Manual which contains all the NCDs. http://www.hcfa.gov/pubforms/progman

        C. Rules Governing NCDs

1. Statutory authority

a. Generally based on 42 U.S.C. § 1395y(a)(1)(A) (S.S.A. § 1862(a)(1)(A)), which restricts coverage of services "not reasonable and necessary."

b. Sometimes based on 42 U.S.C. § 1395x(n) (S.S.A. § 1861(n)), "convenience item, not primarily medical in nature." Primarily applied to medical equipment, e.g. elevators, white cane.

2. Regulations

a. In the late 1980's HCFA made several attempts to publish criteria for NCDs, see, e.g., 52 Fed. Reg. 1557 (April 29, 1987), and 54 Fed. Reg. 5302 (Jan. 30, 1989), but never finalized the much-criticized criteria.

b. HCFA published a description of the process it used to adopt NCDs, 64 Fed. Reg. 22619 (April 24, 1999) and stated its intention to formally promulgate criteria by regulation in the future.

c. HCFA published a Notice of Intent, Medicare Program; Criteria for Making Coverage Decisions, 65 Fed. Reg. 31124 (May 16, 2000).

d. The MCAC adopted Recommendations for Evaluating Effectiveness on February 23, 2001 as an interim measure pending CMS proposal of regulations.

        D. Effects of NCDs on beneficiary claims and appeals.

1. They establish a substantive legal standard for Medicare coverage of specific items or services.

2. They are binding through the ALJ stage of appeal, unlike other agency rules that have not been promulgated pursuant to the APA. 42 U.S.C. § 1395ff(f) (S.S.A. §§ 1869(f)).

3. They cannot be challenged in court for lack of promulgation under the Administrative Procedures Act. 42 U.S.C. § 1395hh(A)(2) (S.S.A. § 1871).

4. Before an NCD can be struck down by a court, the case must be remanded to CMS to allow it to supplement the record. 42 U.S.C. § 1395ff(b)(3)(C) (S.S.A. § 1869(b)(3)(C) (amended by BIPA)).

5. New NCDs imposing "significant costs" on M+COs will not be binding on them until the capitation payment is recalculated. 42 C.F.R. § 422.109.

        E. BIPA changes (implementation indefinitely delayed October 1, 2001).

1. BIPA of 1997, codified at § 1395ff, created a new administrative process for beneficiaries (only) to use in challenging National Coverage Determinations. Such challenges would be made before the Departmental Appeals Board within CMS. There are provisions for discovery, submission of evidence, and consultation with "scientific and clinical" experts. Defer to "reasonable" findings of fact and interpretations of law by CMS.

2. However, the October 1, 2001 effective date of this process has been postponed by HCFA. Problems with the DAB procedure include staff shortages, lack of procedures for obtaining evidence, standard for review, Washington area location.

        F. NCD Policy Issues
                    There are a number of adverse effects of CMS’ current policies regarding NCDs:

1. Coverage of new and emerging treatments is delayed for years.

2. Coverage standards are more restrictive than the Medicare statute.

3. Medicare coverage rules interfere with the practice of medicine.

        G. Legal Challenges to NCDs

1. Richey v. Shalala, No. WOOCAO25 (W.D.Tex. Order Feb.15, 2001). Plantiff, who was denied coverage of LVRS pursuant to a NCD, raised 4 issues: violation of APA in failure to promulgate standards for NCDs; violation of coverage provisions in Medicare statute (both NCD standards and LVRS NCD); violation of statutory prohibition on interference with practice of medicine. Case dismissed with orders to process plaintiff’s administrative appeal.

2. Aitken, et al. v. Shalala, et al., [1998-1 Transfer Binder] Medicare & Medicaid Guide (CCH) ¶ 45,909 (D.Mass. 1997). District court found that the NCD denying coverage of electrical stimulation to promote wound healing was not supported by record, and enjoined operation of the NCD while remanding the case to allow HCFA to attempt to supplement the record, as statute requires.

        A. Local Medical Reviw Policies (LMRPs) and Local Coverage Determinations (LCDs) are coverage rules or screens developed by Medicare contractors including DMERCs. CMS instructs them "to address the most significant abberrancies" (where failure to apply national or local policy results in billings for medically inappropriate or unnecessary services).

1. Rules focus on highest risk to trust fund through cost or volume.

2. In consult with other carriers, PROs, HCFA’s Bureau of Policy Development.

3. Carrier Advisory Committee (CAC) provides input as to local practice.

4. Criteria (PIM § 3.2.2.1(F): service is safe and effective; not experimental or investigational; appropriate; accepted standards of medical practice; qualified personnel; does not exceed patient’s medical needs; and at least as beneficial as alternative services.

5. At times LCDs incorporate NCDs, e.g. chiropractic services, motorized chairs.

6. Distributed for physician comment and information .

7. Used as prepayment edits (screens for computerized claims processing).

8. Often describe criteria for coverage in some but not all situations.

        B. Access To A Particular LMRP

1. Regular LMRPs (other than those concerning medical equipment) are supposed to be posted on the websites of the particular carrier involved. Look at the beneficiary’s denial notice for the name of the carrier to locate its website. CMS has announced plans to post all LMRPs on a new website, www.lmrp.com.

2. Coverage policies for medical equipment are adopted by the four regional Durable Medical Equipment Regional Contractors (DMERCs) that administer this particular category of benefit. Check the CMS website above (p. 1) for the DMERC LMRPs. In addition, the CCH Medicare & Medicaid on-line service has all 4 DMERC coverage manuals as well as their newsletters.

3. Advocates should also be able to obtain a copy of a particular LMRP used in a client’s case by writing to the carrier.

        C. Rules Governing LMRPs

1. General statutory authority is found at 42 U.S.C. § 1395y(a)(1)(A), which provides that services are covered unless they "are not reasonable and necessary for the diagnosis or treatment of illness or injury . . . ."

2. There is no express Medicare regulation currently concerning LMRPs. See Notice of Intent to Publish a Proposed Rule, Medicare Program Criteria for Making Coverage Decisions, 65 Fed. Reg. 31124, 31126 (May 16, 2000).

3. Two Medicare program manuals contain directions concerning adoption and use of LMRPs. Medicare Carriers Manual, § 5261.3 "Payment Safeguard Criterion; and Program Integrity Manual (PIM), Chapter 3.

        D. Effects of LMRPs on Beneficiary Claims

1. They create presumptions of non-coverage as screens used in computer processing of initial claim submissions.

2. No notice of application of a screen is generally given to beneficiaries at the lower stages of appeal, so they do not know about criteria for coverage that they might meet. Initial denial notices (MSNs) typically include the boiler plate explanation, "The information supplied does not support the need for this service."

3. They are binding through the carrier hearing stage of appeal. This is usually the first time that the beneficiary will be notified that a local coverage rule was applied to her claim.

4. They are binding on M+CO plans and at the CHDR appeal level. 42 C.F.R. § 422.101(b)(3).

        E. BIPA Administrative Process For Challenging LMRPs

1. For the first time BIPA of 1997, codified at § 1395ff, made reference to Local Coverage Determinations and described an administrative process for beneficiaries to challenge them.

2. Such challenges would be made before Administrative Law Judges, with provisions for discovery and consultation with scientific experts.

3. However, the October 1, 2001 effective date of this process has been postponed by HCFA.

        F. LMRP Policy Issues

1. The fact that LMRPs are "secret rules" is unfair (in appearance and in reality) to beneficiaries.

2. The LMRPs cause an artificially high level of Medicare appeals (see OEI report) because their initial presumption of non-coverage can only be disproved in appeals.

3. LMRPs establish inconsistent Medicare rules from one region to another (see PROPAC recommendation to discontinue them for this reason).

4. LMRPs result in many unjust denials because of:

a. The shifting of burden of the proof of coverage to beneficiary, contrary to the statutory language (1395y(a)(1)(A)-- states services covered unless not reasonable and necessary.

b. The criteria for coverage spelled out in the Notice of Intent (and to a lesser extent, the PIM Manual (discussed above in II.(A)(4)) are more restrictive than the statute.

        G. Legal Challenges

1. Vorster v. Bowen, 709 F.Supp. 934 (C.D.Cal. 1989), held that denial notices "must contain language that a frequency of service was exceeded, and that the beneficiary may supply rebutting evidence to show that the services were medically required."

2. Erringer v. Thompson, CIV 01-112-TUC-BPV (D.Ariz.filed March 16, 2001), is a putative nationwide class action challenging the lack of notice of application of LMRPs and the lack of regulations adopting criteria for LMRPs.

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