Medicare Coverage Decision-Making and Appeal Procedures: Can Process Meet the Challenge of New Medical Technology?

I. IntroductionMedicare coverage policy for new medical technology has been a very controversial issue in the administration of the Medicare program since its inception. The impact of advances in medical science and medical technology on Medicare program costs has driven this controversy. This Article addresses whether the Medicare coverage decision-making and appeal processes, which are the Medicare program's first responders to new medical technology, are adequate to meet the challenges of new medical technologies and their associated costs.II. BackgroundThis Part describes the Medicare program and its historical development. In particular, it traces inflation in Medicare expenditures and health care costs, and how that inflation was fueled in part by advances in new, expensive medical technology. This Part then describes the Medicare coverage decisionmaking and appeal processes.A. The Medicare ProgramCongress enacted Medicare, a federal health insurance program, in 19651 and expanded Medicare coverage to the seriously disabled and to people with End Stage Renal Disease (ESRD) in 1972.2 Nearly all elderly, some severely disabled, and people with ESRD are eligible for Medicare.3 In 2001, thirtyeight million Americans (13.5% of the population) had health insurance through Medicare.4The Social Security Amendments of 1965 established three distinct programs: the Medicare Hospital Insurance Program (Part A),5 the Medicare Supplementary Medical Insurance Program (Part B),6 and the Medicaid Program.7 Each program has different benefits, is financed and administered independently, and pays for services according to different methodologies. A mandatory Social Security payroll tax on all wage earners funds Part A,8 while premiums of enrollees and congressional appropriations fund Part B.9 These funds are invested in designated government trust funds for the exclusive use of the Medicare program.10Medicare benefits include hospital and related benefits for acute illness and injury, as well as physician and other outpatient services.11 Part A covers hospital care and related home health and skilled nursing home care12 while Part B covers physician and other outpatient services.13 Except as otherwise specified, the major criterion for coverage of benefits is that they be reasonable and necessary for the diagnosis and treatment of illness or injury.14The Balanced Budget Act of 1997 established the Medicare+Choice program (Part C) through which Medicare beneficiaries can enroll in HMOs and other privately administered health plans.15 Beneficiaries in Medicare+Choice receive both Part A and Part B benefits and, at the option of their health plan, additional benefits such as prescription drugs.16 Although viewed as a major reform of the Medicare program with the intent of moving most beneficiaries to managed care plans, the Medicare+Choice program has not attracted participation from as many plans or beneficiaries as anticipated.17For Parts A and B, the Centers for Medicare and Medicaid Services (CMS) contracts with private organizations to administer the Medicare program, including the implementation of Medicare coverage and payment policy.18 Further, Medicare contracts with health care institutions to serve beneficiaries and often deems private accreditation of health care institutions as compliance with requirements for participating in the Medicare program.19 For Part C, CMS contracts directly with the health plans and pays them from the trust funds for Parts A and B based on the number of Medicare beneficiaries enrolled.20The advent of the Medicare program was a seminal event in the history of American health care, representing the federal government's direct responsibility for health insurance for the aged and seriously disabled.21 Despite great need, health coverage for the elderly attracted formidable opposition.22 The medical profession approached the concept cautiously out of a fear of government control of medical practices. …