Medicare+Choice Appeal Procedures: Reconciling Due Process Rights and Cost Containment

By signing the Balanced Budget Act of 1997 (BBA), President Clinton made the most significant changes to since its inception in 1965, by adopting market-driven reforms in an effort to balance the federal budget. One of the most significant reforms in the BBA was the creation of the Medicare+Choice program that provides beneficiaries access to a wide array of private health plan choices as well as traditional fee-for-service (FFS) Medicare. In addition, Medicare+Choice enables to further utilize delivery innovations, including preferred provider organizations (PPOs), open-ended health maintenance organizations (HMOs), point-of-service plans, provider sponsored organizations (PSOs), integrated delivery systems (IDSs) and primary care case management, that have helped the private sector contain costs and expand health care delivery options. Empirical evidence shows that while enrollment of beneficiaries in managed care has increased, the movement has not been as quick as Congress had hoped. Contrary to all the media hype, [in 1996] only a third of all HMOs offered a product, and the twenty-five biggest plans held sixty percent of However, Medicare HMO contractors are greatly expanding geographically and the fastest-growing plans are no longer in a few counties . Factors inhibiting the movement of the beneficiary population to managed care are concerns over quality of care and access to medical services, and particularly lack of knowledge about appeal rights. Even if beneficiaries know about appeal rights, many of those who do file appeals believe that their complaints were handled unfairly. However, as a result of recent litigation in an Arizona federal district court, the Health Care Financing Administration (HCFA) and the managed care industry are currently addressing beneficiaries' fears. New regulations developed by HCFA attempt to increase a beneficiary's access in resolving disputed claims and service denials in a timely fashion. However, the issue of striking the appropriate balance between appeal rights and cost containment still exists for Medicare+Choice options and needs to be addressed before the switch from FFS to Medicare+Choice will become a permanent structural change in the delivery of health care to beneficiaries. This article outlines the historical approach to risk contractor appeal rights, which was based primarily on the traditional model developed for the FFS context. It then presents the growing demand beneficiaries have exhibited for more comprehensive and quicker grievance and appeal procedures, which culminated in Grijalva v. Shalala, a 1996 case in which a federal district court ordered the Secretary of Department of Health and Human Services (HHS) to develop, enforce and monitor notice requirements and an administrative reconsideration process for all adverse decisions. It then describes the rulemakings the HHS promulgated in response to this situation. It then discusses the Ninth Circuit decision affirming the district court's Grijalva decision. It next discusses the requirements of the BBA and of implementing regulations for Medicare+Choice organization procedures, the grievance and appeal procedures that several states have adopted, and the procedures recommended by the National Association of Insurance Commissioners and the National Association for Quality Assurance. It concludes with recommendations for a cost-effective Medicare+Choice appeal system.