Managed Care in the
The following report was written by Edward M. Dale, Director, Elder Law and Legal Assistance to Medicare Patients, Connecticut Legal Services, Inc. It was presented to the National Academy of Elder Law Attorneysin November of 1997.
Public sector managed care is a rapidly growing and evolving area of law that may soon impact all our clients. On the Medicare front, managed care options are being aggressively marketed in many parts of the nation. Already 13% (4.9 million) of all Medicare beneficiaries have joined and 80,000 enroll each month. Over one-third of all Medicare beneficiaries in California and Arizona are enrolled in managed care. Enrollment rates are high in Washington, Oregon, New Mexico, Nevada, Florida, Colorado, Pennsylvania, Massachusetts, Rhode Island and the District of Columbia. Penetration varies greatly, however; in 20 states enrollment is less than 10% and there are no risk-based managed care plans in 14 states.
The Balanced Budget Act (BBA) of 1997 will move us further in the direction of Medicare managed care. To the current crop of Medicare managed care entities - health maintenance organizations (HMOs), Competitive Medical Plans (CMPs) and Health Care Prepayment Plans (HCPPs) - the Act allows doctors and hospitals to establish Provider Sponsored Organizations (PSOs) and Preferred Provider Organizations (PPOs).
Medicaid is adopting managed care at an even faster rate. Thirty-nine states have established risk-based managed care programs for those covered by Medicaid, though most require only families and children to enroll. Unlike Medicare, state Medicaid agencies can force beneficiaries to participate in managed care. Some 14 million Medicaid beneficiaries (nearly 40%) are now enrolled in managed care programs. States previously had to obtain a federal waiver of normal Medicaid requirements in order to move to managed care. 42 U.S.C. §§1315 and 1396n. The Balanced Budget Act eliminates the need for federal waiver approval in most cases, making it much easier for the remaining states to shift their Medicaid populations into managed care.
The six New England states are in the process of creating a managed care system for the "dually-eligible" population - the elder and disabled population that are eligible for both Medicare and Medicaid. This requires HCFA waiver of otherwise mandatory requirements of both the Medicare (42 U.S.C. §1395b-1) and Medicaid programs. Minnesota already has such a system in place and the Health Care Financing Administration (HCFA) is actively soliciting states to move in this direction. This relatively small segment of the Medicaid population accounts for a high portion of all Medicaid expenditures, primarily for long-term care (20% receive nursing home care). In 1995 the 6 million dual eligible individuals (about 13% of the total Medicare population) accounted for 1/3 of the combined expenditures from both Medicare and Medicaid.
There are three roles for NAELA and its members with regard to public managed
The national shift towards managed care is of particular concern for the elderly. Their medical needs are more formidable and they are far more likely to require long term care and other costly services. Their participation in managed care is made more complicated by the interplay of Medicare, Medicare supplement (Medigap) insurance, and Medicaid. Existing laws often have minimal consumer protections. State legislation on managed care varies greatly with some states still lacking any system of licensure, regulation or consumer protection and appeals. Even when appeals are available, this vulnerable population may be reluctant to challenge corporate MCOs with their doctors and attorneys.
Elder Law attorneys need to be active players in state and federal forums to advocate for consumer rights generally and to champion the particular concerns of the elderly. Below are a number of model consumer protection provisions that could be incorporated in federal or state law, regulation or policy relating to public, as well as private, managed care programs.1. Enrollment.
Elder Law attorneys can play an active role in advising clients who are considering enrollment or who have already joined an MCO under Medicare, Medicaid or both programs, providing them with information that will aid them in the decision-making process and that will help them to minimize post-enrollment problems. There are wide range of topics that should be discussed during individual counseling or group presentations regarding public managed care.1.Overview of Managed Care
3. MCO Selection Factors
Medicare, in all settings including managed care, remains primarily a "pay and chase" system, i.e., the client first obtains the medical services and then a claim is filed seeking payment for the services. If coverage is denied, the client is usually financially liable for the costs of care and left to pursue retroactive Medicare coverage through the appeal process. As detailed below, with Medicare managed care, there is the additional prerequisite that the client ask the MCO for the desired care and have that request denied. Only then is the beneficiary allowed to purchase medical care from outside of the MCO and to pursue reimbursement from the MCO. While an appeal seeking access to care can be pursued, the process is still slow, largely immune to hastening, and of limited value when significant delay in obtaining medical services is unacceptable. Most beneficiaries have no practical alternative to purchasing care outside the MCO's network and seeking reimbursement.
Litigation seeking more effective due process rights for Medicare beneficiaries was filed in Arizona and resulted in a very favorable court decision including requirements for prompt notice of denials, advance notice of the termination or reduction of existing services, expedited appeals, and continuation of services pending an initial appeal decision. Grijalva v. Shalala, Medicare and Medicaid Guide, Commerce Clearing House, ¶45,124 (D. Arizona, March 3, 1997). That decision has been appealed and its implementation stayed.
Shortly after this decision, the Health Care Financing Administration (HCFA) issued new regulations which address some of the same due process issues, but provide weaker consumer protections. 62 Federal Register 23,368 (April 30, 1997). These amend several sections of the Medicare regulations relating to managed care, 42 C.F.R. Part 417. The Balanced Budget Act of 1997 also codifies limited consumer protections, including (1) requirements for timely written determinations as to denials of coverage, which must include explanations and appeal rights, (2) provision for expedited appeals, (3) an anti-gag provision and limitations on incentives for doctors to limit services.
The following discussion is based on the state of the law, including the revised regulations, effective September 1, 1997. An appellate decision in Grijalva might change the appeal system significantly.
Social Security laws and regulations for appeals, representation and attorneys' fees, apply to Medicare appeals. 42 U.S.C. §1395ii, 20 C.F.R. §404.1700 et seq. Fees are generally limited to 25% of the past-due benefits obtained at the administrative level. Additionally, payment of attorneys' fees from the federal government is possible if the case is appealed and won in U.S. District Court. The Equal Access to Justice Act (EAJA), 28 U.S.C. §2412(d)(1)(A), provides for fees where the beneficiary prevails and the government's position is not substantially justified. These fees are paid by the federal government. The fee rate for litigation is set by law at $75 per hour. Many courts have ruled that this amount should be increased based on cost of living increases since October 1984. This has raised the hourly rate to well over $100 with rates varying based on regional variations in the Consumer Price Index since 1984.
Many court appeals result in the case being sent back for further consideration or administrative hearing. If the beneficiary wins benefits as a result of a favorable decision on remand, the EAJA covers time expended in representing the claimant in remand hearings in addition to the time involved in the court case.
The appeal process consists of a multi-level administrative appeals, including a hearing with a Social Security Administration Administrative Law Judge, with further appeal through the U.S. District Courts. The following section relate to the most common coverage dispute situations with the most typical forms of Medicare MCOs: health maintenance organizations (HMOs) and competitive medical plans (CMPs). These are risk-based operations in which Medicare pays the MCO a set monthly amount for each Medicare enrollee and the MCO accepts the financial risk of providing Medicare covered care. Different rules may apply for "cost contract" MCOs, where Medicare pays the MCO's actual costs, and health care prepayment plans (HCPPs), essentially cost contract MCOs that cover only Medicare Part B services. See 42 C.F.R. Part 417.
While the appeal procedure should be used when the client has obtained medical care from a non MCO source and is seeking an order requiring the MCO to pay for the care, appeals aimed at securing medical care are less viable due to the potentially long process. In these situations, informal advocacy can be used in lieu of or in addition to a Medicare appeal. This may include enlisting the support of the primary care physician to champion for the need for care and to stress the harm that might result from any delay in providing services. Medical reports or assessments by other doctors and health care providers, outside the MCO's network, can also be used to press these arguments with the MCO. Both the MCO and the primary care physician can be reminded of the potential malpractice risks. The MCO's public relations could suffer from publicity as to inferior care or by disenrollments. Formal complaints can be lodged with the regional HCFA office and with state agencies that regulate MCOs, typically the insurance or public health agencies. Some states have state administered managed care advocacy programs and laws that allow for appeals to state agencies. For example, Connecticut recently established the right to appeal the denial of service to the Insurance Commissioner and an office of managed care advocacy. Conn. Public Act No. 97-99.
Disenrollment and the return to fee-for-service Medicare is also an option in cases in which the MCO refuses to provide necessary service. As detailed below, page 26, a client has the unrestricted option to disenroll from a Medicare MCO effective as early as the first day of the calendar month following notice to the MCO. Most clients will find this a better course than a protracted fight with the MCO. Note however that an MCO may welcome the disenrollment of a client who needs expensive medical care and those who have the audacity to challenge MCO coverage decisions.
Not all MCO actions are subject to appeal. Appealable determinations are those involving payment or reimbursement for services obtained from any source outside of the MCO or the MCO's refusal to provide, initially or on a continuing basis, medical services which are Medicare covered. 42 C.F.R. §417.606(a). A separate appeal process is available for disputes involving coverage for ongoing inpatient hospital care. See page 23.
Each MCO must also have a grievance procedure for all other disputes. 42 C.F.R. §§417.604(a), 417.606(b). Grievance issues include enrollment and disenrollment practices, long waiting periods for appointment and referrals, provider demeanor, etc. Grievances are handled entirely within the MCO with no right of further review. As a result they are of limited value and should be used only when the appeal process is not available.
Even with the recent amendment of the regulations, the appeal process is slow and convoluted. The MCO usually has 60 days from the date of an enrollee's request to notify the enrollee of an adverse decision. 42 C.F.R. §417.608(a). The notice must include the reasons for the determination and information on appeal rights. 42 C.F.R. §417.608(b).
An expedited appeal process is provided for in very limited circumstances. It can be accessed only when the MCO has refused to provide services and the enrollee has not obtained services elsewhere or when the MCO discontinues ongoing services, i.e., when the enrollee is seeking access to medical care from the MCO rather than reimbursement for services purchased elsewhere. 42 C.F.R. §§417.606(a)(3) and (4), 417.609(a). In these circumstances, the enrollee may request an expedited initial determination, but the MCO must concur that a prompt ruling is needed to avoid jeopardy to the enrollee's life, health or ability to regain maximum function. 42 C.F.R. §417.609(b). An expedited determination is also available when requested by a doctor. 42 C.F.R. §417.609(c)(4). After receiving the request for an expedited appeal, the MCO first decides whether the request will be handled on expedited basis and notifies the enrollee of its decision. If the MCO determines that an appeal warrants an expedited appeal, an initial determination as to the medical care must be made and conveyed to the enrollee within 72 hours. More time, up to 10 business days, is permitted in some circumstances. If the appeal is not expedited, the MCO has 60 days to make its initial determination. 42 C.F.R. §417.608.
Following the initial determination, the next stage in the appeal process is a request for reconsideration. 42 C.F.R. §417.614. Request for reconsideration must usually be filed within 60 days of the initial determination. While an expedited reconsideration process is available, here too, that process is only available (1) when requested by a doctor or (2) when the MCO decides that a delay would harm the enrollee. As with the initial determination, a decision within 72 hours is required, but a 10 business day extension is available. 42 C.F.R. §417.617(c). Given the MCO's discretion to deny expedited review that is requested by the client and the requirement for expedited processing when the request comes from a doctor, the best practice is to ask a doctor to make this request. The MCO must allow the enrollee to submit evidence and legal arguments at the reconsideration level, in person or in writing. 42 C.F.R. §417.618.
The MCO is only authorized to issue reconsideration determination that are wholly favorable to the beneficiary. In all other situations, the MCO must notify HCFA or its designated agent and transmit its case file and determination rationale. This must be accomplished within 24 hours of the MCO determination in expedited cases and within 60 days of the reconsideration request in nonexpedited appeals. 42 C.F.R. §417. 620. At present, HCFA contracts with the Center for Health Dispute Resolution, formerly Network Design Group, to handle all reconsideration requests. Written decisions are issued within 60 days which detail the rights and procedures for subsequent appeals. The enrollee, but not the MCO, is allowed to appeal the reconsideration determination to a Social Security Administrative Law Judge, provided at least $100 is in dispute. 42 C.F.R. §§417.630, 417.632. A hearing must be requested within 60 days of the reconsideration determination. There is no procedure for expedited appeals at this or subsequent appeal levels: the Medicare Appeals Council or U.S. District Court.
As detailed above, the existence of an expedited appeal is of little value to the enrollee who needs prompt medical care. Appeals through the reconsideration level can take weeks and obtaining a hearing and decision at the Administrative Law Judge level can still take a year or more. Consequently, most appeals involve a beneficiary seeking reimbursement for services obtained outside of the MCO. With the very limited exception of inpatient hospital care, discussed below, Medicare does not require care or treatment to be provided or continued during the appeal process.
A different appeals is available for in cases involving continuation of inpatient hospital care. 42 C.F.R. §417.605. This procedure is only available for those who have been formally admitted to the hospital and only when there has been a written determination by the MCO or the hospital that continued hospital level of care is no longer necessary. This procedure is not available when the MCO has denied coverage to an enrollee seeking admission to a hospital.
The patient notified of the termination of coverage for inpatient hospital care may request immediate review by the Medicare peer review organization (PRO). PROs are independent medical review entities which, among other duties, handle the lower levels of the Medicare administrative appeal process in hospital cases. The request for review must be made, orally or in writing, by noon of the first business day after the patient has received written notice that Medicare and the MCO will no longer pay for the hospitalization. 42 C.F.R. 417.605(b). The PRO then solicits information from the hospital, patient, the treating physician, and the MCO and issues a written decision. The patient is permitted to stay in the hospital, without financially liability for the costs of care, until noon of the calendar day following day the PRO notifies the patient of its decision. 42 C.F.R. §417.605(c). If the patient remains in the hospital following this time, the patient bears the liability, but may still pursue an appeal seeking to have the MCO cover the costs.
Use of this review process has the potential of providing several days of continuing hospitalization. For example, a patient receiving written notice of an MCO decision to end hospital coverage on a Friday has until noon Monday to phone in a request for review and won't be held financially responsible until at least noon on Tuesday.
If this procedure is utilized, subsequent appeals are handled under the standard Medicare hospital appeals process. 42 C.F.R. §417.604(b)(ii) and 42 C.F.R. Part 473. The major distinction is that the next step is a request for reconsideration to the PRO, followed by appeals to an Administrative Law Judge, the Medicare Appeals Council and the federal courts. It is noteworthy that the PRO appeal process is only available if a request for review is filed following the MCO's or hospital's notice that a continue stay is not medically necessary. 42 C.F.R. §417.604(b)(1). If the appeal is not moved to the PRO track at this point, the appeal is limited to the MCO appeal.
The strong financial incentives attached to risk-based managed care prompt MCOs to seek out the healthy and to discourage those who require extensive medical care from remaining enrolled. While law and regulation regulate the enrollment and disenrollment process, there is abuse and little government monitoring of MCO practices. While there is no Medicare appeal system for disputes relating to enrollment issues, the Health Care Financing Administration regional office staff can be helpful in resolving problems.
Generally, a person covered by Medicare Part B or by both Part A and Part B may enroll in any Medicare MCO operating in the geographic area in which that person resides. 42 C.F.R. §§417.420, 417.422. Exceptions to this rule are those who have end-stage renal disease or who have elected to receive Medicare hospice benefits. 42 C.F.R. §417.423. Applicants are accepted on a first-come, first-serve basis with denial of enrollment by the MCO limited. Denials based on medical status or condition are not allowed. 42 C.F.R. §§417.424, 417.426. Marketing practices are prescribed with the aim of preventing discrimination, inducements to enroll, and door-to-door solicitation and requiring publicity to reach the entire pool of beneficiaries in the area served. 42 C.F.R. §417.428. Monitoring of these practices by HCFA is minimal. Applicants for enrollment should be alerted that MCOs are prohibited from discrimination and discouraging those with existing medical conditions from enrolling and that questions regarding their health care status and needs should not be answered.
Disenrollment problems fall in to areas: improper attempts to disenroll clients, usually because of high health care costs, and failure to disenroll clients who move outside the MCO's coverage area. Involuntary disenrollment by the MCO is allowed only when the beneficiary joins another MCO or for other good cause not related to health care utilization, e.g. nonpayment of premiums or other charges, fraud, loss of entitlement to Medicare coverage, moving out of the area. 42 C.F.R. §§417.432, 417.460. MCOs are prohibited from any action or inaction that would encourage disenrollment. 42 C.F.R. §417.460(a). Disenrollment is a ready option for the beneficiary. The beneficiary can disenroll at any time by providing written notice to the MCO. The beneficiary can designate the effective date of disenrollment which can be as early as the first day of the month following the date that the MCO receives the written notice. 42 C.F.R. §§417.461, 417.464.
There is often a lag between the effective date of disenrollment and HCFA's processing of this change. As a result, Medicare claims filed subsequent to disenrollment may be initially rejected because the Medicare system still shows the client as enrolled in an MCO. Resubmission of the claims a month or two later will usually result in proper processing of these claims. The local Social Security office or HCFA regional office should be able to resolve any problems that persist.
Some clients have encountered MCOs that don't promptly act on disenrollment requests, particularly when the client is moving away from the MCO's service area. In one typical scenario, a beneficiary will notify the MCO that they are moving, but will fail to submit the required written disenrollment request, with the MCO neglecting to advise the client as the need for written notice. The client assumes that they are disenrolled and, usually months later, obtains medical care. Medicare claims are then filed and rejected because the patient is still enrolled in the MCO. When uncorrected, this results in a financial windfall for the MCO, which continues to accept Medicare capitation payments knowing that it will not have pay for any care. Even oral notice of disenrollment should be sufficient. The MCO should respond to oral notice by explaining that a written notice is required. Even without written notice, the MCO is required to disenroll when it has knowledge that the enrollee has permanently moved outside of MCO's coverage area. 42 C.F.R. §417.460(f). The regional HCFA office can intervene in problem cases. Possible remedies include an order to the MCO requiring it to pay for the out-of-area services or retroactive disenrollment. Retroactive disenrollment will allow claims to be resubmitted and paid under Medicare fee-for-service.
Medicaid programs are increasingly shifting from a fee-for-service basis to managed care. While state plans vary widely, Medicaid beneficiaries enjoy the protections and appeal rights established by federal Medicaid law and regulation with regard to managed care issues.
The Balanced Budget Act of 1997 added some new protections for Medicaid managed care: beneficiaries must have a choice between at least two MCOs; MCOs must have adequate capacity to serve the Medicaid population; an appropriate mix and range of direct care providers is required; plans must have internal grievance procedures, systems for assessing quality and health care improvement. Additionally, clients must be reimbursed for emergency care that they pay for, doctors cannot be restricted from telling patients about their health care needs and options, providers must accept MCO payments and are prohibited from charging beneficiaries for services, marketing materials must be approved by the state Medicaid agency, and door-to-door marketing is prohibited. Enrollees can change plans without cause during the first 90 days and for good cause thereafter.
Protections for beneficiaries are included in federal law and regulation, particularly 42 C.F.R. Part 431 and should be included in every contract between a Medicaid agency and an MCO. Contracts are governed by 42 C.F.R. §434.20 et seq. Coverage for those eligible is subject to state variation, based on a State Medicaid Plan filed with HCFA, and federal law, 42 U.S.C. §1396a et seq., which specifies mandatory and optional services. Generally the range and duration of services is greater than the benefits available under the Medicare program. Medicaid, for example, pays for long-term nursing home care. 42 U.S.C. §1396d(a)(4)(A). A basic requirement for Medicaid MCOs is that they must provide the same services available under the state's Medicaid fee-for-service program and these services must be just as accessible (scope, duration and timeliness). 42 U.S.C. §1396b(m)(1)(A), 42 C.F.R. §434.20(c).
Medicaid MCO contracts must provide for open enrollment periods based on the order of requests for enrollment and can't discriminate based on health status or need for health care services. 42 C.F.R. §434.25. Under existing regulations, enrollees must be allowed to disenroll without cause during the first month of the enrollment period. Disenrollment is also the beneficiary's right at any time for good cause, such as poor quality care or lack of access to specialty services. 42 C.F.R. §434.28(e). Emergency services must be available at all times. 42 C.F.R. §434.30. There must be grievance and quality assurance systems. 42 C.F.R. §§434.32, 434.34.
Standard Medicaid rights attach to Medicaid MCO contracts. These include transportation services to health care providers (42 C.F.R. §413.53), written notice, usually in advance, of any action to deny, suspend, reduce or terminate services (42 C.F.R. §431.200 et seq.), written notice of appeal rights (42 C.F.R. §431.210), and the right to continued services pending the outcome of a Medicaid agency fair hearing provided that the enrollee requests a hearing promptly (42 C.F.R. §431.230). Medicaid hearings must de novo and the state agency must take final action within 90 days of the request for hearing. 42 C.F.R. §413.244. Included within these regulations are proposed transfers or discharges from nursing facilities. 42 C.F.R. §§431.200 and 483.12.
The fair hearing regulations authorize the hearing officer to obtain an independent medical assessment when medical issues are involved. 42 C.F.R. §431.240(b). This provision could be used to obtain a hopefully unbiased medical opinion when the client is unable to obtain a second opinion from a source outside the MCO. In cases involving continuation of care, a request for this medical assessment may have the effect of prolonging the care by delaying the hearing process.
These appeal rights are independent of the MCO grievance procedures. Accordingly, when confronted with an appealable issue (a proposed nursing home transfer or discharge or the denial, suspension, termination, reduction of other health care services), it is advisable to request a fair hearing with the Medicaid agency. When continuation of services is at issue, the hearing request can be timed so as to maximize the period of services received, i.e. the request can be delayed until just before the proposed date of action.
In Medicaid managed care the MCO becomes an agent of the state. In Daniels v. Wadley, 926. F. Supp. 1305 (M.D.Tenn.) May 14, 1996, the U.S. District Court ruled that Medicaid fair hearing process attaches to denials of service under managed care (TennCare). The Medicaid agency had imposed three tier system for coverage issues appeals: reconsideration by the MCO (30 days maximum to decide), review by Medical Review Unit (20 days), and a standard Medicaid fair hearing.
The court noted "because of the pecuniary incentives that plans have for denying, suspending, or termination care under the TennCare system Tennessee's enrollees need strong due process protections to protect themselves from inappropriate denials of health care." The MCO must provide for continuing care pending Medicaid agency fair hearing officer review under 42 C.F.R. §§431.230 and 431.231. Internal MCO review decisions could not be considered impartial since plans "have financial incentives to deny enrollees health care even when it is medically appropriate." The Medicaid state agency must issue a final decision and resolve all disputed issues within 90 days of the initial appeal under 42 C.F.R. §431.244. See also J.K. v Dillenberg, 836 F.Supp. 694 (D. Ariz. 1993), ruling that Medicaid MCOs are state actors for constitutional purposes with the state remaining ultimately liable for MCO coverage decisions.
It is noteworthy that the federal regulations do not authorize delegation of the Medicaid agency's obligation to provide written notice of proposed action to the Medicaid beneficiary. Some states have not developed a system under which the MCO sends notice to the Medicaid agency so that the agency can in turn issue its required advance written notice to the enrollee. Therefore, it can be argued that notice of planned action issued solely by the MCO is ineffective, that the time limits for requesting a hearing do not start to run until the Medicaid agency issues a written notice and that current levels of care must be continued until proper notice from both the MCO and the Medicaid agency have been issued and, if there is an appeal, until a Medicaid fair hearing decision is issued by the state agency.
In contrast to Medicare, the Medicaid program offers real protections from reductions in care and a prompt appeal system in instances where care or treatment is denied. While disenrollment is an option, the best course in most cases will be to appeal the proposed action, taking advantage of the right to an independent medical assessment and the relatively quick appeal process. Medicaid agencies, having paid a fixed capitated rate to the MCO, should have no reluctance to order appropriate care and certainly have a financial stake to ensure that beneficiaries aren't forced back into Medicaid fee-for-service at the time they need expense services. One strategy at the fair hearing level would be to request an order requiring the MCO to provide care while requesting, in the alternative, that the beneficiary be allowed to disenroll.
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