Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
MEDICARE ADMINISTRATIVE
APPEALS 
ALJ Hearing Process
JUNE GIBBS BROWN
Inspector General
SEPTEMBER 1999
OEI-04-97-00160 OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, is to
protect the integrity of the Department of Health and Human Services programs as well as the 
health and welfare of beneficiaries served by them. This statutory mission is carried out through a
nationwide program of audits, investigations, inspections, sanctions, and fraud alerts.  The 
Inspector General informs the Secretary of program and management problems and recommends
legislative, regulatory, and operational approaches to correct them. 
Office of Evaluation and Inspections
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General. It conducts short-term management and program evaluations (called
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and
effectiveness of departmental programs. 
OEI's Atlanta Regional Office prepared this report under the direction of Jesse J. Flowers, 
Regional Inspector General, and Christopher H. Koehler, Deputy Regional Inspector General.
Principal OEI staff included: 
REGION HEADQUARTERS
Janet Miller, Project Leader  Stuart Wright, Associate Director 
Josiah Townsel, Team Leader Barbara Tedesco, Statistician
Dwayne Grant  Brian Ritchie, Program Analyst 
To obtain copies of this report, please call the Atlanta Regional Office at 404-562-7729.  Reports 
are also available on the World Wide Web at our home page address:
http://www.dhhs.gov/progorg/oei  T A B L E O F C O N T E N T S
PAGE
EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FINDINGS 
Increasing Numbers and Changing Nature of ALJ Appeals . . . . . . . . . . . . . . . . . . . . . . . 8
Structural Inconsistencies in the Appeals Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Non-Adversarial Nature of ALJ Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
MinimalExperienceandTrainingofALJs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
AGENCY COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
APPENDIX A: HCFA COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 E X E C U T I V E S U M M A R Y
PURPOSE
To evaluate the administrative law judge appeals process for Medicare Part B and 
Medicare Part A fee-for-service claims.
BACKGROUND
If an intermediary or a carrier denies payment for a claim, a provider or a beneficiary may
appeal the denial.  The appeal procedure for Part A and Part B claims is different. 
Regardless of the procedural route, however, providers and beneficiaries may appeal to
HCFA contractors, Administrative Law Judges, and the Departmental Appeals Board of 
the Department of Health and Human Services.
The first step in a beneficiary or provider appeal is a request for a reexamination of a
denied claim.  The request, called a reconsideration, is made to intermediaries for Medicare 
Part A claims. The request is made to carriers for Medicare Part B claims. For Part B
claims, the request is called a review. 
If a Medicare intermediary upholds a denied Part A claim, the next step is to request a 
hearing with an Administrative Law Judge. If a Medicare carrier upholds a denied Part B
claim, there is an additional level of appeal.  This appeal is made to a carrier hearing officer. 
If the carrier's hearing officer upholds the denial, the appellant may then request a hearing
with an Administrative Law Judge. 
If an Administrative Law Judge upholds a denied Part A or Part B claim, an appellant may 
request a review by the Departmental Appeals Board. The Departmental Appeals Board is
the final level of administrative appeal. 
FINDINGS
Increasing Number and Changing Nature of ALJ Appeals
An increasing number of appeals are being heard by ALJs. In addition, a large percentage
of these appeals are reversed and payments made to appellants. Further, although the 
appeals process was established as a non-adversarial system for beneficiaries, it is now a
provider dominated process. 
Medicare Administrative Appeals  1 OEI-04-97-00160  Structural Inconsistencies in the Appeals Process
A number of elements contribute to inconsistencies in the appeals process. The elements
include; lack of consistent criteria for contractors and Administrative Law Judges, lack of 
communication by parties in the appeals system, and lack of precedence of Administrative
Law Judge cases. 
Non-Adversarial Nature of Administrative Law Judge Hearings 
Medicare is not a party to ALJ hearings. Therefore, the non-adversarial structure of the
appeals process often requires that Administrative Law Judges serve as fact finders and 
neutral decision-makers. However, this practice may compromise the neutrality of
Administrative Law Judges by forcing them to present Medicares case at hearings, then 
decide the case. Parties in the appeals process agree that non-adversarial hearings are a
problem. 
Minimal Experience and Training of Administrative Law Judges 
On average, Administrative Law Judges spend about 8 percent of their time adjudicating 
Medicare cases. Their focus is on adjudicating Social Security Administration disability
cases.  Further, Administrative Law Judges receive neither extensive formal nor informal 
training on Medicare.
RECOMMENDATIONS
Correct structural problems:
<< Separate the administrative appeals process for beneficiaries and providers.
<< Establish adversarial ALJ hearings for provider appeals. 
<< Develop and require both Medicare contractors and ALJs to apply the same 
standards.
<< Develop regulations for conducting Medicare ALJ appeals.
< Establish a case precedent system for Departmental Appeals Board rulings.
< Develop thorough, parallel training programs for Medicare contractors and
ALJs. 
<< Create formal communication and information networks that span the entire 
appeals environment.
Establish a dedicated ALJ corps: We submit three organizational options for such a
corps: 
1. Establish an ALJ corps in HHS for Medicare cases.
2.  Create a dedicated corps in SSA for Medicare cases. 
3. Expand the current Part B cadre of ALJs in SSA to handle all Medicare cases.
Medicare Administrative Appeals  2 OEI-04-97-00160  I N T R O D U C T I O N
PURPOSE
To evaluate the administrative law judge appeals process for Medicare Part A and
Medicare Part B fee-for-service claims. 
BACKGROUND
Medicare Part A benefits include home health care, inpatient hospital care, inpatient
psychiatric care, skilled nursing care or rehabilitation associated with recuperation 
following hospitalization, and hospice care for the terminally ill. This inspection considered
only the home health benefit under Part A.  The Health Care Financing Administration 
(HCFA) contracts with five Regional Home Health Intermediaries to process and pay home
health claims under Medicare Part A. 
Medicare Part B benefits include physician services, outpatient services, diagnostic 
laboratory tests, x-rays, ambulance services, and durable medical equipment. The HCFA
contracts with 23 carriers to process and pay Medicare Part B claims. 
Medicare expenditures for FY 1997 were over $210 billion. 
Appeals Process 
If an intermediary or a carrier denies payment for a claim, a provider or a beneficiary may 
appeal the denial. The appeal procedure differs for Part A and Part B claims. Regardless
of procedure, however, the administrative appeals process has a specified order. 
Appellants must begin with the HCFA contractor before going to the Administrative Law
Judge (ALJ).  After the ALJ hearing, cases may be appealed to the Departmental Appeals 
Board of the U.S. Department of Health and Human Services.
ALJs are employed by the Social Security Administration (SSA), but they adjudicate
Medicare appeals under a contractual arrangement. 
The first step in a beneficiary or provider appeal is a request for a reexamination of a 
denied claim. The request, called a reconsideration, is made to intermediaries for Medicare
Part A claims.  The request is made to carriers for Medicare Part B claims.  For Part B 
claims, the request is called a review. There is no minium dollar amount required to
request a reconsideration or a review. 
If a Medicare intermediary upholds a denied Part A claim, the next step is to request a 
hearing with an ALJ. In other words, after the intermediary reconsideration, providers and
Medicare Administrative Appeals  3 OEI-04-97-00160  beneficiaries may appeal denied Medicare Part A claims directly to ALJ offices.  The 
appeals are not reviewed by, or routed through, any other Federal organization or
representative.
If a Medicare carrier upholds a denied Part B claim, there is an additional level of appeal. 
This appeal, requiring $100 or more in controversy, is made to a carrier hearing officer. If
the carrier hearing officer upholds the denial, the appellant may then request a hearing with 
an ALJ.
To qualify for an ALJ hearing, the dollar amount in controversy must be $100 or more for
Part A appeals and $500 or more for Part B appeals.  Under certain conditions, the dollar 
amount of several claims may be aggregated to meet the threshold. A beneficiary may
aggregate claims from two or more providers to meet the threshold.  A provider may 
aggregate claims from different beneficiaries regardless of the service at issue.
However, before most Medicare Part B appeals are reviewed by an ALJ, case files are sent
to the Division of Medicare Part B within the SSA Office of Hearings and Appeals located 
in Falls Church, Virginia. Cases are assigned a docket number and reviewed for procedural
issues at the Division of Medicare Part B.  After docketing and review, the cases are sent 
to the an ALJ office for hearing. Large Part B cases remain at Falls Church for assignment
to a cadre of ALJs who specialize in larger cases.  Staff at the Division of Medicare Part B 
also provide training and serve as an information resource for ALJs.
If an ALJ upholds a denied Part A or Part B claim, an appellant may request a review by
Administrative Appeals Judges of the Departmental Appeals Board.  The Departmental 
Appeals Board consists of a corps of judges and attorneys attached to the Office of the
Secretary, Department of Health and Human Services. 
Medicare Administrative Appeals  4 OEI-04-97-00160  LEVELS OF MEDICARE ADMINISTRATIVE APPEAL 
PART A  PART B 
RECONSIDERATION REVIEW 
(RHHI) (Carrier) 
CARRIER HEARING
(Carrier)
AALLJJ  DIVISION OF 
HHEEAARRIINNGG MEDICARE PART B
((SSSSAA OOffffiiccee ooff  (SSAOfficeofHearingsand
HHeeaarriinnggss aanndd  Appeals)
AAppppeeaallss))  
DDEEPPAARRTTMMEENNTTAALL 
AAPPPPEEAALLSS  BBOOAARRDD  
((DDHHHHSS))  
If the Departmental Appeals Board refuses to hear an appeal, or upholds a denial, the
administrative appeal process is over.  An appellant may, however, seek judicial review in 
Federal Court if the amount in controversy is above $1000.
Impact of Administrative Appeals
The cost to HCFA for administrative appeals is sizable. First, HCFA incurs a considerable
administrative cost through its contractors for processing appeals.  To illustrate, the 
administrative cost incurred by HCFA for administrative appeals totaled over $4 million for
Medicare Part A and about $75 million for Medicare Part B in FY 1996.  The HCFA incurs
this contractor administrative cost regardless of how appeals are ultimately decided.
The HCFA also incurs a cost for use of ALJs employed by SSA. The SSA is reimbursed
from the Medicare Trust Fund for ALJs who adjudicate appeals of Medicare payment 
decisions. This administrative cost totaled over $9 million for Medicare Part A and almost
$15 million for Medicare Part B in FY 1996. 
Medicare Administrative Appeals  5 OEI-04-97-00160  Cost is not the only issue or cause for concern over the Medicare appeals process.  The 
high rate of reversal during the appeal process is a concern for HCFA and its contractors.
According to HCFA representatives, the high rate of reversal may provide an incentive for 
uninformed or abusive providers to submit claims for services and items that are not
covered. 
In addition, contractor staff are increasingly demoralized by a high incidence of ALJ 
reversals. Contractors report seeing providers who have been in the Medicare program for
years use the administrative  appeals process to "beat the system" and obtain payment for 
services and supplies which are not payable under contractor guidelines.
The following table shows the volume of claims in the appeals process in FY 1996.
Volume of Claims in Appeals Process
FY 1996
PART A  PART A PART B
Overall Home Health
Claims Only 
# Claims Processed 142,086,669 14,680,576 666,664,972
#ClaimsDenied 13,457,514 377,185 97,636,027
# Reconsiderations Performed 60,680 30,903 NA
# Reviews Performed NA NA 3,638,363
# Hearing Officer Hearings NA NA 70,716
# ALJ Hearings 12,155 4811 16,360
METHODOLOGY 
We used a standardized mail questionnaire and surveyed all five Regional Home Health 
Intermediaries that process Part A claims for home health services, all 23 carriers who
process Part B claims, and a random cluster sample of ALJs. 
We also surveyed all 28 cadre judges.  Cadre judges are a separate population of SSA 
ALJs. They spend a larger percentage of their time adjudicating Medicare appeals than the
general population of ALJs.  Furthermore, cadre judges adjudicate the most complex and 
highest dollar Part B appeals.
From each of the sources, we obtained information on training and resources, conducting
the appeals process, communication, and suggestions for improving the appeals process. 
Medicare Administrative Appeals  6 OEI-04-97-00160  In sampling the ALJs, we used a one-stage cluster sample.  First, we randomly  selected 30 
hearing offices from the universe of 135 hearing offices across the U.S. that handle
Medicare appeals.  Second, we mailed surveys to all 284 ALJs assigned to the 30 sampled 
hearing offices. Of the 284 sampled ALJs, 123 responded to our survey -- a response rate
of 43 percent.
Because of this poor response rate and quality of the data, we didnt project the ALJ 
survey to the general population or provide any estimates based upon that information. All
information collected from that survey is presented as anecdotal comments. 
Additionally, we surveyed all 28 Medicare cadre judges.  Of the 28 cadre judges, 24 
responded to our survey -- a response rate of 86 percent.
We also interviewed HCFA headquarters and regional office representatives, HCFA
Medicare contractors, Office of Hearings and Appeals and Departmental Appeals Board 
representatives, and the ALJ in charge of the SSA Division of Part B Medicare Appeals.
We tabulated and summarized the information we collected from our contractor and ALJ
surveys.  We also compared the responses we received from each group we interviewed 
and surveyed.
We did our study between January 1998 and January 1999.  We conducted the inspection 
in accordance with Quality Standards for Inspections issued by the Presidents Council on
IntegrityandEfficiency.
Medicare Administrative Appeals  7 OEI-04-97-00160  F I N D I N G S  
Increasing number and changing nature of ALJ appeals 
Appeals and reversal of claims decisions are increasing 
An increasing number of appeals are being heard by ALJs.  This may be due to the high 
rates of contractor denials for payment which are reversed by ALJs. Providers may be
motivated, in part, to appeal to the ALJ level, knowing their claim is likely to be paid. 
There has been no commensurate increase in appeals at lower levels.
The following table demonstrates the sizable increase in the number of ALJ hearings
between FY 1996 and FY 1998. 
Number of ALJ Hearings for Medicare Part A and Part B 
1996  1997 1998 increase 96-97  increase 97-98  increase 96-98 
Part A 12,155 15,725 16,755 29% 6.5% 38%
Part B 16,360 28,256 32,498 73% 15% 99%
Total  28,515 43,981 49,253 54% 12% 73%
In addition, a large percentage of appeals reaching the ALJ level are reversed and payments
made to appellants.  To illustrate, in 1996, 81 percent of home health appeals were 
reversed at the ALJ level. In 1997, 78 percent of Durable Medical Equipment appeals
were reversed at the ALJ level.  Reversal rates of this magnitude could encourage 
appellants.
Providers are now the primary appellants
The Medicare administrative appeals process was established for the beneficiary. Its
structure is non-adversarial.  This means that appellants may present their appeal at a 
hearing without presence or opposition of the adverse party. It allows beneficiaries to
present relevant information in support of their appeal without fear of intimidation by the 
Government and its agents. Medicare is not even represented at ALJ hearings. Only a
written record of the claim and prior levels of appeal are presented.  Most respondents 
viewed non-representation by Medicare as an important protection for beneficiaries.
However, the appeals process is no longer a process predominately for beneficiaries. It is
now a provider process.  The SSA Office of Hearings and Appeals and HCFA contractors
Medicare Administrative Appeals  8 OEI-04-97-00160  do not collect reliable statistics on what percentage of appeals are made by providers as 
opposed to beneficiaries. However, all the respondents to our questionnaires agreed that
beneficiaries make up a very small percentage of appellants. 
Providers do bring beneficiaries to some ALJ hearings along with expert witnesses and 
attorneys. However, many ALJs and contractors do not consider the presence of
beneficiaries to indicate a beneficiary appeal. 
With providers making up the preponderence of appellants, one noticable trend is a cause
for concern. Some providers appeal aggressively, challenging a large percentage of denials.
Contractors report providers do so because of success with prior appeals at the ALJ level. 
The noteworthly media attention concerning high ALJ reversal rates may encourage 
providers to appeal. In addition, there are many appeals consultants informing providers
and their attorneys on the great liklihood of a favorable ALJ decision, and the best ways to 
present their case at hearings.
Structural inconsistencies in the appeals process
Contractors and ALJs use different criteria in making coverage determinations
In many instances, Medicare contractors and ALJs use different criteria in ruling on
Medicare payment and coverage issues.  This, in part, accounts for the high level of 
reversed claim decisionsbyALJs.
Medicare contractors use Medicare law, HCFA regulations, HCFA rulings, and national
coverage determinations as criteria in making claim decisions and in ruling on appeals.
Where applicable,they also rely heavily on contractor manuals and local medical review
policy because they are required to use these standards. 
The ALJs also use Medicare law, HCFA regulations, HCFA rulings, and national coverage 
determinations. However, they rarely use contractor manuals and local medical review
policy because they are not bound by these standards, as are contractors.  As a result, ALJ 
decisions typically reflect use of a much broader and less prescriptive criteria.
The extent to which Medicare contractors and ALJs do not use the same criteria in ruling
on claims could partly explain why ALJs overturn claim decisions made by Medicare 
contractors. A contractor can follow contractor requirements perfectly and come to a
different conclusion than an ALJ who has followed his/her less prescriptive requirements 
perfectly. This commonly results when contractors base decisions on local medical review
policy, which is not binding on ALJs.  For example, contractors note cases they decided 
using the required local medical review policy which were overturned by ALJs. The ALJs
were not required to apply the criteria used as the basis for the decision at the contractor 
level. In fact, the ALJ may not even have access to local medical review policy.
Medicare Administrative Appeals  9 OEI-04-97-00160  Further complicating the problem of inconsistent criteria, HCFA has issued no ALJ appeals 
regulations for conducting Medicare ALJ hearings. Therefore, ALJs must rely on SSA
disability regulations in conducting ALJ hearings. 
The DHHS Departmental Appeals Board and the SSA Office of Hearings and Appeals 
agreed that the absence of specific criteria and guidance partly accounts for the inconsistent
decisions by Medicare contractors and ALJs.  Further, the individual ALJs who responded 
to our survey also said that specific criteria and guidance is needed to help them more
consistently adjudicate cases. 
Medicares ability to defend its appeal determinations is limited 
A number of factors increase the likelihood of appeals being reversed in favor of providers. 
First, providers are afforded the same appeal rights as beneficiaries, including the right to a
non-adversarial hearing.  Second, providers may present their case at hearings and be 
represented by attorneys and expert witnesses. Beyond the written record, Medicare is
typically not represented at ALJ hearings.  A third advantage is that providers are allowed 
to rebut testimony contained in the contractors written record.
Yet another advantage for provider appellants is that they are allowed to use a number of
sophisticated means, including statistical analysis and legal arguments to make their cases. 
These arguments are tailored for the case in question. One Part B cadre ALJ said,
providers are hiring the best law firms to represent their interest.  Another said, 
providers and suppliers have the resources to present their cases with the assistance of
sophisticated counsel and/or experts.  In fact, many ALJs who responded to our survey 
commented that provider representation is outstanding and one-sided.
In contrast to the right of provider appellants to be represented at ALJ hearings, the
appeals process typically allows no opportunity for HCFA and its contractors to rebut 
provider evidence and arguments. Although an ALJ may invite a Medicare contractor to a
hearing, such invitations are uncommon.  Further, when invited, the contractors typically 
send a nurse or a physician to represent them, not an attorney or other legal expert.
Finally, the ALJ determines what role these invitees have in the hearing, which is usually 
clarification of some part of the Medicare record or program.
While contractor representatives are often experts on the Medicare program frequently,
they  have little experience in a legal setting.  Contractor staffs and ALJs told us such 
representatives may be overwhelmed when confronted and challenged by provider
attorneys.  Contractor representatives may also have their testimony countered by other 
expert witnesses on behalf of the provider. In any case, the appeals process does not allow
Medicare to challenge the provider witnesses. 
Medicare Administrative Appeals  10 OEI-04-97-00160  Precedence from prior cases is not considered In ALJ hearings 
Although the appeals system is hierarchal, ALJ decisions do not set precedent.  Further, the 
Departmental Appeals Board, the highest level of Medicare administrative appeals, does
not have precedent setting authority. 
Several Medicare contractors expressed a view that the lack of precedent setting authority 
contributes to inconsistent ruling by ALJs. This variation undermines the Medicare appeals
process and may contribute to other questionable practices.  For example, one Durable 
Medical Equipment Carrier medical director advised us that some abusive providers engage
in ALJ shopping.  In other words, they actively look for an ALJ who renders favorable 
rulings on their particular type of claim.
Representatives of the Departmental Appeals Board also said that ALJ rulings on similar
Medicare cases may be very different.  To illustrate, they described a situation where the 
Departmental Appeals Board reversed an ALJ decision in a narrow and definitive way.
Shortly thereafter, on a similar case, another ALJ rendered essentially the same ruling that 
the Departmental Appeals Board had just reversed. In this example, the second ALJ ruling
will stand unless it is also appealed to the Departmental Appeals Board and overturned. 
Departmental Appeals Board respondents to our inspection voiced strong interest in having 
precedent setting authority in order to clean-up inconsistencies and other problems in the
appeal process. 
Appeals process suffers from limited communication 
The lack of communication about Medicare issues within the ALJ corps promotes 
inconsistency. There are no conferences or national newsletters addressing Medicare for
SSA judges.  This may reflect the lower priority given to Medicare in the SSA ALJ corps. 
The exception to this is the Part B ALJ cadre where attention to Medicare receives a
priority in the form of resources and communication among the judges.  The cadre could be 
a useful model for improved functioning of the Medicare appeals process.
Another useful model for improved communication is Transamerica of California. This
contractor, by their own initiative, improved communication with local ALJs. 
Medicare Administrative Appeals  11 OEI-04-97-00160  EFFECTIVE PRACTICE: 
Transamerica of California 
One HCFA contractor, Transamerica Occidental of California, improved the 
preparation of their case files by improving communication with local ALJs. This
Part B carrier began a dialog with ALJs in November of 1995. The dialog was
initiated by the carrier in an effort to better understand the basis for ALJ decisions. 
The meetings and workshops also provided the contractor an opportunity to learn the
structure and content of appeals files which would be most instructive and helpful for ALJs 
who heard appeals of their decisions.
As a result of the interaction and training, Transamerica developed a file preparation 
format. It was more specific than that required by HCFA. Each file sent to an
ALJ contained a case summary which clearly profiled the cases, and noted the 
specific issue before the ALJ. To aid use of the files by ALJs, the contractor used
plainly marked and tabbed exhibits.  Both the SSA Office of Hearings and Appeals 
and HCFA commented that case file preparation by this Medicare contractor has 
shown great improvement.
The interaction and training also included educating ALJs on the basis and rational
for Medicare contractor decisions. Further, it educated ALJs on the type and content
of contractor files and documents.  The ALJ workshops are comprehensive, covering 
topics such as claims processing, carrier medical review process, local medical review
policies, and sample case analysis.  The chief hearing officer at Transamerica told us 
that the ALJs were, thirsty for knowledge.
Since 1995, Transamerica has continued to conduct the educational workshops for 
contractor staffs, ALJs, and additionally, for Office of Hearings and Appeals attorneys
and legal assistants. 
Transamerica reports that the enhanced understanding by ALJ and Medicare 
contractors, and the enhanced case file preparation has made a difference. 
Agreement between the Medicare contractor and ALJs on Medicare claims has
increased markedly.  To illustrate, at this Medicare contractor ALJ reversals on 
claim decisions decreased from 59 percent in FY 1994 to 31 percent in FY 1997.
Medicare Administrative Appeals  12 OEI-04-97-00160  Non-adversarial nature of ALJ hearings 
ALJs must present the Medicare case at hearings 
The ALJs must serve as fact finders and neutral decision-makers because Medicare is not a 
party to ALJ hearings. The contractor can neither present their case nor rebut the
providers case.  Because the contractor decision is represented only by a written record, 
the ALJs, in effect, are required to present Medicares case from that record. The ALJ is
also required to rebut the providers arguments, should he/she choose to do so.  When 
experts are needed to interpret the written record, it falls to the ALJ to locate such experts,
or to depend on whatever experts the provider presents.  After the excessive burdens 
imposed by the steps listed above, the ALJs remain faced with their primary task, which is
to decide the case. 
Parties in the appeals process agree that non-adversarial hearings are a problem 
Several ALJs said that Medicare should be allowed representation, and should be a party to 
ALJ hearings. In fact, all Part B cadre ALJs responding to the survey said that having
Medicare represented at hearings would help them adjudicate cases.  The judges said that 
the non-adversarial hearings place them in the difficult position of presenting Medicares
case, and place Medicare at a disadvantage.  Comments from ALJs include the following. 
  Medicare cases do not fit anymore into the non-adversary model because the 
issues are often extremely complex and it places an undue burden on the ALJ to
assume the role of advocate and adjudicator in the same case. 
  Without question, the contractor or HCFA should be a party to the proceedings 
and allowed representation. There are millions [of dollars] at stake and the record
should be balanced before a decision is made.  Medicare should be actively present 
in selected cases.
Government is at a distinct disadvantage as evidence of record becomes very one
sided. 
Contractors also want a more balanced ALJ hearing process.  Eighty-five percent of HCFA 
contractors reported that the ALJ hearing process would benefit from contractor
participation at ALJ hearings. 
Finally, representatives of DHHSs Departmental Appeals Board and SSAs Office of 
Hearings and Appeals also consider the non-adversarial hearings to be weighted in favor of
providers.  They noted the increasing complexity of cases, particularly in Part B, as a cause 
for re-structuring the non-adversarial nature of hearings for providers.
Medicare Administrative Appeals  13 OEI-04-97-00160  Minimal experience and training of Administrative Law 
Judges 
ALJs primarily adjudicate Social Security cases
Medicare cases comprise a small percentage of the SSA ALJ corps time.  The ALJ corps 
spends about 8 percent of its work time hearing Medicare cases. To illustrate, during
1996, SSA ALJs adjudicated 365,284 SSA cases and 28,515 Part A and Part B Medicare 
cases.
Accordingly, ALJs have limited experience with the Medicare program  its policies,
rules, and claims.  The inexperience of ALJs was clearly reflected by their response to our 
survey. Of the general ALJ corps, only 43 percent of the ALJs responded to our survey.
Further, of those that did respond, their responses were brief, sketchy, and generally 
incomplete.
ALJs focus on adjudicating SSA disability cases
The ALJ corps was established to hear SSA cases, and its growth has been principally due
to the large number of SSA disability appeals.  The ALJs frequently receive congressional 
pressure to reduce the backlog of disability appeals. As a result, several ALJs responded to
our survey by reporting that they were under pressure to keep up with their Social Security 
disability caseload. Medicare cases are a secondary concern. One ALJ summed up the
situation by simply stating Medicare is not a priority. 
The lower priority of Medicare cases was further illustrated by SSAs Office of Hearings 
and Appeals response to our efforts to obtain information from individual ALJs. Overall,
the Office of Hearings and Appeals was very cooperative and helpful in encouraging its 
ALJ corps to respond to our Medicare survey. Even so, its assistance reflected that the
Office of Hearing and Appeals priority was SSA cases.  To illustrate, because of concern 
about the heavy year-end SSA case load, the Office of Hearings and Appeals delayed
sending a notice to its ALJ corps encouraging them to complete our survey questionnaire. 
ALJs are inadequately trained and equipped for adjudicating Medicare cases 
Many of the ALJs and Medicare contractors we surveyed agreed that one of the most 
serious problemswith the Medicare administrative appeals system isthe unfamiliarity with
Medicare by most of the SSA ALJ corps.  The ALJs receive neither extensive formal nor 
informal training on Medicare.
Many judges contend that they lack sufficient training on Medicare. In fact, most judges
receive only 1 or 2 days of formal training.  Given the complexity of the Medicare program, 
this amount of training seems grossly inadequate.
Medicare Administrative Appeals  14 OEI-04-97-00160  The ALJs point out that on-the-job training is also inadequate.  For most ALJs, the on-the-
job training and experience is not extensive. According to SSA workload data, the average
ALJ spends only about 8 percent of his or her time hearing Medicare cases.  This equates 
to about 18 work days a year on average.
Many of the ALJs told us that resources which could help them come to informed rulings
are also lacking.  They said, for example, they frequently do not have access to useful 
Medicare resources such as HCFA rulings, HCFA cd-rom, contractor manuals, and
contractor publications.  Some of the ALJs did tell us that they had access to some of these 
resources, but most did not have them available and were not using them. Further, where
contractors have manuals to guide them though the appeals process, no comparable manual 
exists for ALJs.
EFFECTIVE PRACTICE:
Part B Cadre
In part to enhance the Medicare expertise of the SSA ALJ corps, SSAs Office of
Hearings and Appeals has taken some positive and helpful actions.  For example, in March, 
1998, SSA established a special cadre of ALJs to hear complex, high dollar Medicare Part
B cases.  A case must have at least $40,000 at issue and involve over 30 beneficiaries to be 
adjudicated by a cadre judge. The cadre, comprised of 28 ALJs, received additional
training and laptop computers with Internet access to HCFA 
resources. 
Although not exclusively dedicated to Medicare hearings, the Part B cadre focuses 
more of its time on Medicare than does the general ALJ corps. This focus promotes
development of Medicare expertise.  The cadre judges demonstrated a high degree 
of knowledge and concern for the Medicare program.  By contrast to the general ALJ 
corp of judges, the Part B cadre responded in high numbers to our Medicare survey
(89 percent vs 43 percent).  Further, their responses to our survey questions were much 
more informed and helpful than those from SSAs general ALJ corps.
Further, the cadre judges have considerable interaction and communication about the 
cases they adjudicate. Cadre judges share information through e-mail correspondence
and electronic bulletin boards specific to cadre judges.  They exchange information 
about particular types of cases to guide other cadre judges hearing similar cases.
Medicare Administrative Appeals  15 OEI-04-97-00160  R E C O M M E N D A T I O N S
Correct structural problems: The following recommendations will help correct structural
weaknesses in the administrative appeals process.  Unless corrected, these weaknesses will 
continue to adversly affect the administrative appeals process.
< Separate the administrative appeals process for beneficiaries and providers. 
This would allow beneficiary appeals to remain a non-adversarial appeal system
which many of our respondents deemed so important.  It would also allow HCFA 
to re-design an appeal system for providers and provide for a balanced hearing that
fairly represents all parties, including Medicare. 
<< Establish adversarial ALJ hearings for provider appeals. As recommended by 
many of the ALJs we surveyed, adversarial hearings are needed to assure fair and
impartial hearings for all parties.  The current non-adversarial process is one-sided 
and heavily weighted in favor of the provider. Further, under the current system,
the ALJ is often burdened with both presenting Medicares case as well as trying to 
make an impartial decision based on one sided evidence.
<< Develop thorough, parallel training programs for Medicare contractors and 
ALJs. HCFA can best determine what training is needed by each group. However,
the need for imparting consistent information to all parties in the appeals process is 
clear. This is particularly true because the appeals process is a hierarchical process
in which common knowledge and information is important. 
<< Develop and require both Medicare contractors and ALJs to apply the same
standards. In much the same fashion as common training elements are important 
to the process, so too, are common standards upon which to base decisions. Again,
because this process is hierarchical, the application of the same rules by all parties 
for decision-making is very important.
< Develop regulations for conducting Medicare ALJ appeals. Medicare claims 
are increasingly complex and costly. As this trend continues, HCFA is likely to see
more and more inconsistent rulings on appeals because of the absence of specific 
regulations to guide the appeals process.
<< Establish a case precedent system for Departmental Appeals Board rulings. 
By establishing precedence and means for communicating prior decisions, HCFA 
could keep the appeals pipeline clear of many "mistaken" decisions. The system
could operate much like the court system currently operates.  We believe the 
Medicare Administrative Appeals  OEI-04-97-00160 
16 practice of case precedence becomes very important in hierarchical hearings 
process.
< Create formal communication and information networks that span the entire 
appeals environment.  Enhancing the knowledge of all parties in the appeal
process should help assure consistency in appeal rulings.
Establish a dedicated ALJ corps: Considering the increasing importance and cost of
Medicare cases, it is time to consider more effective and cost efficient ways to allow 
beneficiaries and providers to appeal Medicare decisions. We believe that the best way to
improve the appeal function is to create a dedicated corps of ALJs who exclusively 
adjudicate Medicare. We suggest three organizational options for this corps.
1. Establish an ALJ corps in HHS.
< It could be in the Office of the Secretary and handle all Departmental
Administrative Law Judge hearings. 
< It could be free standing within the Department, and handle all 
Departmental Administrative Law Judge hearings.
< Itcould beinHCFA and handle exclusivelyMedicareand Medicaid
Administrative Law Judge hearings. 
2.  Create a dedicated corps in SSA, where some superstructure already exists. This 
corps would address only Medicare cases.
3. If HHS does not establish its own dedicated corps and does not negotiate for
one in SSA, it should examine expansion of the current Part B cadre to handle all 
Medicare appeals. While this would be an improvement, the current Part B cadre
judges in SSA are not dedicated to Medicare.  Therefore, Medicare cannot be 
assured the priority that would be available under a dedicated ALJ corps. 
Regardless of organizational location, the structural changes discussed above should be 
corrected. In so doing, care must be taken to maintain the independence of the appeals
process which has been evident in the Social Security ALJ corps, and at the same time 
make needed improvements.
Medicare Administrative Appeals  OEI-04-97-00160 
17 A G E N C Y C O M M E N T S
HCFA concurred with our recommendations. Their comments are in Appendix A.
Medicare Administrative Appeals  OEI-04-97-00160 
18 APPENDIX A