Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

SEPTEMBER 1999 

OEI-04-97-00160 

MEDICARE ADMINISTRATIVE 

APPEALS 

ALJ Hearing Process 
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 

Janet Miller, Project Leader 

Josiah Townsel, Team Leader 

Dwayne Grant 

HEADQUARTERS 

Stuart Wright, Associate Director 

Barbara Tedesco, Statistician 

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 
TABLE OF CONTENTS 

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

Minimal Experience and Training of ALJs .................................. 14

RECOMMENDATIONS .................................................... 16

AGENCY COMMENTS ................................................ 18

APPENDIX A: HCFA COMMENTS .......................................... 19
EXECUTIVE SUMMARY 

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 Medicare’s 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 
INTRODUCTION 

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

DIVISION OF 

MEDICARE PART B 

(SSA Office of Hearings and 

Appeals) 

ALJ 

HEARING 

(SSA Office of 

Hearings and 

Appeals) 

ALJ 

HEARING 

(SSA Office of 

Hearings and 

Appeals) 

REVIEW 

(Carrier) 

CARRIER HEARING 

(Carrier) 

DEPARTMENTAL 

APPEALS BOARD 

(DHHS) 

DEPARTMENTAL 

APPEALS BOARD 

(DHHS) 

RECONSIDERATION 

(RHHI) 

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 

Overall 

PART A 

Home Health 

Claims Only 

PART B 

# Claims Processed 142,086,669 14,680,576 666,664,972 

# Claims Denied 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 didn’t 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 President’s Council on 

Integrity and Efficiency. 

Medicare Administrative Appeals 7 OEI-04-97-00160 
FINDINGS 

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 decisions by ALJs. 

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. 

Medicare’s 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 contractor’s 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. 

Part B carrier began a dialog with ALJs in November of 1995. 

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. 

ALJ contained a case summary which clearly profiled the cases, and noted the 

specific issue before the ALJ. 

plainly marked and tabbed exhibits. 

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. 

of contractor files and documents. 

topics such as claims processing, carrier medical review process, local medical review 

policies, and sample case analysis. 

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. 

claim decisions decreased from 59 percent in FY 1994 to 31 percent in FY 1997. 

This 

The dialog was 

It was more specific than that required by HCFA. Each file sent to an 

To aid use of the files by ALJs, the contractor used 

Both the SSA Office of Hearings and Appeals 

Further, it educated ALJs on the type and content 

The ALJ workshops are comprehensive, covering 

The chief hearing officer at Transamerica told us 

To illustrate, at this Medicare contractor ALJ reversals on 

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 

provider’s case. Because the contractor decision is represented only by a written record, 

the ALJs, in effect, are required to present Medicare’s case from that record. The ALJ is 

also required to rebut the provider’s 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 Medicare’s 

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 DHHS’s Departmental Appeals Board and SSA’s 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 SSA’s 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 Appeal’s 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 problems with the Medicare administrative appeals system is the 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-thejob 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, SSA’s Office of 

Hearings and Appeals has taken some positive and helpful actions. 

1998, SSA established a special cadre of ALJs to hear complex, high dollar Medicare Part 

B cases. 

adjudicated by a cadre judge. 

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. 

development of Medicare expertise. 

of knowledge and concern for the Medicare program. 

corp of judges, the Part B cadre responded in high numbers to our Medicare survey 

(89 percent vs 43 percent). 

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. 

and electronic bulletin boards specific to cadre judges. 

about particular types of cases to guide other cadre judges hearing similar cases. 

For example, in March, 

A case must have at least $40,000 at issue and involve over 30 beneficiaries to be 

The cadre, comprised of 28 ALJs, received additional 

This focus promotes 

The cadre judges demonstrated a high degree 

By contrast to the general ALJ 

Further, their responses to our survey questions were much 

Cadre judges share information through e-mail correspondence 

They exchange information 

Medicare Administrative Appeals 15 OEI-04-97-00160 
<

<

<

<

RECOMMENDATIONS 

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 Medicare’s 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 

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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. 

< It could be in HCFA and handle exclusively Medicare and 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. 

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AGENCY COMMENTS 

HCFA concurred with our recommendations. Their comments are in Appendix A. 

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APPENDIX A