Medicare’s fee-for-service health care program consists of two parts—A and B. Part A covers inpatient hospital, skilled nursing facility, hospice, and certain home health services. Part B covers physician services, diagnostic tests, and related services and supplies. Medicare providers, on behalf of their beneficiaries, can appeal denied claims for services. Currently, there are four levels of administrative appeal (see fig. 1). Appeals for denied Part A and Part B Medicare claims currently follow similar, but not identical, paths. At the first level of appeal, the process is the same for both Part A and Part B denials. The Medicare claims administration contractor reexamines the claim along with any additional documentation provided by the appellant. At this level, in general, only written materials are reviewed; however, Part B appellants may request telephone hearings. If the appellant of a Part B claim is dissatisfied with a decision at the first level, he may proceed to the second level of review, conducted by the Medicare contractor. At this stage, the file is once again reviewed, including any additional documentation submitted by the appellant, and a hearing may be conducted. However, there is no comparable second level of review by Medicare contractors of Part A appeals. Appellants of both Part A and Part B denied claims who remain dissatisfied with the decisions rendered by Medicare contractors may appeal to the third level—SSA’s OHA—where appeals are adjudicated by ALJs. At this level, appellants have the option of attending a hearing conducted by telephone, by videoconference, or in person. OHA’s ALJs adjudicated the appeal of about 122,000 Medicare claims in fiscal year 2003. Should appellants also be dissatisfied with the ALJ’s decision, they can appeal to the MAC. The MAC’s adjudication is the fourth and final level of the administrative appeals process. It is based on a review of OHA’s decision; the MAC does not conduct hearings. Appellants who have had their appeals denied at all levels of the administrative appeals process have the option of appealing to a federal district court. In addition to preparing for the transition of SSA’s appeals workload, HHS continues to plan numerous administrative and structural changes required by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA). Most of these changes have not yet been implemented, including the finalization of new regulations. Among other things, BIPA mandated shorter time frames; expedited procedures for processing Medicare appeals at all levels; and the establishment of new contractors, known as qualified independent contractors (QIC). Contracts for QICs have not yet been awarded, but once QICs become operational, they will provide a new second level of adjudication for Part A appeals and replace the existing second level of the appeals process for Part B claims. As noted earlier, figure 1 shows the appeals bodies that are currently involved in Medicare appeals. It also shows those that will be responsible for resolving Medicare appeals once BIPA has been fully implemented and OHA’s workload has been transferred to HHS. The transfer of the appeals workload from SSA to HHS is not a new proposal. As early as 1988, while SSA was still a part of HHS, discussion regarding the transfer of this function was already under way and, throughout the years, the development of potential transfer plans and strategies has continued. Discussions were active as late as 2003, culminating in SSA’s decision not to seek funding for Medicare appeals in its fiscal year 2004 budget request. Instead, HHS requested and received funding to cover the cost in its fiscal year 2004 budget. Under a reimbursable agreement with CMS, SSA will continue to hear Medicare appeals until September 30, 2005. In response to MMA’s mandate to transfer the workload, SSA and HHS created an interagency team that drafted the required transfer plan. The team has continued to meet to deliberate various aspects of the plan and discuss its implementation. Representatives from both agencies have stressed their commitment to ensuring a successful transfer of the Medicare appeals process from SSA to HHS. The plan indicates that HHS will begin to exercise adjudicative authority for Part A and Part B ALJ appeals that are received on or after July 1, 2005. The plan notes that this schedule is being adopted so SSA may concentrate on reducing its pending workload between July 1, 2005 and September 30, 2005 and to permit HHS to prepare for and begin conducting ALJ hearings. According to MMA, the plan is required to provide information regarding 13 key elements. For purposes of this report, we have grouped these elements into six broader categories—timetable, scope of work, adjudication guidance, operational matters, staffing, and oversight. Table 1 lists these six categories and related elements and identifies the act’s requirements for each element. We found that HHS’s and SSA’s plan is too vague to serve as a blueprint for the transfer’s implementation. We evaluated the plan’s 13 elements, mandated by MMA, and grouped them into six categories to evaluate whether the plan was sufficient to ensure a smooth and timely transition. We found that in virtually every category, the information contained in the plan, as well as documentation provided to us in the course of our work, lacked sufficient detail to ensure that HHS will achieve a smooth and timely transfer. Further, the lack of detail and the fact that some aspects of the plan have not yet been finalized raise serious questions as to whether HHS and SSA have considered the breadth of challenges inherent in the transfer. Our review suggests that the plan’s deficiencies, if not corrected, may compromise service to appellants. (App. I contains a summary evaluation of our analysis of the plan.) Transferring SSA’s annual workload of appeals—about 122,000 claims in fiscal year 2003—to HHS requires the development of many interrelated components. For example, deciding where ALJs should be geographically located affects hiring and training plans and the need for office space. Because the transfer date is approaching, many of these activities must be completed simultaneously so that HHS can ensure that service to appellants will not be disrupted. With the exception of the development of a case tracking system, the plan contains few milestones for completing tasks. Some of the few dates that are mentioned merely reflect the MMA- imposed deadlines between July 1, 2005, and October 1, 2005, without noting interim milestones. For example, there are no milestone dates associated with the vital tasks of producing training materials for newly hired ALJs or locating office space for ALJs to conduct hearings. Other elements of the plan are addressed without ever mentioning dates, such as the ensuring of independence for ALJs and the establishment of performance standards for them. Moreover, the plan does not assign responsibility to any group, office, or individual to perform the necessary tasks to execute key elements of the plan. In our view, the level of complexity associated with the transfer would warrant the development of a detailed schematic outlining all of the steps that need to be taken, as well as the corresponding dates for completing these steps, to ensure that the plan could be successfully executed. In response to our inquiries, the transfer team reported that it did not prepare a project plan nor could it supply information about ambiguous or absent milestones. Without specific milestones, HHS does not have a management tool for determining whether the general dates contained in the plan can be met as scheduled. The transfer plan also lacks a contingency component, to be used in the event that something prevents the transfer from occurring as scheduled. Given the importance of having a system in place for adjudicating appeals, we view this as a considerable oversight. Failure to successfully implement even one element of the plan, such as the development of a geographic distribution plan to ensure appellants appropriate access to ALJs throughout the country, could derail the transfer. Although this is a critical element of the plan, there is no contingency provision. HHS officials maintained that they are confident the transfer will be executed in a timely manner, eliminating the need for a contingency plan. However, they indicated that if necessary, they could renew their reimbursable agreement with SSA to adjudicate Medicare appeals for another year. In contrast, SSA officials emphasized to us that responsibility for all Medicare appeals will pass, under MMA, to HHS on October 1, 2005. According to them, it is not a given that SSA will have the capability, or even the legal authority as of that date, to adjudicate Medicare appeals under any arrangement with HHS. In our view, this is the type of issue a contingency plan could address. In agency comments, both SSA and HHS reported that they have identified a mechanism for HHS to continue to use SSA ALJs to adjudicate Medicare appeals after the date of the transfer, if necessary. However, neither agency provided details concerning this mechanism in their comments. As a result, we are unable to evaluate it. Understanding the size of the appeals workload is a critical first step in planning for the transfer because other decisions, such as the number of ALJs needed to complete the adjudications, are predicated on it. We found that the transfer plan does not present a thorough analysis of the expected workload and the costs to transfer the function and adjudicate appeals. Further, the plan is based on unreliable staff and cost data, which undermine the validity of the plan’s projections. MMA mandated that certain external factors be incorporated into the plan’s analyses, such as changes in the number of appeals and the effect of statutory changes. However, the plan did not contain a detailed discussion of the implications of these factors on workload and costs. HHS’s plan to initially hire 50 ALJs is based on information from OHA that it uses an average of 46 ALJs to adjudicate Medicare appeals each month.