NCPA - National Center for Policy Analysis

Bureaucrats In Charge Of Medicare Denials

May 16, 2000

The Patients' Bill of Rights is supposed to address the concern that managed care organizations allow officials to deny medical claims on the basis that certain treatments or procedures were not medically necessary. Supporters of patients' rights legislation say decisions of medical necessity should be made by physicians.

But in Medicare, the federal health program for the elderly, bureaucrats regularly make such determinations, note experts. However, unlike managed care organizations, doctors have no way of determining in advance whether a given treatment or procedure will be covered.

  • The Secretary of the Department of Health and Human Services is legally authorized to make determinations about what is "reasonable" and "necessary" medical service.
  • Today, the Medicare bureaucracy and its contractors often make such determinations and deny payment for medical services.
  • According to 1997 data from the Health Care Financing Administration (HCFA), the agency that administers Medicare, 19 percent of the total of Medicare Part B claims denied were denied on the basis of "medical necessity."

In many cases these physicians' services are formally "covered" by Medicare, but don't meet specific conditions that either HCFA or their contractors say would make those services necessary. But unlike managed care, where physicians submit proposed treatments for review and approval beforehand, Medicare doctors cannot know in advance.

If the payment is denied by HCFA, they must go through an administrative appeals process. In 1999, HCFA admitted that for appeals of claims under Medicare Part B alone, the average time for administrative law judges to render a decision was 524 days.

Furthermore, if the claim is denied, the physician may be subjected to civil penalties and the application of the False Claims Act, with treble damages and mandatory civil penalties in the event doctors are found to submit claims that are not "medically necessary."

Source: Robert E. Moffit, et al., "How Medicare Bureaucracy Limits The Range Of Medical Treatments Available To Seniors," Heritage Lecture No. 666, May 12, 2000, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400.


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