Against Hearings in Medicare?

As the backlog of Medicare appeals indicates, Medicare claimants are seeking many more hearings than we can currently provide. The mismatch makes a fundamental question particularly acute: Why do we hold hearings to review Medicare coverage decisions in the first place?

It’s a question worth asking. The Affordable Care Act mandated that denials of private health insurance coverage be reviewed by external, contract medical specialists, without a hearing. (See here.) If we are comfortable with private, sometimes profit-motivated coverage decisions obtaining external review review by someone other than an Administrative Law Judge (ALJ), without a hearing, why do we feel differently about Medicare coverage decisions?

It’s not because of the accuracy benefit of an ALJ hearing.  If all we cared about were accuracy in resolving Medicare claims—cost-effective application of coverage criteria to claims, what Jerry Mashaw called “bureaucratic rationality”—I think we would offer Medicare claimants something along the lines of the more streamlined private sector paper external review process rather than an ALJ hearing. These claims ultimately depend on the “medical necessity” of the treatment or service in question, an issue of medical judgment about symptoms and science. As Congresswoman Speier intimated in one of the congressional hearings on Medicare’s backlog over the summer (see minute 13 of part II here), a professionally-trained specialist reviewing the record may be better positioned to come to the “right” answer about that than a generalist ALJ listening to the claimant’s explanation. So in her words, it is somewhat “odd” that we have ALJs do this work in the first place. And, anyway, by my math a private contractual review would cost about half as much as an ALJ hearing, so even if the ALJ hearing has some marginal accuracy advantage it doesn’t appear to be worth its cost.

We offer ALJ hearings to Medicare claimants because we care about more than accuracy.  Procedural justice tells us that a claimant should have an opportunity to be heard—literally—when she disagrees with the government’s decision about her deservedness for healthcare coverage.  And it seems safe to assume that ALJs are much better at doling out procedural justice than private contractors, however that concept is understood.

That is a powerful argument in favor of providing ALJ hearings.  But at the same time, it seems to me that most of the claimants who make up Medicare’s backlog don’t really benefit from being heard for its own sake. They are big hospitals or durable medical equipment manufacturers who want to reverse a denial of coverage they think was wrong, and benefit from a hearing only when they win.  There is no inherent procedural justice value to giving such a claimant a hearing.  So why don’t we offer those claimants the option of getting the outcome they want (reversal) through a more streamlined process, perhaps along the lines of private-sector external review, that costs much less to administer than an ALJ hearing?

I’ll stop asking rhetorical questions: I think we should, and am glad to see the Office of Medicare Hearings and Appeals already taking tentative steps in that direction through its statistical sampling initiative.  The next post in this mini-series will give an overview of the broader reforms I have in mind.

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