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Statement of Need: Results of HCFA's efforts to gain more beneficiary input and studies by various external organizations clearly indicate the need for more rapid turnaround on decisions involving medically necessary, covered services. Delays in such decisions could affect quality of care and the health status of Medicare enrollees. In addition, the need for expedited review in cases where a beneficiary's life, health status, or ability to function could be in serious jeopardy has been identified, and is becoming increasingly available to under-65 enrollees of managed care plans. Last, there has been confusion as to the appeal rights of Medicare enrollees who have received covered services, particularly from skilled nursing facilities and home health agencies, but for whom such services are subsequently terminated or reduced. This rule would clarify the Medicare enrollee's right to appeal in these situations.

Summary of the Legal Basis: Section 1876(c)(5) of the Social Security Act requires that the contracting HMO/CMP provide meaningful procedures for hearing and resolving grievances between the organization and the member. Subpart Q of 42 part 417 sets forth specific regulatory requirements for implementation of this provision. In a final regulation issued in November 1994, HCPPs were required to provide the appeal protections of this subpart.

Alternatives: Various time frames for conducting preservice and other service-related denials were considered. This regulation proposes following time frames being recommended for adoption by the National Association of Insurance Commissioners (NAIC) in their Health Carrier Grievance Procedure Model Act, which will likely be used by State legislatures as a licensure requirement for HMOs and other managed care plans. Conformity with NAIC model requirements will enhance consumer/beneficiary understanding and utilization of appeal protections, eliminate confusion on the part of health plan staff responsible for the appeals process, and improve plan performance in this area.

Anticipated Costs and Benefits: Although the costs and benefits associated with this rulemaking have not yet been estimated, no significant budgetary impact is anticipated. Medicare contracting health plans would experience additional costs associated with these appeals improvements, including a higher volume of appeals. These costs would be absorbed within the plans' Medicare payment amount. HCFA will experience some additional administrative costs associated with expansion of its reconsideration contract. These costs are justified by the improved protections available to beneficiaries who choose Medicare managed care. The appeals process is an integral and critical component to prepaid, managed systems of care. That is, the incentives of prepaid health plans to manage utilization of services is balanced by quality checks and balances, including the appeals process. A strong appeals process helps ensure that Medicare enrollees receive all medically necessary covered services.

Risks: There is bipartisan and industry support for this rule and there are no apparent risks.