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Deconstructing Medicare’s Improvement Standard

For 81-year-old Wanda Papciak, a Pittsburgh resident, 2008 was a bad year. In April she had hip replacement surgery, was discharged home, readmitted to the hospital for an infection, and discharged to a skilled nursing facility (SNF) for rehabilitation therapy. She was readmitted to the hospital, discharged to a different SNF, and received more therapy until July 10, when she was told that services would end because she had met her “maximum potential for physical and occupational therapy.” Ms. Papciak and her family then filed an appeal, which was eventually denied by an administrative law judge. Having exhausted all the administrative remedies, they then filed suit in Federal court.

“Medicare won’t pay!” Patients and family caregivers dread these words when they ask why Mom’s home health aide won’t be coming any more or why Dad’s rehab in a SNF is ending. Hearing this conversation-ender, a person might envision a faceless government bureaucrat in Washington making these individual decisions. Actually, the home care agency or the SNF makes the decision to end services. It knows, based on experience, that a faceless bureaucrat in a private company called a fiscal intermediary under contract to Medicare will review its claims and approve or deny them based on the local coverage standards. (Medicare managed care plans operate under their own rules and can deny home health or rehab coverage even if the provider believes continued service is warranted, putting both provider and patient at financial risk.)

One of the most common reasons given for denying these claims is that the patient does not have “restorative potential,” is in a “stable disease state,” or is not meeting Medicare’s “improvement standard.” In other words, “You’re not going to get any better. From now on you just need custodial care.”

Recourse to the improvement standard has become so ingrained in practice that most providers assume that it is written in law or regulation. In fact, as the Center for Medicare Advocacy (CMA) points out, federal regulations state: “The restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities.”

If it’s not in the law or regulations, where does this justification for service denials come from? The CMA states that “the improvement standard derives instead from some Medicare manual provisions, which have been refined, simplified, and emphasized in contractors’ internal guidelines over time… [It] has become so much a part of Medicare culture that, even when presented with contrary evidence in the form of regulations and manual provisions, employees simply ignore it and state unequivocally that the improvement standard requires that coverage be terminated.”

In May, 14 members of Congress, led by Representative Joe Courtney, Democrat of Connecticut, wrote a letter to the Centers for Medicare and Medicaid Services (CMS) calling for “an expeditious review and elimination of the ’erroneous’ Improvement Standard in all care settings.” And two recent federal court rulings added some weight to their complaint.

In October, Christina Reiss, a judge in the U.S. District Court for Vermont, ruled that an administrative law judge had improperly applied a “stability” standard in rejecting coverage of home health services for Sandra Anderson, a 60-year-old woman who had suffered a stroke in 2004.

A month earlier, Wanda Papciak’s case finally came before a judge. Cathy Bisson, a judge in the U.S. District Court of W.D. Pennsylvania, ruled that the administrative law judge had failed to apply the correct legal standard (the need for skilled nursing care to maintain her level of functioning) and had failed to consider her condition as a whole.

What will be the impact of these two rulings? Judith Stein, executive director of CMA, said in an e-mail, “CMS is unlikely to appeal, and the agencies involved [the service providers and the fiscal intermediaries] do not have standing to appeal.” Neither of these cases was a class action suit, so the two rulings apply only to the facts in these cases. CMA would like President Obama to issue a clear directive in an executive order stating that “an ability to improve shall not be the deciding factor in making any Medicare coverage determination.”

Such an order, the organization says, would “go a long way toward removing a major barrier to Medicare coverage and necessary care for older and disabled people living with chronic conditions” and would also have a positive effect on people who are covered by private insurance.

Having experienced the frustrating “making progress” dance with insurers to keep essential services in place for my late husband, I understand the problem. However, opening this path to almost unlimited coverage without specific definitions and guidelines, as well as monitoring of providers and fiscal intermediaries, would substantially increase Medicare costs and make it vulnerable to fraud. Since one of the pillars of health care reform is reducing Medicare costs, such a move seems unlikely. Furthermore, given the idiosyncratic nature of recovery, rehab, and maintaining function for a person with a chronic illness or disability, it is difficult to write appropriately flexible yet realistic regulations and guidelines.

In the meantime, patients and family caregivers who feel that services are being denied unfairly can appeal to their state’s Quality Improvement Organization. The appeal process can be lengthy, and if the appeal is denied, the patient is liable for the costs of services provided during the appeal process. Careful documentation of the patient’s condition and capacity for progress is essential. But as these new rulings show, sometimes the law is on the patient’s side.

Carol Levine is director of the Families and Health Care Project of the United Health Care Fund and a Hastings Center fellow.

Published on: November 23, 2010
Published in: Health and Health Care

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