Medicare Program: Changes to the Medicare Claims Appeal Procedures, 11420-11499 [05-4062]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 70, Number 44 (Tuesday, March 8, 2005)]
[Rules and Regulations]
[Pages 11420-11499]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-4062]



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Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 401 and 405



Medicare Program: Changes to the Medicare Claims Appeal Procedures; 
Interim Final Rule

Federal Register / Vol. 70, No. 44 / Tuesday, March 8, 2005 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 401 and 405

[CMS-4064-IFC]
RIN 0938-AM73


Medicare Program: Changes to the Medicare Claims Appeal 
Procedures

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: Medicare beneficiaries and, under certain circumstances, 
providers and suppliers of health care services, can appeal adverse 
determinations regarding claims for benefits under Medicare Part A and 
Part B under sections 1869 and 1879 of the Social Security Act (the 
Act). Section 521 of the Medicare, Medicaid, and SCHIP Benefits Act of 
2000 (BIPA) amended section 1869 of the Act to provide for significant 
changes to the Medicare claims appeal procedures. This interim final 
rule responds to comments on the November 15, 2002 proposed rule 
regarding changes to these appeal procedures, establishes the 
implementing regulations, and explains how the new procedures will be 
implemented. It also sets forth provisions that are needed to implement 
the new statutory requirements enacted in Title IX of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).

DATES: Effective date: These regulations are effective on May 1, 2005. 
However, in view of the wide span of applicability of these rules and 
the complex, intertwined nature of the affected appeal procedures, not 
all of these provisions can be implemented simultaneously. Please see 
section I.E. of the preamble for a full description of the 
implementation approach.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on May 9, 2005.

ADDRESSES: In commenting, please refer to file code CMS-4064-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of three ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to https://www.cms.hhs.gov/regulations/
ecomments. (Attachments should be in Microsoft Word, WordPerfect, or 
Excel; however, we prefer Microsoft Word.)
    2. By mail. You may mail written comments (one original and two 
copies) to the following address ONLY: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: CMS-4064-
IFC, P.O. Box 8011, Baltimore, MD 21244-8011.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section below.

FOR FURTHER INFORMATION CONTACT: Michele Edmondson-Parrott, (410) 786-
6478 (for issues relating to general appeal rights). Janet Miller, 
(410) 786-1588 (for issues relating to assignment or authorized 
representatives). Jennifer Eichhorn Frantz, (410) 786-9531 (for issues 
relating to initial determinations and redeterminations). Arrah Tabe-
Bedward, (410) 786-7129 or Jennifer Eichhorn Frantz, (410) 786-9531 
(for issues relating to Qualified Independent Contractor (QIC) 
reconsiderations). Arrah Tabe-Bedward, (410) 786-7129 or John Scott 
(410) 786-3636 (for issues relating to expedited access to judicial 
review, Administrative Law Judge (ALJ) hearings and Medicare Appeals 
Council (MAC) reviews). Jennifer Collins, (410) 786-1404 or Rosalind 
Little, (410) 786-6972 (for issues relating to reopenings).

SUPPLEMENTARY INFORMATION: 
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-4064-IFC and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. After the close of the 
comment period, CMS posts all electronic comments received before the 
close of the comment period on its public website. Comments received 
timely will be available for public inspection as they are received, 
generally beginning approximately 3 weeks after publication of a 
document, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, Maryland 21244, Monday 
through Friday of each week from 8:30 a.m. to 4 p.m. To schedule an 
appointment to view public comments, phone (410) 786-7197.
    Copies: To order copies of the Federal Register containing this 
document, send your request to: New Orders, Superintendent of 
Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954. Specify the date 
of the issue requested and enclose a check or money order payable to 
the Superintendent of Documents, or enclose your Visa or Master Card 
number and expiration date. Credit card orders can also be placed by 
calling the order desk at (202) 512-1800 (or toll-free at 1-888-293-
6498) or by faxing to (202) 512-2250. The cost for each copy is $10. As 
an alternative, you can view and photocopy the Federal Register 
document at most libraries designated as Federal Depository Libraries 
and at many other public and academic libraries throughout the country 
that receive the Federal Register.
    This Federal Register document is also available from the Federal 
Register online database through GPO Access, a service of the U.S. 
Government Printing Office. The web site address is: https://
www.access.gpo.gov/nara/.
    To assist readers in referencing sections contained in this 
preamble, we are providing the following table of contents.

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Table of Contents

I. Background
    A. Overview of Existing Medicare Program
    B. Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act (BIPA) of 2000
    C. Related Provisions of the Medicare Prescription Drug, 
Improvement, and Modernization Act (MMA) of 2003
    D. Codification of Regulations
    E. Implementation of the New Appeal Requirements
II. Analysis of and Responses to Public Comments
    A. Overview of Comments on November 15, 2002 Proposed Rule
    B. Appeal Rights (Sec.  405.900 through Sec.  405.912)
    1. Basis and Scope, Definitions, General Rules, and Parties to 
Initial Determinations, Redeterminations, Reconsiderations, Hearings 
and Reviews (Sec.  405.902 through Sec.  405.906)
    2. Medicaid State Agencies (Sec.  405.908)
    3. Appointed Representatives (Sec.  405.910)
    4. Assignment of Appeal Rights (Sec.  405.912)
    5. Initial Determinations (Sec.  405.920 through Sec.  405.928)
    6. Redeterminations (Sec.  405.940 through Sec.  405.958)
    7. Redetermination, Notification, and Subsequent Limitations on 
Evidence (Sec.  405.954, Sec.  405.956, Sec.  405.966)
    8. Reconsiderations (Sec.  405.960 through Sec.  405.978)
    9. Conduct of a Reconsideration (Sec.  405.968 and Sec.  
405.976)
    10. Reopenings of Initial Determinations, Redeterminations, 
Reconsiderations, Hearings, and Reviews (Sec.  405.980 through Sec.  
405.986)
    11. Expedited Access to Judicial Review (Sec.  405.990)
    12. ALJ Hearings (Sec.  405.1000 through Sec.  405.1066)
    13. Remand Authority (Sec.  405.1034)
    14. When May an ALJ Consolidate a Hearing? (Sec.  405.1044)
    15. When May an ALJ Dismiss a Request for Hearing? (Sec.  
405.1052)
    16. Content of ALJ's Decision (Sec.  405.1046)
    17. Appeals Involving Overpayments (Sec.  405.1064)
    18. Review by the MAC and Judicial Review (Sec.  405.1100 
through Sec.  405.1140)
III. Response to Comments
IV. Collection of Information Requirements
V. Regulatory Impact Analysis
VI. Waiver of Proposed Rulemaking

I. Background

[If you choose to comment on issues in this section, please include the 
caption ``BACKGROUND'' at the beginning of your comments.]

A. Overview of Existing Medicare Program

    The original Medicare program consists of two parts (Part A and 
Part B). Part A, known as the hospital insurance program, covers 
certain care provided to inpatients in hospitals, critical access 
hospitals, and skilled nursing facilities, as well as hospice care and 
some home health care. Part B, the supplementary medical insurance 
program, covers certain physicians' services, outpatient hospital care, 
and other medical services that are not covered under Part A.
    In addition to the original Medicare program, beneficiaries may 
elect to receive health care coverage under Part C of Medicare, the 
Medicare Advantage (MA) program. Under the MA program, an individual is 
entitled to those items and services (other than hospice care) for 
which benefits are available under Part A and Part B. An MA plan can 
provide additional health care items and services that are not covered 
under the original Medicare program. Beginning in January 2006, 
beneficiaries also can elect to receive prescription drug coverage 
under Part D of Medicare through the Medicare prescription drug 
benefit.
    Under the original Medicare program, a beneficiary can generally 
obtain health services from any institution, agency, or person 
qualified to participate in the Medicare program that undertakes to 
provide the service to the individual. After the care is provided, the 
provider or supplier (or, in some cases, a beneficiary) can submit a 
claim for benefits under the Medicare program to the appropriate 
government contractor, either a fiscal intermediary (FI) (for all Part 
A claims and certain Part B claims) or a carrier (for most claims under 
Part B). If the claim is for an item or service that falls within a 
Medicare benefit category, is reasonable and necessary for the 
individual, and is not otherwise excluded by statute or rule, then the 
contractor pays the claim. However, the Medicare program does not cover 
all health care expenses. Therefore, if the Medicare contractor 
determines that the medical care is not covered under the Medicare 
program, then it denies the claim.
    Generally, when a contractor denies a claim, it notifies the 
provider, supplier, or beneficiary of the denial and offers the 
opportunity to appeal the denial. The existing appeal procedures for 
original Medicare are set forth in regulations at 42 CFR part 405, 
subparts G and H. Separate procedures for appealing determinations made 
under the Part C program are set forth at subpart M of part 422. There 
is a similar, separate appeals process for Part D claim determinations 
set forth at subpart M of Part 423. After an appellant has exhausted 
the administrative appeal procedures offered under the Medicare 
program, the Medicare statute provides the opportunity for a 
dissatisfied individual to seek review in Federal court.
    Consistent with section 1852(g)(5) of the Act, the MA regulations 
provide that enrollees in MA plans who are dissatisfied with 
determinations regarding their Part C benefits have the right to a 
hearing before an Administrative Law Judge (ALJ), review by the 
Departmental Appeals Board (DAB), and judicial review at the Federal 
district court level in much the same manner as beneficiaries have 
under the fee-for-service Medicare program. These regulations are 
codified at Sec. Sec.  422.600 through 422.612. Section 1860D-4(h) of 
the Act establishes similar rights for enrollees in Medicare 
prescription drug plans. To the extent that there are any differences 
in the appeal procedures for these enrollees, we will address those 
differences in future Part C and Part D rulemaking documents.
    The regulations in part 405 subpart G beginning at Sec.  405.701 
describe reconsiderations and appeals under Medicare Part A. When a 
Medicare contractor makes a determination for a Part A claim, the 
beneficiary or, in some circumstances, the provider, can appeal the 
determination. (Consistent with sections 1861(u) and 1866(e) of the Act 
and Sec.  400.202, the term ``provider'' generally includes hospitals, 
skilled nursing facilities (SNFs), home health agencies (HHAs), 
comprehensive outpatient rehabilitation facilities (CORFs), and 
hospices, as well as certain clinics, rehabilitation agencies, and 
public health agencies.) If the determination is appealed, then the 
contractor reconsiders the initial determination. If the contractor 
upholds the original determination, a party can request a hearing 
before an ALJ, provided that the amount in controversy is at least 
$100. If a party is dissatisfied with the ALJ's decision, a party can 
request review by the DAB. The component within the DAB that is 
responsible for Medicare claim appeals is the Medicare Appeals Council 
(MAC). (Although the Medicare appeals regulations in part 405 contain 
some limited provisions regarding ALJ and MAC proceedings, these 
proceedings are generally governed by the Social Security 
Administration (SSA) regulations at 20 CFR part 404, subpart J.) MAC 
decisions constitute the final decision of the Secretary and can be 
appealed to a Federal court. Generally, the lower level of appeal must 
be exhausted before the appeal can be elevated to the next level.
    Medicare Part B appeal procedures are set forth in part 405 subpart 
H (Sec.  405.801 et seq.). Under these

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regulations, beneficiaries and suppliers that accept assignment for 
Medicare claims can appeal to a Medicare contractor for a review of the 
contractor's initial determination that a claim cannot be paid, either 
in full or in part. (The term ``supplier'' is defined under section 
1861(d) of the Act, as amended by section 901(b) of the MMA, and means 
a physician or other practitioner, a facility, or other entity (other 
than a provider of services that furnishes items or services) under 
Medicare. This regulation will use the term ``supplier'' to include 
physicians.) Suppliers that do not take assignment and providers, in 
some circumstances, also have appeal rights.
    If the contractor's review results in a continued denial of the 
claim, and the amount in controversy is at least $100, the appellant 
can request a second level appeal known as a ``fair hearing.'' If the 
hearing officer upholds the denial, the appellant can request a hearing 
before an ALJ, provided that the appellant meets the amount-in-
controversy requirement. (We published a ruling, CMS Ruling No. 02-1, 
which implemented the $100 amount-in-controversy requirement for Part B 
ALJ hearings specified in section 521 of BIPA for initial 
determinations made on or after October 1, 2002. See 67 FR 62478, 62480 
(Oct. 7, 2002). For initial determinations prior to October 1, 2002, 
the amount in controversy threshold was $500 for all services other 
than home health ($100).) Subsequent aspects of the appeals process for 
Part B claims are identical to those described above for a Part A 
claim.

B. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection 
Act of 2000

    Section 521 of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000, (Pub. L. 106-554) (BIPA), 
amended section 1869 of the Act to require revisions to the Medicare 
fee-for-service appeals process. Among the major changes required by 
the BIPA amendments are--
     Establishing a uniform process for handling Medicare Part 
A and Part B appeals, including the introduction of a new level of 
appeal for Part A claims;
     Revising the time frames for filing a request for Part A 
and Part B appeals;
     Imposing a 30-day time frame for certain 
``redeterminations'' made by the contractors;
     Requiring the establishment of a new appeals entity, the 
qualified independent contractor (QIC), to conduct ``reconsiderations'' 
of contractors' initial determinations (including redeterminations) and 
allowing appellants to escalate cases to an ALJ hearing, if 
reconsiderations are not completed within 30 days;
     Establishing a uniform amount in controversy threshold of 
$100 for Part B appeals at the ALJ level;
     Imposing 90-day time limits for conducting ALJ and DAB 
appeals and allowing appellants to escalate cases to the next level of 
appeal if ALJs or the MAC do not meet the 90-day deadline; and
     Imposing ``de novo'' review when the MAC reviews an ALJ 
decision made after a hearing.
    On November 15, 2002, we published in the Federal Register a 
comprehensive proposed rule (67 FR 69312) to implement the provisions 
of section 521 of the BIPA, as well as other complementary changes 
needed to improve the Medicare claim appeal procedures.
    Revised section 1869 of the Act also requires that the Secretary 
establish a process by which a beneficiary can obtain an expedited 
determination if the beneficiary receives a notice from a provider of 
services that the provider plans to terminate all services or discharge 
the beneficiary from the provider. Previously, this right to an 
expedited review existed under statute only for hospital discharges 
(under sections 1154 and 1155 of the Act). On November 26, 2004, we 
published a separate final rule, Expedited Determination Procedures for 
Provider Service Terminations (69 FR 69252), to respond to comments on 
that aspect of the November 15, 2002 proposed rule and to set forth the 
regulations needed to establish new expedited review procedures for 
provider service terminations.

C. Related Provisions of the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA)

    On December 8, 2003, the Medicare Prescription Drug, Improvement, 
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted. The 
MMA includes a number of provisions that affect the Medicare claim 
appeals process, each of which is summarized below. To the extent that 
the new statutory language has necessitated revisions or additions to 
our proposed regulations to ensure that they conform to the MMA, we 
have incorporated the needed changes into this interim final rule. A 
brief summary of these provisions follows. To the extent that the MMA 
provisions entail regulatory changes, a discussion of those changes is 
set forth in the appropriate section of this preamble.
1. Requirement To Transfer the Administrative Law Judge Function to the 
Department of Health and Human Services (Section 931 of the MMA)
    Section 931 of the MMA requires transfer of the functions of 
administrative law judges (ALJs) responsible for hearing appeals under 
title XVIII of the Act (and related provisions of title XI of the Act) 
from the Commissioner of SSA to the Secretary of the Department of 
Health and Human Services (DHHS). These ALJs are required to be 
organizationally and functionally independent from CMS and must report 
to and fall under the general supervision of the Secretary of DHHS. The 
DHHS and SSA were required to jointly develop a plan to facilitate this 
transfer not later than April 1, 2004, and the transfer will take place 
no earlier than July 1, 2005, but not later than October 1, 2005. On 
March 25, 2004, DHHS and SSA submitted a report to the Congress that 
describes the process through which DHHS and SSA will accomplish the 
transfer of responsibility for the ALJ function. A copy of that report 
is available online at https://www.hhs.gov/medicare/appealsrpt.pdf.
2. Process for Expedited Access to Judicial Review (Section 932 of the 
MMA)
    Section 1869(b) of the Act provides for expedited access to 
judicial review in situations involving Medicare claims appeals. 
Section 932 of the MMA amends section 1869(b) of the Act by requiring a 
review entity to respond to a request for expedited access to judicial 
review in writing within 60 days after receiving the request. The term 
``review entity'' means up to three reviewers who are ALJs or members 
of the Departmental Appeals Board as determined by the Secretary. If 
the review entity does not act within the 60-day deadline, then the 
party can request judicial review. Expedited access to judicial review 
can be granted when the MAC does not have authority to decide questions 
of law or regulation relevant to matters in controversy and there is no 
material issue of fact in dispute. See Sec.  405.990.
3. Revisions to the Medicare Fee-for-Service Appeals Process (Section 
933 of the MMA)

a. Requirement for Full and Early Presentation of Evidence (Section 
933(a))

    Section 933(a) of the MMA amends section 1869(b) of the Act to 
require providers and suppliers to present any evidence for an appeal 
no later than the

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QIC reconsideration level, unless there is good cause that prevented 
the timely introduction of the evidence. In this interim final rule 
with comment, we are adopting regulations to specify that in the 
absence of good cause, a provider, supplier, or beneficiary represented 
by a provider or supplier must present evidence at the QIC level. 
Evidence not presented by the parties at the QIC level cannot be 
introduced at a higher level of appeal. See Sec.  405.956(b)(8), Sec.  
405.966(a), Sec.  405.1018, and Sec.  405.1122(c).

b. Use of Patients' Medical Records (Section 933(b))

    Section 933(b) of the MMA amends section 1869(c)(3)(B)(i) of the 
Act to require QICs to review an individual's medical records when 
conducting a reconsideration involving medical necessity. See Sec.  
405.968(a).

c. Notice Requirements for Medicare Appeals (Section 933(c))

    Section 933(c) of the MMA amends sections 1869(a), 1869(c), and 
1869(d) of the Act to require appeal notices issued at the initial 
determination, redetermination, reconsideration, and ALJ levels to 
include certain information. As amended, section 1869(a)(4) of the Act 
requires that a notice of an initial determination include the reasons 
for the determination, including whether a local medical review policy 
(LMRP) or local coverage determination (LCD) was used. The notice of 
initial determination must also include procedures for obtaining 
additional data concerning the determination and notification of any 
applicable appeal rights, including instructions on how to request a 
redetermination. See Sec.  405.921(a).
    Section 1869(a)(5) of the Act specifies that a notice of 
redetermination must include the specific reasons for the 
redetermination, a summary of the clinical or scientific evidence used 
to make the redetermination, if applicable, information on how to 
obtain additional information concerning the redetermination, and 
notification of any applicable appeal rights. See Sec.  405.956.
    Reconsideration notices, under the amended section 1869(c)(3)(E) of 
the Act, are required to include information about applicable appeal 
rights. See Sec.  405.976. Section 1869(d) of the Act is also amended 
to require that notices of ALJ decisions give the specific reasons for 
the decision, including, if applicable, a summary of the clinical or 
scientific evidence used in making the decision, the procedures for 
obtaining additional information about the decision, and any applicable 
appeal rights. See Sec.  405.1046(b). Additionally, section 933 of the 
MMA amends sections 1869(a), 1869(c), and 1869(d) of the Act to require 
all appeal notices to be written in a manner calculated to be 
understood by a beneficiary.

d. Qualified Independent Contractors (QICs) (Section 933(d))

    Prior to the MMA, section 1869(c) of the Act, as amended by section 
521 of BIPA, required the Secretary to enter into contracts with at 
least 12 entities called qualified independent contractors (QICs) to 
conduct reconsiderations of contested claim determinations. Section 
1869(c) sets forth certain requirements for the QICs and their reviews 
and panels. Section 933(d) of the MMA makes a number of revisions to 
section 1869(c) of the Act, including providing additional detail 
regarding the eligibility requirements for QICs (section 933(d)(1) of 
the MMA) and the eligibility requirements for QIC reviewers (section 
933(d)(2) of the MMA). We have added Sec.  405.968(c)(3) to reflect the 
requirement of section 1869(g)(1)(C) that where a claim pertains to the 
furnishing of treatment by a physician, or the provision of items or 
services by a physician, a reviewing professional must be a physician. 
In addition, section 933(d)(3) of the MMA amended section 1869(c)(4) of 
the Act to reduce from 12 to 4 the minimum number of QICs with whom the 
Secretary must contract.
4. Process for the Correction of Minor Errors or Omissions Without 
Pursuing an Appeal (Section 937 of the MMA)
    Section 937 of the MMA requires that the Secretary develop a means 
of allowing providers and suppliers to correct minor errors or 
omissions to claims submitted under the programs under title XVIII 
without initiating an appeal. The statute specifies that this process 
be available no later than December 8, 2004. We have revised Sec.  
405.980 to allow providers and suppliers to make these corrections 
through the reopenings process. See Sec.  405.927 and Sec.  405.980.
    This process was developed in consultation with Medicare 
contractors and representatives of providers and suppliers, as required 
by section 937 of the MMA. We published an article on April 30, 2004 
that is available online at https://www.cms.hhs.gov/medlearn/matters/
mmarticles/2004/SE0420.pdf to address the implementation of section 937 
and consulted with providers and suppliers about this implementation 
during open door forums held between August 3 and August 31, 2004. We 
also created an e-mailbox, PBG937@cms.hhs.gov, for providers and 
suppliers to comment on our proposed implementation. The comment period 
closed September 10, 2004.
5. Appeals by Providers When There Is No Other Party Available (Section 
939 of the MMA)
    In situations where a beneficiary dies and there is no other party 
available to appeal an unfavorable determination, section 939 of the 
MMA amends section 1870 of the Act to permit a provider or supplier to 
file an appeal. See Sec.  405.906(c).
6. Revisions to the Appeals Time Frames and Amounts in Controversy 
(Section 940 of the MMA)
    Sections 1869(a)(3)(C)(ii) and 1869(c)(3)(C)(i) of the Act as added 
by section 521 of BIPA established 30-day decision making time frames 
at both the redetermination and reconsideration levels. Additionally, 
section 1869 (b)(1)(E) of the Act established the amount in controversy 
(AIC) requirement for ALJ hearing requests and judicial review as $100 
and $1000, respectively. Section 940 of the MMA amended these 
provisions so that the decision-making time frame for redeterminations 
and reconsiderations is 60 days and the AICs for ALJ hearings and 
judicial review will now be adjusted annually, beginning on January 1, 
2005, by the percentage increase in the medical care component of the 
consumer price index (CPI) for all urban consumers and rounded to the 
nearest multiple of $10. See Sec.  405.950(a), Sec.  405.970(a), and 
Sec.  405.1006. A conforming amendment applies these AICs to the Part C 
MA program as well, and we have proposed that they apply to Part D when 
the new prescription drug benefit becomes available in January 2006. 
See 69 Fed. Reg. 46,866, 46,910, and 46,911, 46,722 for the MA proposed 
rule and 69 Fed. Reg. 46,632 for the Part D proposed rule. (The medical 
care component of the CPI increased by 4.5 percent in 2004. 
Consequently, the AIC in 2005 for ALJ hearings will remain $100, and 
the AIC for judicial review will be $1,050.)
7. Determinations of Sustained or High Levels of Payment Errors 
(Section 935(a) of the MMA)
    Consistent with section 1893(f)(3) of the Act, as amended by 
section 935(a) of the MMA, determinations by the Secretary of sustained 
or high levels of payment errors are precluded from administrative or 
judicial review. See Sec.  405.926(p).

[[Page 11424]]

8. Limitations on Further Review of Prior Determinations (Section 
938(a) of the MMA)
    Section 1869(h)(6) of the Act, as amended by section 938(a) of the 
MMA, requires that there must be no administrative or judicial review 
of ``prior determinations'' on coverage of physicians'' services, a new 
aspect of the Medicare program that the MMA specifies must begin by 
June 2005. See Sec.  405.926(q).

D. Codification of Regulations

    The current regulations governing Medicare administrative appeals 
are set forth in 42 CFR part 405, subparts G and H. These regulations 
will continue to be necessary for an indefinite transition period until 
the completion of all appeals that result from initial determinations 
made before the implementation of the new procedures set forth in this 
interim final rule. However, the new BIPA and MMA provisions make 
possible a largely uniform set of appeals procedures that can be 
applied for claims under both Parts A and B of Medicare. Therefore, 
this interim final rule establishes a new subpart I of part 405 that 
sets forth in one location the administrative appeals requirements for 
Medicare carriers, fiscal intermediaries (FIs), QICs, ALJs, and the 
MAC. The major subjects covered in subpart I of part 405 are as 
follows:
     General Rules (Sec.  405.900 through Sec.  405.912)--
Definitions and requirements concerning initial determinations, parties 
to appeals, appointing a representative, and assigning appeal rights.
     Initial Determinations (Sec.  405.920 through Sec.  
405.928)--Requirements concerning the processing time frames for 
initial claim determinations, descriptions of actions that are initial 
determinations, and the effect of an initial determination.
     Redeterminations (Sec.  405.940 through Sec.  405.958)--
Requirements concerning requesting a redetermination, the 
redetermination process, applicable notice requirements, and the effect 
of a redetermination.
     QIC Reconsiderations (Sec.  405.960 through Sec.  
405.978)--Requirements concerning requesting a reconsideration, the 
reconsideration process, applicable notice requirements, and the effect 
of a reconsideration.
     Reopenings (Sec.  405.980 through Sec.  405.986)--
Requirements concerning reopening of determinations and decisions, 
including the good cause standard, content requirements for notices of 
revised determinations or decisions, and the effect of a revised 
determination or decision.
     Expedited Access to Judicial Review (Sec.  405.990)--
Requirements concerning obtaining expedited access to judicial review.
     ALJ Hearings (Sec.  405.1000 through Sec.  405.1064)--
Requirements concerning requesting a hearing, the hearing process, 
applicable notice requirements, the effect of an ALJ's decision, and 
the applicability of national and local coverage determinations.
     MAC Review (Sec.  405.1100 through Sec.  405.1140)--
Requirements concerning requesting a review, the review process, 
applicable notice requirements, the effect of a review decision, and 
the requirements for requesting judicial review.

E. Implementation of the New Appeal Requirements

    We believe that the changes set forth in this interim final rule, 
in conjunction with the introduction of a new case-specific appeal data 
system that we are now developing, will produce substantial 
improvements in the efficiency of the Medicare claims appeal process. 
We expect that the implementation of these new appeal procedures, along 
with the transfer of the ALJ function from SSA to DHHS, will reduce 
appellants' concerns over the fairness and timeliness of Medicare 
appeal decisions. The introduction of QICs, in particular, will not 
only reassure appellants of the independence of the reconsideration 
process, but also offer them for the first time routine 
reconsideration, by a panel of physicians or other health care 
professionals, of all medical necessity issues. As a result, we believe 
these new procedures will lead, over time, to significant reductions in 
the need to pursue appeals at the later stages of the appeals system, 
such as ALJ hearings and MAC reviews.
    In the short term, however, we recognize that implementing the 
changes set forth in this interim final rule may prove challenging both 
for the entities responsible for conducting appeals and for appellants 
themselves. For example, there may be an initial increase in requests 
for second level appeals (that is, reconsiderations by QICs), given the 
availability of these new independent appeal entities and the 
introduction of physician review panels, as well as the fact that the 
time frame for a QIC decision is only half of the current time frame 
for a contractor fair hearing. Similarly, increases in requests for ALJ 
hearings or MAC reviews are also possible, in view of the establishment 
of relatively short decision-making time frames for these entities.
    Another challenge involves the need for appeal entities to process 
appeals that were filed before and after the implementation of these 
new appeal procedures. For example, the DHHS ALJs and the MAC will need 
to continue processing appeals received before the implementation of 
QICs at the same time that they begin to receive appeals of QIC 
reconsiderations. Thus, until all appeals that were filed under the 
rules in effect before full implementation of these regulations are 
completed, different administrative deadlines and procedures may apply, 
depending on the timing and source of the previous, lower-level appeal 
decision. Based on previous experience, the need for parallel 
procedures could extend over a year, as all cases currently in the 
appeals pipeline are resolved.
    In addressing these challenges and implementing the new procedures, 
we need to balance the goal of implementing the new procedures as 
quickly as possible with our responsibility to facilitate a clear and 
well-organized transition to the new procedures for appellants and 
appeals entities alike. We also need to ensure that existing appeals 
continue to be carried out as expeditiously as possible as we 
transition fully to the new appeals procedures. These goals drive the 
implementation approach described below.
    The appeal procedures set forth in section 521 of BIPA were to take 
effect for initial determinations made on or after October 1, 2002. As 
discussed in the proposed rule, we were unable to fully implement the 
BIPA provisions by that date without disrupting other fundamental 
functions of the Medicare program (for example, the processing and 
payment of claims). We were also aware of the possibility of additional 
statutory changes, as were subsequently enacted in the MMA. 
Additionally, we recognize that the MMA has, in some cases, established 
specific deadlines for implementation of certain appeals provisions. 
For example, section 933(a)(2) of the MMA establishes an effective date 
of October 1, 2004 for the prohibition on submission of new evidence, 
absent good cause, by providers or suppliers in any ALJ or MAC appeal 
if that evidence was not presented at the QIC reconsideration. For 
other provisions, the MMA either makes no explicit reference to an 
effective date, or specifies (under section 933(d)(4)) that certain MMA 
amendments will be effective as if included in the BIPA legislation; 
that is, as of October 1, 2002. In the absence of

[[Page 11425]]

a specific effective date, the provisions became effective on the date 
of enactment of the MMA.
    Given the unavoidable delays in full implementation of the BIPA 
changes, it will not be possible to meet all of the MMA deadlines. As a 
practical matter, full, effective implementation of both the MMA and 
BIPA provisions can be achieved only in concert with the availability 
of QICs in the Medicare appeals process. Thus, we believe that full 
implementation of these regulations must be premised on, and linked to, 
QIC implementation.
    As noted above, another important related MMA provision is the 
transfer of the ALJ hearing function for Medicare claims appeals from 
SSA to DHHS. Section 931(b) of the MMA mandates that this transition 
take place not earlier than July 1, 2005, and not later than October 1, 
2005. We have also taken this impending change into account in 
establishing the implementation schedule for the new appeals provisions 
set forth in this interim final rule.
    Based on all of these considerations, the table below illustrates 
the implementation approach that we are following for the provisions of 
this interim final rule:

                         Implementation Approach
------------------------------------------------------------------------
               Section(s)                           Effective
------------------------------------------------------------------------
Sec.   401.108.........................  Effective date of interim final
                                          rule.
Sec.   405.900-Sec.   405.928..........  Effective date of interim final
                                          rule.
Sec.   405.940, Sec.   944(a), and Sec.  FI initial determinations
   944(b).                                issued on or after May 1,
                                          2005. Carrier initial
                                          determinations issued on or
                                          after January 1, 2006.
Sec.   942(a)..........................  Effective date of interim final
                                          rule.
Sec.   405.942(b), Sec.   405.944(c),    All requests for
 Sec.   405.946 through Sec.   405.958.   redeterminations received by
                                          FIs on and or after May 1,
                                          2005. All requests for
                                          redeterminations received by
                                          Carriers on or after January
                                          1, 2006.
Sec.   405.960-Sec.   405.978..........  May 1, 2005 for
                                          redeterminations issued by FIs
                                          January 1, 2006 for
                                          redeterminations issued by
                                          Carriers.
Sec.   405.980-Sec.   405.990..........  Effective date of interim final
                                          rule.
Sec.   405.1000-Sec.   405.1018........  Effective for all appeal
                                          requests stemming from a QIC
                                          reconsideration.
Sec.   405.1020........................  July 1, 2005 for all ALJ
                                          hearing requests.
Sec.   405.1022-Sec.   405.1140........  Effective for all appeal
                                          requests stemming from a QIC
                                          reconsideration.
------------------------------------------------------------------------

    As the table reflects, we have concluded that the best approach to 
implement the new appeal procedures is to phase in the new procedures 
beginning in FY 2005. QIC reconsiderations will become available in two 
stages depending on if an FI or carrier carries out the 
redetermination. For all FI redeterminations issued on or after May 1, 
2005, appellants will have a right to reconsideration by a QIC within 
60 days of their request for reconsideration, as well as escalation to 
an ALJ if the reconsideration is not completed timely. Similarly, the 
new reconsideration and escalation procedures will take effect for all 
carrier redeterminations issued on or after January 1, 2006. Thus, in 
2006, all new appeals will be carried out under the regulations set 
forth in this interim final rule, including provisions on--
     Reconsiderations by QICs;
     The new statutory time frames for reconsiderations, ALJ 
hearings, and MAC reviews;
     The possibility of escalation of cases where the time 
frames are not met;
     The new notice and evidence rules; and
     Medicare-specific ALJ procedures.
    The phased-in approach enables at least two QICs to begin carrying 
out reconsiderations of appealed FI redeterminations beginning in May 
2005, and thus to provide the second level reconsideration envisioned 
by the statute for Part A claims as soon as possible. In January 2006, 
at least four QICs will begin carrying out reconsiderations of appealed 
carrier redeterminations. We believe that this phased-in approach to 
QIC implementation constitutes the only viable approach for an 
undertaking of this magnitude and is critical to ensuring that we: (1) 
Minimize disruption among the current Medicare contractors and current 
appellants; and (2) have adequate opportunity to educate providers, 
suppliers, and beneficiaries about the new procedures. Phasing in the 
transition from the current process serves to eliminate any unnecessary 
risk in terms of our ability to manage major appeal transitions at all 
of our FIs and carriers simultaneously. In addition, these contractors 
are dealing at the same time with numerous statutorily mandated changes 
(such as the contracting reform changes required under Title IX of the 
MMA).
    We have chosen to implement the changes initially for 
redeterminations conducted by fiscal intermediaries for several 
reasons. Fiscal intermediaries are responsible for all appeals 
involving Part A claims, as well a limited number of Part B claims. The 
Part A process currently does not include a second level of contractor 
appeal prior to an ALJ hearing, unlike the Part B fair hearing 
procedure. Thus, introducing the QIC reconsideration step first for 
these claims ensures that Part A appellants have access to a second 
pre-ALJ appeal process as soon as possible. Implementing the new 
procedures for appeals resulting from FI determinations also gives us 
an opportunity over several months to identify and address any process 
problems or other technical difficulties involved in the first stages 
of QIC reconsiderations before transitioning the much larger Part B 
appeals workload that is now performed by carriers.
    One unavoidable consequence of this change will be that some 
employees of current contractors will need to be either reassigned or 
discharged since the FIs and carriers will no longer be conducting fair 
hearings. However, we believe that the slightly longer transition for 
the much larger carrier workforce will help to ameliorate the potential 
human costs of this change.
    Finally, we note that wherever it was feasible (that is, where the 
BIPA and MMA appeals provisions are not fundamentally premised on the 
introduction of QIC reconsiderations into the appeals process), we have 
already taken a series of steps to implement the new appeal provisions 
mandated by the statute, including most notably the transition to a 
uniform redetermination process by our FIs and carriers. We issued 
instructions (CR 2620) to effect this change beginning on October 1, 
2004. The instructions incorporate both the redetermination decision-
making time frames and notice requirements required by the statute

[[Page 11426]]

(under sections 1869(a)(2), 1869(a)(3) and 1869(a)(5) of the Act, as 
amended by section 521 of BIPA and sections 933 and 940 of the MMA). We 
have also issued instructions to the contractors regarding the 
implementation of section 939 of the MMA (which took effect upon 
enactment of the MMA) concerning appeals by providers when there is no 
other party available because of the death of the beneficiary 
appellant. These regulations codify those changes.

II. Analysis of and Responses to Public Comments

A. Overview of Comments on November 15, 2002 Proposed Rule

    We received 37 timely comments from organizations representing 
providers and suppliers, beneficiary advocacy groups, administrative 
law judges, law offices, health plans, and others. The issues most 
frequently raised by commenters include: Beneficiary protections, 
particularly for unrepresented beneficiaries; deadlines for filing 
appeals and time frames for decision-making; notices; differences 
between an assignee and an appointed representative of a beneficiary; 
authority of representatives of parties; time frames for the escalation 
of cases from one level to the next when adjudicators fail to meet 
their deadlines; the role of the new entities, qualified independent 
contractors (QICs), that will perform reconsiderations; evidentiary 
requirements; the perceived formality of administrative law judge (ALJ) 
procedures, especially adversarial proceedings whereby we enter the 
process in general, and the impact on beneficiaries in particular; 
whether an ALJ's role changes and how much deference the ALJ gives to 
our policies; dismissals and remands of appeals; and distinctions 
between reopenings and appeals.
    These comments and our responses are discussed below, in order of 
the new regulations text. (For the convenience of the reader, we are 
presenting below a chart offering a sequential overview of the 
available procedures and related time frames associated with the former 
and current appeals process. This chart is for illustrative purposes 
only, and certain details (such as when escalation of a case is 
permissible) have been omitted for ease of presentation. For a full 
description of the applicable requirements, please consult the preamble 
material that follows and the regulations text.)
[GRAPHIC] [TIFF OMITTED] TR08MR05.000


[[Page 11427]]



B. Appeal Rights (Sec.  405.900 Through Sec.  405.912)

1. Basis and Scope, Definitions, General Rules, and Parties to Initial 
Determinations, Redeterminations, Reconsiderations, Hearings and 
Reviews (Sec.  405.900 Through Sec.  405.906)
[If you choose to comment on issues in this section, please include the 
caption ``Appeal Rights--Basis and Scope, etc.'' at the beginning of 
your comments.]

    In the proposed rule, we proposed that providers would be allowed 
to file an administrative appeal of Medicare initial determinations to 
the same extent as beneficiaries. Currently, providers have limited 
rights to appeal Medicare initial determinations: providers can appeal 
Medicare determinations only when the determination involves a finding 
that: (1) The item or service is not covered because it constitutes 
custodial care, is not reasonable and necessary, or for certain other 
reasons; and (2) the provider knows, or reasonably could have been 
expected to know, that the item or service in question is not covered 
under Medicare (that is, there is a finding with respect to the 
limitation of liability provision under section 1879 of the Act). 
Regarding non-participating providers and suppliers, however, we 
proposed maintaining the current appeal policies.
    Consistent with section 940 of the MMA, in this interim final rule, 
we are making a change to Sec.  405.904(a)(2) concerning the amounts in 
controversy for ALJ hearings and judicial review. Section 940 of the 
MMA requires the amount in controversy to be adjusted annually based on 
the medical care component of the consumer price index for all urban 
consumers. Accordingly, we have deleted specific references to the 
previous $100 and $1,000 threshold requirements.
    We have made two revisions to proposed Sec.  405.906. In the 
proposed rule, we inadvertently omitted certain nonparticipating 
suppliers as potential parties to an initial determination. The interim 
final rule corrects that error by specifying under Sec.  405.906(a)(2) 
that a nonparticipating supplier who has accepted assignment can be a 
party to an initial determination.
    Also, consistent with section 1870(h) of the Act, as amended by 
section 939(a) of the MMA, we have added a conforming provision to 
Sec.  405.906(c) concerning parties to appeals. Where a provider or 
supplier is not already a party, revised Sec.  405.906(c) permits the 
provider or supplier to appeal an initial determination relating to 
services it rendered to a beneficiary who subsequently dies. This 
provision is intended to give appeal rights to nonparticipating 
suppliers who are not considered parties to the initial determination 
and who may not have secured an assignment of appeal rights from the 
beneficiary.
    Comment: Several commenters sought clarification on whether the 
intent of the proposed rule was to give party status to providers on 
the basis of a ``technical denial.'' (A technical denial is a denial 
based on an item or service failing to meet all of the requirements of 
a Medicare-covered benefit, rather than on a determination that an item 
or service is not reasonable and necessary under section 1862(a)(1)(A) 
of the Act, or on a determination that an item or service constitutes 
custodial care.) Many interpreted the proposed rule as maintaining the 
current policy that providers do not have appeal rights for these types 
of denials. Other commenters believed that our intent was to allow 
providers to appeal to the same extent as beneficiaries and agreed with 
the proposal. Still other commenters questioned whether the change in 
policy to expand appeal rights for providers would mean that 
contractors would no longer deny claims because the claims failed to 
meet the requirements of the Medicare benefit.
    Response: A provider or supplier can appeal a properly submitted 
claim only after the contractor has issued an initial determination on 
that claim. Thus, if a contractor rejects a claim because the claim was 
improperly submitted (for example, the claim was missing the basic 
information needed to process it), that rejection does not constitute 
an initial determination.
    Currently, Sec.  405.710(b) allows a provider to appeal an initial 
determination on Part A coverage only when a contractor determines: (1) 
That an item or service is not covered because it constitutes custodial 
care; (2) that an item or service is not covered because it did not 
qualify as covered home health services because the beneficiary was not 
confined to the home or did not need skilled nursing care on an 
intermittent basis; (3) that an item or service is not covered because 
it was a hospice service provided to a non-terminally ill individual; 
(4) that the item or service is not covered because it is not 
reasonable and necessary; and (5) either the beneficiary or provider of 
services, or both, knew, or could reasonably have been expected to 
know, that the item or service is excluded from Medicare coverage. 
Historically, only beneficiaries were afforded the right to appeal 
claims that were denied because the items or services failed to meet 
the requirements of the Medicare covered benefit (for example, a denial 
of home health services due to the lack of a physician certification). 
Despite this restriction, however, providers routinely accessed the 
appeals process by acting as the beneficiary's appointed representative 
in situations where they would otherwise not have had appeal rights.
    As discussed in the proposed rule, a clear goal of the BIPA 
legislation was to establish a uniform appeals process for Part A and 
Part B claims, and thus for all beneficiaries, providers, and 
participating suppliers. In keeping with this goal, we believe that the 
interests of the appeals process would be best served by ensuring that 
providers are afforded an equal opportunity to be heard with regard to 
all Medicare initial determinations. Therefore, as proposed, we are 
specifying that Medicare providers may file administrative appeals of 
initial determinations to the same extent as beneficiaries. With this 
change, we achieve consistency in our approach to which individuals or 
entities can bring an appeal under Part A and Part B.
    This interim final rule does not change the available bases for 
claim denials. Contractors may continue to deny claims on the basis 
that the item or service is not a Medicare benefit, or more precisely, 
that the item or service in question does not adhere to all the 
requirements set forth in the definition of the Medicare benefit. 
Rather, this interim final rule changes the appeals status of providers 
and participating suppliers, allowing them to appeal all denials on 
their own accord.
    Comment: One commenter requested clarification on whether a 
beneficiary can appeal even if the beneficiary has appointed a 
representative or initiated a valid assignment of appeal rights. The 
commenter expressed concern that under proposed Sec.  405.906, any 
party to the initial determination can request a redetermination. A 
literal reading of this section would permit a beneficiary to pursue an 
appeal even if the beneficiary has an appointed representative or has 
assigned appeal rights to a provider or supplier. In addition, the 
commenter asked if beneficiaries could pursue an appeal at the same 
time as the provider.
    Response: The commenter raises two sets of issues: (1) The appeal 
rights of a beneficiary who has appointed a representative; and (2) the 
appeal rights of a beneficiary who has assigned these rights to a 
provider or supplier.
    Beneficiaries can either exercise their appeal rights themselves or 
through an appointed representative, or they can assign their appeal 
rights to the provider

[[Page 11428]]

or supplier that delivered the service or item. (We note that 
appointment of a representative and assignment of appeal rights are two 
different and unrelated actions.) Unlike assignment, appointment of a 
representative does not entail transferring one's appeal rights, nor 
does it make the appointed representative a separate party to the 
appeal. An appointed representative is chosen by a party to assist a 
beneficiary in exercising appeal rights with respect to one or more 
initial determinations. The beneficiary retains party status during the 
appeals process, and therefore, never loses the right to appeal to 
subsequent levels of the appeals process. To avoid confusion regarding 
representation, either the beneficiary or the appointed representative 
(but not both the beneficiary and the appointed representative) should 
request the appeal.
    On the other hand, when a beneficiary completes a valid assignment 
of appeal rights, the beneficiary assigns appeal rights for the 
particular claim or claims to a provider or supplier who is not 
otherwise a party to the initial determination. If the beneficiary 
assigns appeal rights in accordance with Sec.  405.912(f), then the 
beneficiary transfers any right to request a redetermination, 
reconsideration, hearing, or MAC review with respect to the item or 
services at issue, unless the assignment is revoked in accordance with 
Sec.  405.912(g). While it is not permissible for a beneficiary to file 
an appeal when a valid assignment of appeal rights is in force, it is 
possible for more than one party to file a request for an appeal on the 
same claim when no assignment of appeal rights has been made (for 
example, a beneficiary and a supplier that has accepted assignment of a 
claim). We are providing under Sec. Sec.  405.944(c) and 405.964(c) 
that if more than one party timely files a request for redetermination 
or reconsideration on the same claim before a redetermination or 
reconsideration is made on the first timely filed request, the 
contractor or the QIC will consolidate the separate requests into one 
proceeding and issue one determination. These provisions are consistent 
with the longstanding policy that multiple parties have t he right to 
appeal the same claim. We note, however, that has been very rare for 
more than one party to exercise this right.
    Comment: One commenter pointed out that Sec.  405.906(a)(1) lists a 
beneficiary who has filed a claim for payment or has had a claim for 
payment filed as a party to the initial determination. The commenter 
suggested that we revise this provision since beneficiaries in most 
instances do not file claims.
    Response: As a general rule, we require providers and suppliers to 
submit claims to seek reimbursement for items or services that they 
have delivered to beneficiaries. Thus, beneficiaries generally do not 
need to file claims, but they continue to have the right to do so. (In 
some situations, however, beneficiaries are prohibited from filing 
claims on their own, such as for glucose test strips.) Accordingly, we 
believe that it is necessary to maintain this language in the interim 
final rule to accommodate those rare instances where beneficiaries may 
submit claims (for example, because a supplier improperly refuses or 
fails to submit a timely claim with Medicare for reimbursement). For 
clarity, we have added Sec.  405.926(n) and Sec.  405.926(o) to reflect 
that a provider or supplier's failure to request an initial 
determination or submit a timely claim does not constitute an initial 
determination, and that determinations with respect to whether an 
entity qualifies for an exception to the electronic claims submission 
requirement under 42 CFR, part 424, are not considered initial 
determinations.
2. Medicaid State Agencies (Sec.  405.908)
[If you choose to comment on issues in this section, please include the 
caption ``Medicaid State Agencies'' at the beginning of your comments.]

    In the proposed rule, we drafted a separate provision acknowledging 
the right of a Medicaid State Agency to pursue an appeal on behalf of a 
beneficiary who is entitled to benefits under both Medicare and 
Medicaid. We proposed that a Medicaid State Agency would not be 
considered a party, unless the agency actually pursued a 
redetermination on behalf of a dually eligible beneficiary. A 
contractor would not automatically send a Medicaid State Agency notice 
of determinations made during the administrative appeals process, nor 
would the agency be permitted to request QIC reconsiderations, ALJ 
hearings or MAC reviews, unless the agency actually filed a request for 
redetermination for a beneficiary. If a Medicaid State Agency filed a 
request for a redetermination, it would retain party status for the 
claim throughout the rest of the appeals process.
    Comment: With regard to a Medicaid State Agency filing an appeal on 
behalf of an individual that is entitled to both Medicare and Medicaid 
benefits, one commenter recommended that we clarify the definition of a 
dual eligible.
    Response: A dual eligible beneficiary is one who is eligible for 
and enrolled to receive benefits under both the Medicare and Medicaid 
programs. To clarify this concept, we have replaced the proposed text 
``dually eligible for Medicare and Medicaid'' in Sec.  405.908. 
Instead, the text now states that ``[w]hen a beneficiary is enrolled to 
receive benefits under both Medicare and Medicaid, the Medicaid State 
Agency may file a request for an appeal with respect to a claim for 
items or services furnished to a dual eligible beneficiary.'' We note 
that we further clarified in this provision that the Medicaid State 
Agency's appeal is only with respect to services for which has made 
payment or for which it may be liable.
    Comment: A commenter recommended that we clarify what qualifies as 
a timely filed redetermination request under Sec.  405.908.
    Response: A request for a redetermination by a Medicaid State 
Agency will be considered timely if it meets the requirements at Sec.  
405.942. Section 405.942(a) specifies that a request for a 
redetermination must be filed within 120 calendar days from the date 
the party receives the notice of the initial determination. Although 
the Medicaid State Agency is not a party to the initial determination, 
it is filing a redetermination request with respect to a claim for 
items and services furnished to a beneficiary. Therefore, the 
timeliness of the request will be determined by the date that the 
beneficiary receives the initial determination notice, otherwise known 
as the Medicare Summary Notice (MSN). For purposes of calculating the 
date of receipt of the MSN under Sec.  405.942(a)(1), it is presumed 
that the beneficiary received the MSN 5 days after the date on the MSN, 
unless there is evidence to the contrary.
3. Appointed Representatives (Sec.  405.910)
[If you would like to comment on issues in this section, please include 
the caption ``Appointed Representatives'' at the beginning of your 
comments.]

    Under proposed Sec.  405.910, we incorporated and modified several 
of the provisions in 20 CFR part 404, subpart R, and 42 CFR part 405, 
subparts G and H, as they relate to the representation of parties. 
These provisions eliminated the need for incorporation of the existing 
SSA regulations regarding appointment of representatives.
    Proposed Sec.  405.910(a) sets forth the definition of appointed 
representative as an individual authorized by a party, or

[[Page 11429]]

under State law, to act on the party's behalf in dealing with any of 
the levels of the appeals process. Appointed representatives do not 
have independent party status and take action only on behalf of the 
individual or entity they represent.
    Under proposed Sec.  405.910(d), we set forth that in order to be 
valid, an appointment both needs to be in writing, and signed by the 
party making the appointment and the individual agreeing to accept the 
appointment (even when the individual being appointed is an attorney). 
Proposed section Sec.  405.910(e) establishes the time frame governing 
the duration of representation as: (1) The life of an individual 
appeal, and (2) for purposes of appeals of other initial 
determinations, one year from its original effectuation.
    New section 1869(b)(1)(B)(iv) of the Act makes clear that section 
206(a)(4) does not apply in the case of Medicare appeals. This section 
permits the award of attorney's fees (not to exceed 25 percent) from a 
claimant's entitlement to past-due disability benefits. Therefore, in 
proposed Sec.  405.910(f), we are explicit that no award of attorney 
fees can be made against the Medicare trust funds. However, we 
requested comments on petitions to ALJs to review and approve attorney 
fees.
    In proposed Sec.  405.910(g) through Sec.  405.910(k), we 
delineated the responsibilities and rights of an appointed 
representative. In proposed Sec.  405.910(l), we established the rules 
regarding delegation. (Delegation is the act of empowering another to 
act as a representative.) In order for an appointed representative to 
designate another person to act as a representative (the designee), the 
appointed representative must: (1) Give the designee's name to the 
party; (2) secure the designee's acceptance of both the representation 
and the requi