Senate Finance Committee Chairman Orrin Hatch (R-Utah) today delivered the following opening statement at a committee markup of the Audit & Appeal Fairness, Integrity, and Reforms in Medicare (AFIRM) Act of 2015, an original bill to improve the Medicare audit and appeals process:

Many of us here on the Finance Committee are deeply concerned about Medicare improper payments and the overall solvency of the Medicare Trust Fund.  A recent GAO report found that, in Fiscal Year 2014 alone, Medicare covered health services for approximately 54 million elderly and disabled beneficiaries at a cost of $603 billion. Of that figure, an estimated $60 billion, or approximately ten percent, were improperly paid, averaging more than $1,000 in improper payments for every Medicare beneficiary.

The large number of Medicare improper payments has led to an increased number of audits to identify and recapture those funds.  While auditors for the Centers for Medicare & Medicaid Services have been reasonably successful in their mission to conduct audits on the more than one billion claims submitted to Medicare every year, they face an uphill battle in their efforts to recover improper Medicare payments.  In 2013, for example, CMS auditors recovered over $3 billion.  While this may sound like a large number, it represents only a small fraction of the improper payments made that year.

An unintended consequence of the increasing number of audits has been a dramatic increase in the number of Medicare appeals.  We held a hearing on this topic this past April where we discussed a number of pressing issues facing the Medicare appeals system. 

Currently, there are so many appeals being filed that the Office of Medicare Hearings and Appeals can’t even docket them for 20 to 24 weeks.  In FY 2009, the majority of appeals were processed within 94 days.  In Fiscal Year 2015, it will take, on average, 604 days to process an appeal.  This is an incredibly frustrating amount of time not only for physicians and other health care providers but for beneficiaries, many of whom live on a fixed incomes.

Adding to this problem is the fact that large portions of the initial payment determinations are reversed on appeal.  The Department of Health and Human Services Office of Inspector General reported that, of the 41,000 appeals made to Administrative Law Judges in FY 2012, over 60 percent were partially or fully favorable to the defendant.

Such a high rate of reversals raises questions about the quality of initial determinations and whether providers and beneficiaries are facing undue burdens on the front end.

In order to safeguard beneficiaries and ensure the solvency of the Medicare Trust Fund, we need to address these issues now.  That is why Senator Wyden and I have introduced this bipartisan bill, the Audit and Appeal Fairness, Integrity, and Reforms in Medicare, or AFIRM, Act of 2015.

If enacted, this bill will improve oversight of the Medicare audits and appeals process to more effectively address the staggering Medicare appeals backlog.  And, it will lay the groundwork for a more level playing field, reducing the burden on providers and suppliers, and giving auditors the tools necessary to better protect the Medicare Trust Fund.  The AFIRM Act will address these issues in three ways. 

First, it will improve CMS oversight and require better coordination between the agency and audit contractors.  It will ensure that all parties receive transparent data regarding review practices and appeal outcomes at each level of review.

Second, the bill will require that CMS create new incentives to improve auditor accuracy.  It will also require that CMS create an independent Ombudsman for Medicare Reviews and Appeals to help resolve complaints made by appellants and those considering appeal.

Finally, the bill will make needed reforms to the Medicare appeals process to address the appeals backlog without sacrificing quality.  It will raise the amount in controversy for review by an ALJ to match the amount for review by a District Court.  In addition, the bill will create a new Medicare Magistrate program for cases with lower costs, allowing senior attorneys with expertise in Medicare law and policies to adjudicate cases in the same way as ALJs.  It will also allow for the use of sampling and extrapolation, with the appellant’s consent, to expedite the appeals process.  And, the bill will establish a voluntary alternate dispute resolution process for multiple pending claims with similar issues to be settled as a unit instead of as individual appeals.

These improvements will address the appeals backlog and ensure that the Medicare Trust Fund is protected without creating undue burdens for health care providers and suppliers. I want to thank Ranking Member Wyden for working with me on this effort and for making this a true bipartisan markup.  I encourage my colleagues to help us move the AFIRM Act through today’s markup process as cleanly and efficiently as possible.