HHS Secretary Agrees to Settle Lawsuit Which Will Improve Medicare Coverage For Therapy Services [11-12-12]

Filed under: Industry Updates — Editor @ 3:07 pm

In late October, the U.S. Department of Health and Human Services (“HHS”) released a proposed settlement in a class-action lawsuit concerning Medicare coverage for medical rehabilitation services. This settlement will likely have a significant beneficial impact on providers of rehabilitative care as well as their patients.  The proposed settlement of the case at issue, Jimmo et. al. v. Health and Human Services Secretary, is currently pending approval by Chief Judge Christina C. Reiss in the U.S. District Court in Vermont. The proposed settlement was negotiated by the lawyers from the Department of Justice and HHS, and was submitted to Judge Reiss last week. She is expected to approve the proposed settlement in the near future.

The Jimmo case is a nation-wide class action in which over 10,000 plaintiffs have joined. Plaintiffs also include thousands of individual Medicare beneficiaries whose claims for skilled nursing and therapy services were denied before January 18, 2011. The certified class of plaintiffs also includes organizations such as the National Multiple Sclerosis Society, the Parkinson’s Action Network, the Paralyzed Veterans of America, and the National Committee to Preserve Social Security and Medicare.

The class action complaint was filed in January, 2011 alleging that DHHS has been illegally using an arbitrary “Improvement Standard” to deny Medicare coverage to beneficiaries who “cannot show a likelihood of medical or functional improvement.” The fundamental legal issue in the case is that neither the Medicare law nor the Secretary’s regulations require a beneficiary to meet this “Improvement Standard,” yet the Medicare manual and guidelines have imposed it for more than 30 years. Specifically, the manual and guidelines establish restrictive standards that deny beneficiaries coverage for skilled nursing and therapy services if they have reached a plateau, are not improving, or are stable. The complaint also alleged that the “Improvement Standard” was not implemented through proper rulemaking and therefore the Secretary of HHS has adopted an unlawful standard to determine which Medicare beneficiaries are entitled to coverage. Furthermore, the complaint contends that such practices have resulted in wrongful termination of Medicare coverage for thousands eligible beneficiaries.

In this case, the plaintiffs argued that there is in fact no such “Improvement Standard” in the Medicare statute and that instead, the law requires that Medicare payment is precluded only for services that are “not reasonable and necessary for the diagnosis of treatment of illness or injury to improve the functioning of a malformed body member.” Opinion and Order on Defendant’s Motion to Dismiss, Opinion and Order. In support of this allegation, plaintiffs cited various Medicare regulations which demonstrate that the “Improvement Standard” has been capriciously imposed for decades. The plaintiffs also argued that the Medicare manual and other guidelines do not comply with the Medicare statute because the manual’s “Improvement Standard” is more restrictive than the controlling law which requires that payment is precluded for items and services that “are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member[.]” 42 U.S.C. § 1395y(a)(1)(A).

The denial of Medicare benefits in cases where individuals have not shown improvement has led to denial of care and treatment because beneficiaries are unable to pay for services on their own. The arbitrary standard at issue largely affects individuals with chronic illnesses, because the nature of these diseases prevents any sort of improvement from the illness. However, medical professionals argue that rehabilitation, physical therapy, and occupational therapy are essential to those with chronic illness because it maintains their functional ability and performance as well as their quality of life.

Under the pending proposed settlement HHS will be required to apply a revised standard when determining coverage for rehabilitation services. Specifically, Medicare will be required to pay for skilled nursing and therapy services for beneficiaries if such services are needed to “maintain the patient’s current condition or prevent or slow further deterioration.” This new standard would replace the “Improvement Standard” that has purportedly been improperly utilized. Furthermore, federal officials have agreed to rewrite the Medicare manual so that it no longer contains language employing the “Improvement Standard.”

The modifications to the Medicare manual will apply to the traditional Medicare program, as well as to private Medicare Advantage plans and to those who are 65 and older, as well as those who are 65 and under but qualify for Medicare because of a disability. Plaintiffs in this class action litigation will have an opportunity to have denied claims reviewed under the revised standard. If the proposed settlement is approved by Chief Judge Christina C. Reiss, it will become a settlement agreement, and Judge Reiss would retain jurisdiction to enforce this agreement for up to 4 years.

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