Medicare: Incomplete Plan to Transfer Appeals Workload from SSA  
to HHS Threatens Service to Appellants (04-OCT-04, GAO-05-45).	 
                                                                 
The Medicare appeals process has been the subject of widespread  
concern in recent years because of the time it takes to resolve  
appeals of denied claims. Two federal agencies play a role in	 
deciding appeals--the Department of Health and Human Services	 
(HHS) and the Social Security Administration (SSA). Currently,	 
neither agency manages and oversees the entire multilevel	 
process. In the Medicare Prescription Drug, Improvement, and	 
Modernization Act of 2003 (MMA), Congress mandated that SSA	 
transfer its responsibility for adjudicating Medicare appeals to 
HHS between July 1, 2005, and October 1, 2005. In addition, it	 
directed the two agencies to develop a transfer plan addressing  
13 specific elements related to the transfer. GAO's objective was
to determine whether the plan is sufficient to ensure a smooth	 
and timely transition.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-45						        
    ACCNO:   A12893						        
  TITLE:     Medicare: Incomplete Plan to Transfer Appeals Workload   
from SSA to HHS Threatens Service to Appellants 		 
     DATE:   10/04/2004 
  SUBJECT:   Health care programs				 
	     Claims adjudicators				 
	     Claims processing					 
	     Insurance claims					 
	     Medical expense claims				 
	     Administrative law judges				 
	     Appeals						 
	     Medicare Program					 

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GAO-05-45

                 United States Government Accountability Office

GAO

                       Report to Congressional Committees

October 2004

MEDICARE

 Incomplete Plan to Transfer Appeals Workload from SSA to HHS Threatens Service
                                 to Appellants

                                       a

GAO-05-45

[IMG]

October 2004

MEDICARE

Incomplete Plan to Transfer Appeals Workload from SSA to HHS Threatens Service
to Appellants

                                 What GAO Found

Transferring the Medicare appeals workload from SSA to HHS requires
careful preparation and the precise implementation of many interrelated
items. The transfer is mandated to take place no later than October 1,
2005. SSA and HHS have stressed their commitment to ensuring a successful
transfer of the administrative law judge (ALJ) level of the Medicare
appeals process, and both agencies have emphasized that they are
continuing to further develop details of the plan. Although the plan
generally addresses each of the 13 elements mandated by MMA, it omits
important details on how each element will be implemented. Furthermore,
the plan overlooks the need for contingency provisions, which could prove
to be essential, should critical tasks not be completed in a timely
manner. GAO believes that this essential information is needed to
facilitate a smooth and timely transfer. Its absence makes it unclear how
the transfer plan will be implemented and threatens to compromise service
to appellants.

Completeness of Medicare Appeals Transfer Plan

This aspect of the plan is complete
This aspect of the plan is partially complete
This aspect of the plan is incomplete
Source: GAO analysis of Medicare appeals transfer plan and supporting
information.

                 United States Government Accountability Office

Contents

Letter

Results in Brief
Background
Incomplete Transfer Plan Lacks Sufficient Detail to Ensure a

Smooth and Timely Transition Conclusion Recommendations for Executive
Action Agency Comments and Our Evaluation

                                       1

                                      3 4

10 22 23 23

Appendix I Analysis of the Medicare Appeals Transfer Plan

Appendix II Comments from the Social Security Administration

Appendix III	Comments from the Department of Health and Human Services

Appendix IV GAO Contact and Staff Acknowledgments 41

GAO Contact 41 Acknowledgments 41

Table

Table 1: MMA Requirements for the Transfer Plan by Category

Figures

Figure 1: Current and Future Medicare Administrative Appeals Process 7
Figure 2: Completeness of Medicare Appeals Transfer Plan 26

Abbreviations

ALJ administrative law judge
BIPA The Medicare, Medicaid, and SCHIP Benefits Improvement

and Protection Act of 2000 CMS Centers for Medicare & Medicaid Services
DAB Departmental Appeals Board HHS Department of Health and Human Services
MAC Medicare Appeals Council MAS Medicare Appeals System MMA Medicare
Prescription Drug, Improvement, and

Modernization Act of 2003 OHA Office of Hearings and Appeals OPM Office of
Personnel Management QIC qualified independent contractor SSA Social
Security Administration

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separately.

United States Government Accountability Office Washington, DC 20548

October 4, 2004

The Honorable Charles E. Grassley
Chairman
The Honorable Max Baucus
Ranking Minority Member
Committee on Finance
United States Senate

The Honorable Joe Barton
Chairman
The Honorable John D. Dingell
Ranking Minority Member
Committee on Energy and Commerce
House of Representatives

The Honorable William M. Thomas
Chairman
The Honorable Charles B. Rangel
Ranking Minority Member
Committee on Ways and Means
House of Representatives

In fiscal year 2003, Medicare-the federal health insurance program that
serves the nation's elderly and disabled-processed over 1 billion claims
submitted by providers on behalf of the beneficiaries they serve. The
Centers for Medicare & Medicaid Services (CMS), an agency within the
Department of Health and Human Services (HHS), is responsible for
administering the Medicare program. With assistance from 46 claims
administration contractors, CMS is charged with identifying and denying
health care claims that are invalid, incomplete, or otherwise improper.
Medicare beneficiaries and providers have the right to appeal denied
claims. In fiscal year 2003, the Medicare program denied about 136 million
claims, or about 13 percent of all claims submitted. Of these denied
claims,
more than 5 million were appealed.

Medicare appeals are resolved through an administrative process
consisting of multiple levels of review through several entities. The
process allows appellants who are dissatisfied with decisions at one level
to appeal to the next level. The entities tasked with resolving appeals
are
referred to as "appeals bodies." HHS is responsible for implementing and

overseeing the Medicare appeals process. It includes using CMS's claims
administration contractors that consider appeals of denied claims,
administrative law judges (ALJ) from another federal agency-the Social
Security Administration (SSA)-who adjudicate appeals, and the Medicare
Appeals Council (MAC) within HHS's Departmental Appeals Board (DAB), which
reviews decisions made by the ALJs.

SSA was an agency within HHS until 1994, when it was separated from HHS
and became an independent agency. Despite its removal from HHS, SSA's
Office of Hearings and Appeals (OHA) continued to hear, or "adjudicate,"
Medicare appeals. Although still a participant in this process, OHA's
primary mission is to resolve Social Security appeals. Its Medicare
workload is relatively small, representing about 11 percent of the appeals
it heard in fiscal year 2003. As a consequence, most of OHA's ALJs have
greater expertise in Social Security matters than in Medicare. Because of
their separate and distinct missions, and for the sake of administrative
simplicity, HHS and SSA have contemplated transferring OHA's Medicare
appeals workload from SSA to HHS for years, but an agreement between the
two agencies on specific details of the transfer was never reached.

The Medicare appeals process has been the subject of widespread concern.
Last year we reported that there has been poor coordination among the
appeals bodies, which has affected their abilities to effectively manage
the process.1 We also found that management by two federal agencies-HHS
and SSA-with neither agency managing and overseeing the entire process,
has complicated the appeals bodies' attempts to streamline the process.
The appeals bodies have also been criticized for the length of time it
takes them to render decisions, particularly SSA's OHA and HHS's MAC.

In the recently enacted Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), Congress mandated that SSA transfer its
responsibility for adjudicating Medicare appeals to HHS, with the result
that all levels of the process would reside within a single federal
agency.2 MMA specified that the transfer be completed not earlier than
July 1, 2005, and not later than October 1, 2005. The law also required
that SSA and HHS develop a plan for transferring the work and specified 13
elements

1See GAO, Medicare Appeals: Disparity between Requirements and Responsible
Agencies' Capabilities, GAO-03-841 (Washington, D.C.: Sept. 29, 2003).

2Pub. L. No. 108-173, S: 931, 117 Stat. 2066, 2396.

that were to be addressed in that plan.3 MMA directed SSA and HHS to
submit the transfer plan to GAO for evaluation no later than April 1,
2004. Our objective was to evaluate this plan4 to determine whether it is
sufficient to facilitate a smooth and timely transition.

To do our work, we assessed how well the plan addressed the specific
requirements set out in MMA and interviewed officials at HHS and SSA
responsible for developing the plan. We also reviewed laws and regulations
relevant to the transfer. To learn more about the plan's implications, we
interviewed ALJs who currently adjudicate Medicare appeals at OHA and
judges at the MAC who review appealed OHA decisions. We also met with
other officials at OHA, DAB, and CMS and representatives from two
beneficiary advocacy groups to discuss the implications of the transfer
plan. To learn more about HHS's ability to hire new ALJs, we spoke with
officials from the Office of Personnel Management (OPM). We interviewed
officials from the Office of Management and Budget to learn about the
costs associated with the transfer and related budgetary matters.
Representatives from the Association of Administrative Law Judges-the
union representing ALJs- and the American Bar Association submitted
written comments regarding the transfer plan, which we considered.
Finally, we analyzed available information and other materials supporting
the assumptions on which the plan is based, to determine their validity
and to evaluate the appropriateness of the plan's strategies. We performed
our work from March 2004 through September 2004 in accordance with
generally accepted government auditing standards.

Results in Brief	Transferring the Medicare appeals workload from SSA to
HHS poses a complex challenge that requires careful preparation and the
precise implementation of many interrelated tasks. Although the plan
generally addresses each of the 13 elements mandated by MMA, it does not
fully address 5 of them. For example, while MMA mandated that the plan
address cost projections and financing by including funding levels
required

3The 13 elements were transition timetable, workload, cost projections and
financing, regulations, feasibility of precedential authority, geographic
distribution, access to ALJs, shared resources, case tracking, hiring,
training, independence of ALJs, and performance standards.

4The Secretary of Health and Human Services and the Commissioner of Social
Security, Report to Congress: Plan for the Transfer of Responsibility for
Medicare Appeals (March 2004).

for fiscal year 2005 and subsequent fiscal years, the plan only contains
information for fiscal year 2005. In addition, we found that the plan
lacks detailed information for 11 of the 13 elements, making it difficult
to understand how the transfer will be accomplished. For example, the plan
contains insufficient information concerning the timing of the transfer,
such as a detailed schedule or project plan to ensure that critical tasks
are accomplished. Other elements of the plan required by MMA-including the
development of new regulations to guide the appeals process and critical
operational matters-have not been thoroughly addressed. Moreover, issues
that establish the foundation for many other transfer activities- such as
the geographic distribution of ALJs-have not been resolved. Finally,
ambiguous details concerning plans for hiring and training ALJs,
developing appropriate performance standards, and safeguarding their
decisional independence leave it unclear exactly how these important
components of the transfer will ultimately be accomplished. The scarcity
of detailed information regarding specific dates, duties, and decisions
prevents a full assessment of the plan's elements and the absence of
contingency plans, should elements not be completed in a timely manner,
threatens to compromise service to appellants.

We are recommending that the Secretary of HHS and the Commissioner of SSA
take steps to help ensure a smooth and timely transition of the Medicare
appeals workload from SSA to HHS, including the completion of a
substantive and detailed transfer plan that includes contingency plans.
HHS, with one exception, and SSA generally agreed with the
recommendations. HHS stated the recommendation to develop contingency
plans for four elements was unnecessary. We believe a contingency plan for
each congressionally mandated element would best ensure a smooth and
timely transition. The agencies also noted new efforts to facilitate the
transfer of Medicare appeals to HHS. Although these efforts might have
merit, we had no opportunity to evaluate them.

Background 	Medicare's fee-for-service health care program consists of two
parts-A and B. Part A covers inpatient hospital, skilled nursing facility,
hospice, and certain home health services. Part B covers physician
services, diagnostic tests, and related services and supplies. Medicare
providers, on behalf of their beneficiaries, can appeal denied claims for
services. Currently, there are four levels of administrative appeal (see
fig. 1). Appeals for denied Part A and Part B Medicare claims currently
follow

similar, but not identical, paths. At the first level of appeal, the
process is the same for both Part A and Part B denials. The Medicare
claims administration contractor5 reexamines the claim along with any
additional documentation provided by the appellant. At this level, in
general, only written materials are reviewed; however, Part B appellants
may request telephone hearings. If the appellant of a Part B claim is
dissatisfied with a decision at the first level, he may proceed to the
second level of review, conducted by the Medicare contractor. At this
stage, the file is once again reviewed, including any additional
documentation submitted by the appellant, and a hearing may be conducted.
However, there is no comparable second level of review by Medicare
contractors of Part A appeals.6

Appellants of both Part A and Part B denied claims who remain dissatisfied
with the decisions rendered by Medicare contractors may appeal to the
third level-SSA's OHA-where appeals are adjudicated by ALJs.7 At this
level, appellants have the option of attending a hearing conducted by
telephone, by videoconference, or in person. OHA's ALJs adjudicated the
appeal of about 122,000 Medicare claims in fiscal year 2003. Should
appellants also be dissatisfied with the ALJ's decision, they can appeal
to the MAC. The MAC's adjudication is the fourth and final level of the
administrative appeals process. It is based on a review of OHA's decision;
the MAC does not conduct hearings. Appellants who have had their appeals
denied at all levels of the administrative appeals process have the option
of appealing to a federal district court.

In addition to preparing for the transition of SSA's appeals workload, HHS
continues to plan numerous administrative and structural changes

5In addition to processing and paying claims, the claims administration
contractors currently administer the first level of the Part A appeals
process and the first two levels of the Part B appeals process.

6Currently, appellants whose Part A appeals are denied by Medicare
contractors at the first level, and who wish to continue to appeal their
denied claims, proceed directly to the third level of the administrative
appeals process-SSA's OHA.

7OHA employs most-about 1,000-of the 1,300 ALJs who are employed by the
federal government. Because OHA's primary mission is to adjudicate Social
Security disability appeals, its resources are largely devoted to these
matters. Although it does not have a dedicated corps of ALJs for Medicare
appeals, it has a cadre of 34 ALJs with significant Medicare hearings
experience. However, few of these ALJs adjudicate Medicare appeals
exclusively. Other ALJs may also have Medicare experience, to varying
degrees. As a result, some Medicare appeals are randomly assigned to ALJs
who may not be familiar with Medicare statutes and program rules.

required by the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (BIPA).8 Most of these changes have not yet been
implemented, including the finalization of new regulations. Among other
things, BIPA mandated shorter time frames; expedited procedures for
processing Medicare appeals at all levels; and the establishment of new
contractors, known as qualified independent contractors (QIC). Contracts
for QICs have not yet been awarded, but once QICs become operational, they
will provide a new second level of adjudication for Part A appeals and
replace the existing second level of the appeals process for Part B
claims.

As noted earlier, figure 1 shows the appeals bodies that are currently
involved in Medicare appeals. It also shows those that will be responsible
for resolving Medicare appeals once BIPA has been fully implemented and
OHA's workload has been transferred to HHS.

8Pub. L. No. 106-554, app. F, S: 521, 114 Stat. 2763A-463, 2763A-534.

reimbursable agreement with CMS, SSA will continue to hear Medicare
appeals until September 30, 2005.

In response to MMA's mandate to transfer the workload, SSA and HHS created
an interagency team that drafted the required transfer plan. The team has
continued to meet to deliberate various aspects of the plan and discuss
its implementation. Representatives from both agencies have stressed their
commitment to ensuring a successful transfer of the Medicare appeals
process from SSA to HHS. The plan indicates that HHS will begin to
exercise adjudicative authority for Part A and Part B ALJ appeals that are
received on or after July 1, 2005. The plan notes that this schedule is
being adopted so SSA may concentrate on reducing its pending workload
between July 1, 2005 and September 30, 2005 and to permit HHS to prepare
for and begin conducting ALJ hearings.

According to MMA, the plan is required to provide information regarding 13
key elements. For purposes of this report, we have grouped these elements
into six broader categories-timetable, scope of work, adjudication
guidance, operational matters, staffing, and oversight. Table 1 lists
these six categories and related elements and identifies the act's
requirements for each element.

Table 1: MMA Requirements for the Transfer Plan by Category

Category and related elements MMA requirement (A) Timetable

            (1) Transition timetable A timetable for the transition.

                               (B) Scope of work

(2) Workload 	The number of ALJs and support staff required now and in the
future to hear and decide Medicare appeals in a timely manner, taking into
account current and anticipated claims volume, appeals, the number of
beneficiaries, and statutory changes.

(3) Cost projections and financing 	Funding levels required for fiscal
year 2005 and subsequent years to carry out the functions transferred
under the plan.

                           (C) Adjudication guidance

(4) Regulations The establishment of specific regulations to govern the
appeals process.

(5) Feasibility of precedential authority 	The feasibility of developing a
process to give MAC decisions, addressing broad legal issues, binding
precedential authority.

                            (D) Operational matters

(6) Geographic distribution 	The steps that should be taken to provide for
an appropriate geographic distribution of ALJs throughout the United
States to ensure timely access.

(7) Access to ALJs	The feasibility of (a) electronically filing appeals to
the ALJ level and (b) conducting hearings using video-or teleconferencing
technologies.

(8) Shared resources 	The steps that should be taken to enter into
arrangements between HHS and SSA to share office space, support staff, and
other resources, with appropriate reimbursement.

(9) Case tracking 	The development of a unified case tracking system that
will facilitate the maintenance and transfer of case-specific data across
both the fee-for-service and managed care components of the Medicare
program.

(E) Staffing

(10) Hiring 	The steps that should be taken to hire ALJs, taking into
account their Medicare expertise and appropriate geographic distribution,
and to hire support staff for ALJs.

(11) Training Training for ALJs regarding Medicare laws and regulations.

(F) Oversight

(12) Independence of ALJs 	The steps that should be taken to ensure the
independence of ALJs through placement of ALJs in an administrative office
organizationally and functionally separate from CMS and its contractors,
and providing that ALJs report to, and be under the general supervision
of, the Secretary of HHS, but not report to, or be subject to supervision
by, another officer of HHS.

(13) Performance standards 	The appropriateness of establishing
performance standards for ALJs with respect to timeliness of decisions,
taking into account applicable requirements.

Source: GAO analysis of Section 931 of MMA.

Incomplete Transfer Plan Lacks Sufficient Detail to Ensure a Smooth and
Timely Transition

We found that HHS's and SSA's plan is too vague to serve as a blueprint
for the transfer's implementation. We evaluated the plan's 13 elements,
mandated by MMA, and grouped them into six categories to evaluate whether
the plan was sufficient to ensure a smooth and timely transition. We found
that in virtually every category, the information contained in the plan,
as well as documentation provided to us in the course of our work, lacked
sufficient detail to ensure that HHS will achieve a smooth and timely
transfer. Further, the lack of detail and the fact that some aspects of
the plan have not yet been finalized raise serious questions as to whether
HHS and SSA have considered the breadth of challenges inherent in the
transfer. Our review suggests that the plan's deficiencies, if not
corrected, may compromise service to appellants. (App. I contains a
summary evaluation of our analysis of the plan.)

Category A: Essential Milestones and Contingency Strategies Not Included
in Transition Timetables

Element 1: Timetable

Transferring SSA's annual workload of appeals-about 122,000 claims in
fiscal year 2003-to HHS requires the development of many interrelated
components. For example, deciding where ALJs should be geographically
located affects hiring and training plans and the need for office space.
Because the transfer date is approaching, many of these activities must be
completed simultaneously so that HHS can ensure that service to appellants
will not be disrupted. With the exception of the development of a case
tracking system, the plan contains few milestones for completing tasks.
Some of the few dates that are mentioned merely reflect the MMAimposed
deadlines between July 1, 2005, and October 1, 2005, without noting
interim milestones. For example, there are no milestone dates associated
with the vital tasks of producing training materials for newly hired ALJs
or locating office space for ALJs to conduct hearings. Other elements of
the plan are addressed without ever mentioning dates, such as the ensuring
of independence for ALJs and the establishment of performance standards
for them. Moreover, the plan does not assign responsibility to any group,
office, or individual to perform the necessary tasks to execute key
elements of the plan. In our view, the level of complexity associated with
the transfer would warrant the development of a detailed schematic
outlining all of the steps that need to be taken, as well as the
corresponding dates for completing these steps, to ensure that the plan
could be successfully executed. In response to our inquiries, the transfer
team reported that it did not prepare a project plan nor could it supply
information about ambiguous or absent milestones. Without specific
milestones, HHS does not have a management tool for

determining whether the general dates contained in the plan can be met as
scheduled.

The transfer plan also lacks a contingency component, to be used in the
event that something prevents the transfer from occurring as scheduled.
Given the importance of having a system in place for adjudicating appeals,
we view this as a considerable oversight. Failure to successfully
implement even one element of the plan, such as the development of a
geographic distribution plan to ensure appellants appropriate access to
ALJs throughout the country, could derail the transfer. Although this is a
critical element of the plan, there is no contingency provision. HHS
officials maintained that they are confident the transfer will be executed
in a timely manner, eliminating the need for a contingency plan. However,
they indicated that if necessary, they could renew their reimbursable
agreement with SSA to adjudicate Medicare appeals for another year. In
contrast, SSA officials emphasized to us that responsibility for all
Medicare appeals will pass, under MMA, to HHS on October 1, 2005.
According to them, it is not a given that SSA will have the capability, or
even the legal authority as of that date, to adjudicate Medicare appeals
under any arrangement with HHS. In our view, this is the type of issue a
contingency plan could address. In agency comments, both SSA and HHS
reported that they have identified a mechanism for HHS to continue to use
SSA ALJs to adjudicate Medicare appeals after the date of the transfer, if
necessary. However, neither agency provided details concerning this
mechanism in their comments. As a result, we are unable to evaluate it.

Category B: The Plan's Assumptions to Predict the Scope of Work Are Not
Credible

Understanding the size of the appeals workload is a critical first step in
planning for the transfer because other decisions, such as the number of
ALJs needed to complete the adjudications, are predicated on it. We found
that the transfer plan does not present a thorough analysis of the
expected workload and the costs to transfer the function and adjudicate
appeals. Further, the plan is based on unreliable staff and cost data,
which undermine the validity of the plan's projections. MMA mandated that
certain external factors be incorporated into the plan's analyses, such as
changes in the number of appeals and the effect of statutory changes.
However, the plan did not contain a detailed discussion of the
implications of these factors on workload and costs.

Element 2: Workload

HHS's plan to initially hire 50 ALJs is based on information from OHA that
it uses an average of 46 ALJs to adjudicate Medicare appeals each month.

However, SSA does not have a dedicated corps of ALJs who are exclusively
devoted to hearing Medicare appeals, and based its estimate on the average
amount of time ALJs spend doing Medicare work. OHA has no formal
timekeeping system for its ALJs, and instead, the chief of each local
hearing office estimates the amount of time ALJs spend each month
adjudicating Medicare appeals. Individual ALJs do not provide their own
time estimates, and the information supplied by each local office is not
otherwise verified. The transfer team did not independently determine the
accuracy of this information, despite the plan's heavy reliance on it.

Despite the fact that MMA requires the plan to address the number of ALJs
and support staff required to hear Medicare appeals now and in the future,
the plan limits itself to the present. It does not specifically address
how the implementation of recent statutory changes to Medicare may affect
the appeals workload and increase the need for personnel. For example, the
plan does not address the potential impact of additional appeals resulting
from MMA's new prescription drug benefit.9 Further, the largest impact may
result from the implementation of BIPA's changes, which will not become
effective until the QICs are fully established-now slated for October
2005. BIPA's changes to the appeals process were to apply to appeals of
claims denied on or after October 1, 2002. However, CMS issued a ruling on
October 7, 2002,10 that held that the majority of BIPA's provisions apply
only to appeals adjudicated by QICs. Because QICs are not yet operational,
the appeals process is currently operating in accordance with regulations
established prior to BIPA's passage.11 The establishment of the QICs and
new regulations implementing BIPA's provisions are now expected to occur
simultaneously with the plan to transfer the OHA workload. As a result, it
will be HHS's ALJs who will be expected to comply with BIPA's shorter time
frames for processing appeals. While their OHA colleagues, who faced no
deadlines, took an average of 327 days to complete a Medicare appeal in
fiscal year 2003, HHS ALJs will be expected to render decisions much more
quickly-within 90 days. The plan is silent as to how HHS's new corps of
ALJs will meet

9MMA created a new, voluntary prescription drug benefit for Medicare
beneficiaries, to start in 2006.

1067 Fed. Reg. 62,478.

11There are two exceptions that resulted from the October 7, 2002 ruling,
implementing BIPA's changes-revising the deadline for filing an appeal for
the first level of review and reducing the dollar threshold for filing an
appeal at the OHA level.

BIPA's time frames by completing the same workload in less than onethird
the time taken by OHA.

In addition, the plan states that efficiencies will be gained from hiring
ALJs and staff who are specialized in Medicare, increasing reliance on
teleconferences and videoconferences to minimize travel, and improving the
management of appeals cases. While efficiencies may be gained in the long
term, we found that the plan did not provide a sound quantitative basis to
support HHS's claim that efficiencies would mitigate demand for more
resources in the first year of operation. Further, the plan does not
contain a contingency provision to address the possibility that greater
efficiencies may not be achieved. In our view, this is significant as, in
the short term, HHS may experience a period of diminished efficiency while
new staff-both ALJs and support personnel-take time to attend training,
develop expertise with Medicare issues, and gain familiarity with their
new organization and infrastructure.

Element 3: Cost Projections and Financing

The plan notes that $129 million was requested for fiscal year 2005 for
Medicare appeals reforms, which includes start-up funds for HHS's ALJ
unit; funds to reimburse SSA for continuing to process Medicare appeals;
and funds to implement other BIPA reforms, as amended by MMA. In fiscal
year 2004, $50 million was intended for processing appeals submitted to
ALJs. HHS officials told us that they anticipate requiring the same amount
for fiscal year 2005. The $50 million for processing appeals is based upon
SSA's agreement to adjudicate approximately 50,000 cases,12 at a cost of
$1,000 each, in fiscal year 2004. We learned that HHS expects to use $8
million in fiscal year 2005 to meet start-up costs for the transfer of ALJ
functions. Although the plan notes that start-up funds will allow HHS to
begin hiring attorneys and other staff, it makes no mention of office
space, equipment, and other infrastructure development costs. Most of the
remaining balance is expected to be used for establishing QICs. We also
noted that the plan does not provide cost projections for years subsequent
to 2005, as required by MMA.

12An appellant may aggregate multiple denied claims into a single appeal
or "case" to meet OHA's minimum dollar threshold for filing an appeal. In
addition, the appeals bodies may reconfigure a "case" to group denied
claims related to similar issues.

Office of Management and Budget officials, who are responsible for
approving HHS's requests, and HHS officials could not provide specific
budgetary details related to the plan. Moreover, HHS's estimate of the
costs of adjudicating Medicare appeals in fiscal year 2005 is based on its
assumption that those costs will mirror what it is paying SSA to resolve
appeals this fiscal year under its reimbursable agreement. However, OHA
reported that the actual costs of adjudicating these appeals exceeded the
amount it was being paid. After adjusting for inflation and overhead, OHA
officials estimated that their actual cost in fiscal year 2003-the most
current data available-was closer to $1,300 per case. MMA allows for
increased financial support to ensure that the HHS ALJ unit meets its
workload demands. However, should additional funds be needed, the plan
does not include a contingency provision that defines criteria and other
relevant measures to justify future requests for increased financial
support.

                           Category C: Completion of
                           Adjudication Guidance for
                            ALJs Not Fully Addressed

The timely issuance of regulations governing the appeals process will have
a significant effect on the implementation of the transfer plan. Without
regulations implementing the provisions of BIPA, and more recently MMA,
the appeals process will lack guidance critical for its operation.
Nonetheless, the plan does not address time frames for establishing these
regulations nor does it discuss what actions will be taken should the
regulations not be finalized by the time of the transfer. It appears,
however, that no regulations will be needed regarding the use of MAC
decisions as binding precedents on lower levels of the appeals process,
including ALJs, at least in the near future. The plan has addressed this
matter by retaining current policy, which allows ALJs and the other
appeals bodies to consider these decisions as guidance, but does not
require them to be viewed as binding precedents. However, the plan
suggests that this decision may only be for the short term.

Element 4: Regulations

To implement MMA's provisions to transfer SSA's workload to HHS,
regulations will need to be drafted and finalized by October 1, 2005-the
date that the transfer is required to be complete. As required by MMA, the
plan acknowledges the need for specific regulations and mentions that
regulations will be developed in several areas, such as providing
appellants the opportunity to file appeals electronically and a reliance
on videoconferences in lieu of in-person hearings. However, the plan is
silent on the anticipated time frames for issuing these regulations and
does not include interim dates to ensure they are finalized on time. In
the absence

of regulations, it is not clear how appellants will be assured of having
sufficient access to ALJs. For example, without regulations it is
uncertain what forum will be used to provide information to beneficiaries
and providers, how access to this information will be provided, and what
will be used as the basis for this information. The plan also does not
address whether there will be a need to issue additional regulations on
other aspects of the transfer, such as procedures for hiring ALJs,
initiating a training program, developing ALJ performance standards, and
identifying opportunities for HHS and SSA to share resources. Given the
ambiguity in the plan, it is unclear how the required transfer of the
appeals function to HHS could proceed on a timely basis.

Moreover, although the plan recognizes that regulations implementing most
of BIPA's provisions have not been finalized, it does not address the
impact of this situation. This is particularly troubling because,
according to CMS, the implementation of QICs will be delayed if final
regulations are not issued by November 2004. As a result, HHS may be
compelled to develop and operate two separate processing systems-one that
follows current rules, and another that complies with BIPA's mandated
deadlines and other requirements.

Element 5: Feasibility of Precedential Authority

In response to an MMA requirement to address precedential authority, the
plan makes clear that MAC decisions will not be binding on lower levels of
the appeals process, including ALJs. The plan acknowledges that
precedential authority may contribute to more consistent decisions by
ALJs. However, it concludes that the risk of an inaccurate or incomplete
interpretation of an agency ruling could result in greater problems when
the same issue is raised more clearly or in different circumstances. The
plan therefore concludes that the risks inherent in giving the MAC
precedential authority outweigh the benefits. The plan also suggests that
high-level decisions could serve as guidance to the lower levels in the
process, without having the full force of precedent. Although the plan
indicates that HHS will reevaluate its stand on the merits of granting
binding precedential authority to MAC decisions, it does not specify what
might contribute to a change in its current position on the issue.

Category D: Operational Absent or insufficient details and vague
descriptions regarding critical Matters Need Greater operational aspects
of the transfer prevented us from fully evaluating Specificity these
components and, in our view, put the successful implementation of

the transfer at risk. The lack of a geographic distribution plan for HHS

ALJs alone threatens to undermine efforts to accomplish the transfer in a
timely manner. Beyond this, the lack of specific plans to ensure access to
ALJs nationwide and to share resources with SSA to enhance appellant
access may well compromise service to appellants. Finally, although the
plan outlines important details concerning the establishment of a new case
tracking system, its implementation is linked to the establishment of the
QICs in July 2005, making a current evaluation impractical.

Element 6: Geographic Distribution

While the plan addresses the topic of the future geographic distribution
of ALJs, it does not include the steps to be taken to ensure that
appellants across the country will have timely access to such judges, as
MMA requires. Rather than detailing a specific geographic distribution
strategy, the transfer plan indicates that a central hearing support
office will be located in the Baltimore, Maryland and Washington, D.C.,
metropolitan area and that a field structure will be established. Because
many issues relating to the successful implementation of the transfer,
such as hiring staff, hinge on the strategy for distributing ALJs
throughout the country, its absence from the plan is a serious
shortcoming.

The plan notes that HHS will develop a process for determining the size
and location of the field structure and will reach a final decision about
the geographic distribution of ALJs by the end of calendar year 2004.
However, the plan does not include key information that would enable us to
analyze this critical component of the plan, such as the anticipated
number of field office locations or the size and resources required for
each office. The plan also does not supply information about the number of
judges to be housed in each location or details concerning whether certain
case processing activities-such as case receipt, research, and preparation
for hearings-will be centralized or regionally based.

Element 7: Access to ALJs

MMA required the plan to address the feasibility of electronically filing
appeals to the ALJ level. CMS is developing a beneficiary Web site, which,
in its pilot at one contractor, allows beneficiaries Internet access to
claims information. The plan anticipates that HHS will use this Web site
to allow electronic appeals submissions. Although the plan does not
discuss when this feature will be available, a CMS official estimated it
would not be ready for testing for at least 2 years. HHS is also exploring
the possible development of another Internet-based filing system that does
not depend on CMS's beneficiary Web site.

MMA also required that the plan address the feasibility of using video-and
teleconferencing to provide access to ALJs. Although the plan identifies a
variety of sources for providing ALJs and appellants with videoconference
access-including SSA, private contractors, and other government
agencies-no analysis has been conducted to determine where videoconference
sites are needed, where such sites are actually available, and the costs
of such services. Moreover, SSA does not expect appellants to travel more
than 75 miles to attend hearings, but the plan does not address HHS's
expectations in this regard. Appellants in remote areas of the country may
be unlikely to find access to videoconference facilities within such a
radius. In regard to teleconferences, the plan notes that a small number
of appeals are currently conducted in this manner, but more commonly,
teleconferences are used to obtain the testimony of expert witnesses. The
plan refers to HHS's willingness to expand its use of teleconferences,
where appropriate, but does not define the conditions that would
constitute "appropriate" use.

Moreover, no analysis has been done to determine what proportion of
appellants would actually be interested in having their appeals heard
using videoconferences or teleconferences. Several ALJs told us that
beneficiaries are often uncomfortable using videoconference facilities and
prefer to have their cases heard face-to-face. While appellants have the
right to request in-person hearings, the plan does not include an
assessment of HHS's capacity to conduct such hearings. There is no
contingency provision to facilitate in-person hearings, should this be
appellants' preference. Further, as a result of changes to the appeals
process due to BIPA, hearings by ALJs will provide an appellant's sole
opportunity to be heard in person, making access to them all the more
important. Although OHA has been able to accommodate appellants through
its network of 10 regional offices and an additional 143 field offices
with hearing rooms throughout the United States and Puerto Rico, HHS
currently has no available capacity to hear Medicare claims appeals.13

13Although HHS employs nine ALJs, they focus on other departmental
matters. One of these ALJs adjudicates appeals at the Food and Drug
Administration. The remaining eight work at DAB and hear enforcement
appeals, including those related to Medicare fraud and provider penalties.
The latter have a backlog of almost 500 pending cases. However, these ALJs
have no hearing rooms and, instead, use the hearing rooms of local courts
or other agencies.

Element 8: Shared Resources

The plan does not address MMA's mandate that it include steps for SSA and
HHS to share office space, support staff, and other resources. Moreover,
it does not include a contingency element should HHS be unable to use SSA
resources to complete the Medicare workload. Instead, the plan focuses
exclusively on sharing videoconference facilities, but the arrangements
for sharing this resource are ambiguous. For example, while the plan notes
that SSA is willing to share its videoconference sites, it also makes
clear that SSA will have priority over the use of the equipment and does
not include a protocol for ensuring that HHS will have sufficient and
timely access. One SSA official told us the agency anticipates that it
will have excess videoconference capacity once it expands its
videoconference system. Currently, SSA has 148 videoconference units
available but plans to increase this number to 351 units at 302 different
sites by 2006. However, the agency has not yet performed an analysis to
establish where and when excess capacity is anticipated. Because SSA ALJs
schedule their hearings well in advance, HHS ALJs may have difficulty
scheduling videoconferences in their localities to meet their 90-day
BIPA-mandated deadline. Moreover, even with access to 302 facilities,
depending on the location of available equipment, HHS ALJs may have to
travel to videoconferences, which could be as time-consuming as traveling
to inperson hearings.

Element 9: Case Tracking

The plan addresses the mandate's directive to develop a unified case
tracking system for all appeals levels, and outlines a new tool designed
to fulfill the mandate's requirements-the Medicare Appeals System (MAS).
We found that the design and approach to implementing MAS appear
reasonable. However, the plan was drafted with the expectation that MAS
would be first used by QICs in the summer of 2004. The delay in
implementing QICs, which are now not expected to become fully operational
until October 2005, has reduced the time available for live testing of the
system to determine if it will perform as expected. Currently, HHS is
unable to conduct such testing. This delay may leave insufficient time to
fully test MAS and make necessary adjustments to the system, but the plan
leaves no margin for such an occurrence. However, should MAS be
unavailable at the time of the transfer, CMS has an alternate case
tracking system that could be temporarily deployed until the new system
becomes operational.

Category E: Strategy for Staffing HHS's ALJ Unit Is Undeveloped

The plan lacks a detailed staffing strategy to ensure that HHS can attract
both ALJs and support staff by the time of the transfer. MMA required the
plan to include steps to hire ALJs, taking into account their expertise in
Medicare, and to address training in Medicare laws and regulations.

Element 10: Hiring

As required by MMA, the plan addresses steps that should be taken to hire
ALJs and support staff. It outlines HHS's intention to hire ALJs from
various sources, including OPM's register of qualified ALJs, the list of
retired ALJs who have expressed interest in returning to work and are
available for temporary reappointment, and ALJs currently employed and
adjudicating administrative appeals at other agencies.14 However, it does
not discuss how HHS will be able to ensure that it can attract the 50 ALJs
it plans to hire. Moreover, we expect that it may be difficult for HHS to
identify and hire 50 ALJs with Medicare knowledge. For example, OPM's
register, the largest source of new ALJs with 1,300 potential candidates,
does not include information indicating whether candidates have Medicare
expertise. Similarly, HHS cannot tell which of the 110 retired ALJs on the
register of those interested in returning to work have Medicare expertise.
And, although ALJs already employed at other agencies may be interested in
seeking employment at HHS, few of them are likely to have knowledge of
Medicare rules. Given that the majority of ALJs currently employed by SSA
focus primarily on disability appeals, few of them are likely to have
significant Medicare expertise.

HHS's plan to hire ALJs and other professional and administrative staff in
a manner that ensures an appropriate geographic distribution is a major
staffing consideration. However, the plan does not address how HHS will
incorporate this feature into its hiring plans. Given the lack of such a
geographic distribution plan, there is no way for ALJ candidates to know
where new positions will be located-which may have a great bearing on
their interest. As a result, even the OHA ALJs with Medicare expertise may

14OPM administers the ALJ examination and maintains a hiring register.
Federal agencies that intend to hire ALJs must specify the number and
locations of the judgeships they would like to fill and submit their
requests for candidates to OPM. OPM supplies three to five of the highest
ranked candidates for each slot. Those not hired are returned to the
register. Agencies may also hire temporary ALJs from a roster of retired
judges who have made themselves available for reemployment. This roster is
also maintained by OPM. In addition, federal agencies may hire ALJs who
are already employed in that capacity at other agencies by posting vacancy
announcements and evaluating applicants.

not be interested in transferring to HHS, if this would require them to
relocate.

The plan lacks other details concerning HHS's hiring plans. For example,
it is not explicit about whether HHS will hire the 50 ALJs and 200 support
staff all at once, or if it intends to conduct several rounds of hiring
and training. The plan does not outline who is to be involved in the
hiring process and, as of July 2004, HHS had not decided whether a chief
judge might be hired first to participate in the hiring of the ALJs and
support staff. Finally, the plan does not acknowledge the possibility that
HHS may be unable to hire all needed staff by the time of the transfer. By
not recognizing this possibility, the plan misses the opportunity to
develop critical contingency arrangements.

Element 11: Training

As required by the mandate, the plan describes HHS's plans to develop a
training strategy but, nonetheless, leaves key questions unanswered.
Although the plan establishes four broad categories for short-term
training, it does not include substantive information on the training's
content. It also lacks other critical information, such as a detailed
description of its plans to provide initial training for HHS's ALJs. While
OHA's ALJ training of new hires lasts 5 weeks, the plan does not describe
the duration of HHS's planned training or the depth of material to be
covered. It also does not specify who will be responsible for developing
the training curriculum and course materials or presenting the training to
new ALJs. The plan mentions that HHS is also developing a long-term
training strategy, but there are no details for providing ongoing training
and refresher classes to ALJs in future years. Even OHA ALJs with Medicare
knowledge may need additional training, as some indicated to us that their
understanding of the program's rules is not current.

In addition to our concerns regarding the content of this plan element,
the lack of a detailed schedule for developing and presenting the new
training program raises concerns about HHS's ability to have an adequately
prepared staff to adhere to its plans to begin processing appeals by July
1, 2005. The only date included in HHS's training schedule indicates that
both hiring and training will begin in the second quarter of calendar year
2005- at most, 3 months before the plan anticipates HHS ALJs will begin
hearing appeals. This poses a challenging time frame for HHS, especially
if its training will mirror OHA's 5-week program. Given the plan's
timeline, there is little opportunity to pursue alternate training
arrangements, should delays occur.

Category F: Issues of Oversight Remain Unresolved

Although the plan recognizes the importance of ALJ decisional
independence-an element critical to the integrity of the appeals
process-it does not specify, organizationally, where ALJs will be housed
within HHS nor does it discuss the safeguards that will be put in place to
ensure ALJs are insulated from undue influence from HHS. The plan outlines
the circumstances under which performance standards can be applied to ALJs
without threatening their independence. However, other than meeting time
frames prescribed by law, the plan proposes no standards nor does it
describe the process that might be used to develop such standards.

Element 12: Independence of ALJs

Despite the fact that the independence of ALJs is critical to ensuring due
process to appellants, the plan is silent on what steps will be taken to
shield ALJs from real or perceived external pressures, including pressure
from elsewhere in HHS, which is tasked with overseeing the Medicare
program. ALJs throughout the federal government may have to issue rulings
against the agencies that employ them.15 However, since SSA became an
independent agency in 1994, OHA ALJs hearing Medicare appeals, as SSA
employees, have not been in this position.

The plan notes that SSA has a long history of maintaining independence of
ALJs. MMA required that the plan provide information on steps to be taken
to ensure the independence of ALJs hearing Medicare appeals once this
function has been transferred to HHS. However, the plan merely repeats
MMA's requirement-that the HHS ALJ unit will report solely to the
Secretary of HHS and that it will be separate from CMS. The plan provides
no information about the proposed, new organizational structure, nor does
it specify who, in terms of title and duties, will direct and manage the
HHS ALJ unit. Furthermore, the plan does not define the relationship of
ALJs to other HHS offices, such as CMS and the MAC-with which the ALJ unit
will have to communicate and coordinate-or where, organizationally, the
ALJ unit will be housed. The plan also does not include standards that
either HHS, or the new ALJ unit, could use to evaluate whether the
independence of the ALJ unit is being achieved. Similarly, the plan makes
no reference to the steps that will be taken to ensure the objectivity of
ALJ

15To ensure that ALJs feel free to exercise their independent judgment,
federal law provides them with several protections. For example, ALJs are
excluded from the definition of "employee," for the purposes of
performance appraisal systems applicable to other federal employees. 5
U.S.C. S: 4301(2)(D) (2000).

training. Finally, the plan does not recognize the possibility that the
independence of the ALJ unit could be questioned nor does it specify a
contingency plan to ensure-and if necessary, restore-the continued
independence of ALJs.

Element 13: Performance Standards

The plan addresses the appropriateness of establishing performance
standards for ALJs, as required by MMA. Although the plan acknowledges
that it is important that ALJs adhere to the new time frames for
processing appeals as established by BIPA, it is unclear whether any other
performance standards for ALJs will be established. The plan notes that
the law allows the imposition of "administrative practices and programming
policies that ALJs must follow," including timeliness of decisions, so
long as the agency does not use the guidelines to influence the ALJs'
decisions. In addition, the plan holds that it is not unreasonable to
expect a minimum level of efficiency and that ALJs can be disciplined for
"good cause," which may be based on performance or unacceptably low
productivity. However, the plan does not discuss whether such guidelines
will be imposed, by what means the agency would evaluate a minimum level
of efficiency, who would evaluate the judges, and what actions might be
taken based on unsatisfactory findings. Similarly, the plan does not
include specific steps the agency would take to ensure that any guidelines
and performance standards that are imposed would not interfere with ALJ
independence. Finally, the plan does not address how ALJs would be
evaluated should any new standards be challenged.

Conclusion 	SSA and HHS have stressed their commitment to ensuring a
successful transfer of the ALJ level of the Medicare appeals process from
SSA to HHS. Addressing the 13 elements specified in MMA and developing and
implementing contingency provisions are key to ensuring that the
transition is smooth and that services to appellants are not disrupted.
Although both agencies have stressed that they are continuing to further
develop details of the plan, based on the information they have developed
thus far, we believe that the plan does not comprehensively address the 13
elements and, thus, seriously jeopardizes a successful and timely
transition. For example, the absence of specific milestones, the use of
unreliable data, and the lack of an acknowledgement that HHS may
ultimately need to develop two separate processing systems to adhere to
current practices and those required by BIPA are serious shortcomings.
Moreover, the absence of details related to providing appellants access to
ALJs, hiring and training staff with expertise in Medicare, and preserving

ALJ independence further undermine the plan's credibility. The plan's lack
of specific details jeopardizes HHS's ability to begin adjudicating
appeals as scheduled. Unless SSA and HHS act quickly to effectively
address the 13 elements required by MMA and finalize the transition plan
for transferring responsibility for adjudicating Medicare appeals from SSA
to HHS, the appeals process could be compromised.

Recommendations for 	To help ensure a smooth and timely transition of the
Medicare appeals workload from SSA to HHS, we recommend that the Secretary
of HHS and

Executive Action	the Commissioner of SSA take steps to complete a
substantive and detailed transfer plan. Specifically, we recommend that
the Secretary and Commissioner take the following six actions:

o  	Prepare a detailed project plan to include interim and final
milestones, individuals or groups responsible for completing key elements
essential to the transfer, and contingency plans.

o  	Validate data and perform analyses to support decisions regarding key
elements, such as workload, staffing needs, and costs.

o  	Outline a strategy that addresses the possible need for two separate
processing systems at HHS-one for appeals that follows the current
processing practices and one that complies with BIPA's time frames and
other requirements-in the event that the BIPA provisions establishing the
QICs are not implemented as scheduled.

o  	Identify where staff and hearing facilities-including videoconference
equipment-are needed as well as opportunities to share staff and office
space.

o  	Develop an approach to ensure that ALJs and support staff with
Medicare expertise can be hired, and that all staff are adequately trained
to process and adjudicate Medicare appeals.

o  Define the relationship of HHS's ALJ unit to the other organizations
within

Agency Comments
and Our Evaluation

the department, and identify safeguards that will be established to ensure
decisional independence.

We provided a draft of this report to both SSA and HHS for their review.
In its written comments, HHS agreed with all but one of our
recommendations. HHS said that contingency plans for several plan
elements-regulations, feasibility of precedential authority, independence
of ALJs, and performance standards-were unnecessary. Because of the
critical nature of these provisions and the inter-dependence of the plan's
components, we continue to believe that the establishment of such plans

for each congressionally mandated element would best ensure a smooth and
timely transition.

Further, HHS emphasized that it attempted to ensure that it provided us
with the most current information available regarding decisions associated
with the transition. However, we do not believe that HHS has kept us fully
apprised of all of its efforts. For example, in its comments, HHS
described the establishment of the Office of Medicare Hearings and Appeals
Transition and the activities of this new office related to the transfer.
Although HHS indicated that this office was established in July 2004,
before our work was complete, this information was not shared with us. In
addition, although HHS noted several other efforts to enhance the
transition process-such as its analysis of internal data to make caseload
projections for fiscal years 2005 and 2006-this information also was not
provided to us during the course of our work. Although this, and other
efforts HHS cited to facilitate the transfer of Medicare appeals might
have promise, we had no opportunity to evaluate them.

We are also concerned with HHS's characterization of our findings and its
own progress in implementing the transfer. For example, HHS interprets
figure 2 in our report as indicating that we believe that the plan meets
substantially all MMA requirements. However, figure 2 clearly shows that 5
of the 13 plan elements do not completely address these requirements.
Moreover, figure 2 shows that the plan lacks detailed information and
contingency plans for the vast majority of the elements. Such significant
deficiencies suggest that a smooth and timely transfer may be in jeopardy.
HHS also stated that the public comments it received concerning the plan
were positive. Our information does not support this assertion. Our
evaluation of these comments showed that they mirrored the concerns
addressed in our report and raised serious questions about the ability of
SSA and HHS to effect the transfer in a manner that would preserve the
independence of ALJs and ensure the quality of service to appellants.

In its written comments, SSA agreed with our recommendations by either
expressing its concurrence or by citing steps it has taken to aid with
their implementation. SSA also noted that it shared our concern that
adequate planning needs to take place and agreed that detailed contingency
planning is important. Although SSA's comments focused on its continuing
contribution to enhance HHS's understanding of the current Medicare
appeals process, it also emphasized that some elements of the plan are the
sole responsibility of HHS. While we agree that HHS must ultimately assume
full and complete responsibility for the appeals process, until the
transition is complete, we believe that both agencies are accountable for

ensuring that appeals are adjudicated promptly and competently, and for
coordinating their efforts so that the transfer occurs on a smooth and
timely basis.

Finally, both SSA and HHS expressed concern with the title of our report.
HHS said that the title might raise unnecessary fears among the advocate
and beneficiary communities. Further HHS stated that it is on track for an
efficient and effective transfer of the ALJ function at the earliest
possible time allowed by the MMA. Although HHS indicated that much
progress has been made in key areas, such as development of regulations
and the assurance of ALJ independence, it provided no new information in
support of these efforts. In addition, many other significant questions
raised in our report, such as the geographic distribution of ALJs, were
not addressed in its comments. Therefore, we continue to have significant
concerns about the agencies' abilities to effectuate the transfer on a
timely basis. Both agencies also reported that they had identified a
mechanism for HHS to continue to use SSA ALJs to adjudicate Medicare
appeals after the statutory date of the transfer, if necessary. However,
neither SSA nor HHS described this mechanism and we therefore were unable
to evaluate it. Consequently, we continue to believe that our evaluation
of the evidence supports the report title. SSA's and HHS's comments are
reprinted in appendixes II and III, respectively.

We are sending copies of this report to the Secretary of HHS, the
Commissioner of SSA, and other interested parties. In addition, this
report will be available at no charge on GAO's Web site at
http://www.gao.gov. We will also make copies available to others upon
request.

If you or your staffs have any questions about this report, please call me
at (312) 220-7600. An additional GAO contact and other staff members who
prepared this report are listed in appendix IV.

Leslie G. Aronovitz Director, Health Care-Program Administration and
Integrity Issues

Appendix I: Analysis of the Medicare Appeals Transfer Plan

Based on our review of the plan and additional materials provided by the
transfer team, we found that the plan to transfer the Medicare appeals
function from the Social Security Administration to the Department of
Health and Human Services is insufficient to ensure a smooth and timely
transition. Although the plan generally addresses each of the 13 elements
mandated by the Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 (MMA), as indicated in figure 2, it omits important details on
how each element will be implemented. Furthermore, the plan overlooks the
need for contingency provisions, which could prove to be essential, should
critical tasks not be completed in a timely manner.

Figure 2: Completeness of Medicare Appeals Transfer Plan

This aspect of the plan is complete
This aspect of the plan is partially complete
This aspect of the plan is incomplete
Source: GAO analysis of Medicare appeals transfer plan and supporting
information.

Appendix II: Comments from the Social Security Administration

Appendix II: Comments from the Social Security Administration

Appendix II: Comments from the Social Security Administration

Appendix II: Comments from the Social Security Administration

Appendix II: Comments from the Social Security Administration

Appendix II: Comments from the Social Security Administration

Appendix II: Comments from the Social Security Administration

Appendix III: Comments from the Department of Health and Human Services

Appendix III: Comments from the Department of Health and Human Services

Appendix III: Comments from the Department of Health and Human Services

Appendix III: Comments from the Department of Health and Human Services

Appendix III: Comments from the Department of Health and Human Services

Appendix III: Comments from the Department of Health and Human Services

Appendix III: Comments from the Department of Health and Human Services

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact Geraldine Redican-Bigott, (312) 220-7678

Acknowledgments 	Margaret Weber, Craig Winslow, Shirin Hormozi, and
Barbara Mulliken made key contributions to this report.

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