As a result of efforts by the Center for Medicare Advocacy and other attorneys, two federal courts have recently ruled in favor of beneficiaries whose claims for payment had been denied based on restrictive Medicare coverage rules.  In both cases the Centers For Medicare & Medicaid Services (CMS) reversed their earlier position that services were “not reasonable and necessary” (42 U.S.C. § 1395y(a)(a)), and liberalized its coverage rules while the plaintiffs’ claims were pending.  The courts rejected CMS’ position that, to give the agency time to implement changes in its payment procedures, it could refuse to cover plaintiffs’ services even after finding that they met statutory requirements.

One of the cases was brought by a Medicare beneficiary who received cryosurgery for prostate cancer on March 30, 1999.  Guzzo v. Thomas, No. 03-1346 (6th Cir. June 25, 2004) (not recommended for full-text publication).  In 1997 CMS had issued National Coverage Determination (NCD) 35-96, which stated that cryosurgery could not be considered reasonable and necessary because the evidence was not yet sufficient to demonstrate its effectiveness.  On February 1, 1999, two months before plaintiff Guzzo received cryosurgery, Medicare issued a Decision Memorandum finding that the procedure was safe and effective.  However, because the agency had made its liberalized coverage rule applicable to services received on and after July 1, 1999, payment for that Mr. Guzzo’s services were denied.   Reversing the decisions upholding denial in the administrative and district court proceedings, the Sixth Circuit reasoned that “entitlement to reimbursement is triggered when the Government announces that a medical procedure is ‘reasonable and necessary.’”

The second case involved a Medicare beneficiary who received treatments called Enhanced External Counterpulsation (EECP or ECP) for his severe angina in 1997 and 1998.   Wallis v. Thompson, CIV 02-448-TUC-WDB (D.Ariz. Order January 20, 2004), Motion For Clarification granted June 10, 2004.   CMS had adopted a NCD in 1984 denying Medicare coverage of EECP because there was not yet enough “published clinical evidence” of its utility. Coverage of Mr. Wallis’ procedure was denied based on the NCD, and he appealed the denial.  In 1998 Medicare found that EECP was “reasonable and necessary”, and later announced EECP would be covered only for beneficiaries who received the service after July 1, 1999.  The court agreed with Mr. Wallis that the liberalized NCD should be applied retroactively to claims in the appeal process.  The court prohibited the agency from:  refusing to apply the less restrictive NCD adopted in 1998 to cover plaintiff’s pending claims; and, refusing to apply revised NCDs authorizing Medicare coverage of services formerly ruled “not reasonable and necessary” to claims that are pending at the time of revision.

The rationales of these decisions could help many beneficiaries, since NCDs and Local Coverage Determinations (LCDs) are widely used by CMS to deny payment for services until studies have established their safety and efficacy.  Medicare beneficiaries whose appeals are pending when the agency finds that the service meets the “reasonable and necessary” statutory requirements may now successfully argue that they are entitled to coverage although Medicare has not yet officially started paying for the service. 

The Guzzo case was brought by Joseph K.Grekin of Schafer and Weiner, PLLC, (248) 540-3340, with an amicus brief filed by Sally Hart of the Center For Medicare Advocacy, (520) 322-0126 and Sarah Lenz Lock of AARP Foundation Litigation, (202) 434-2060.  The Wallis case was brought by Sally Hart and Gill Deford of the Center For Medicare Advocacy, (520) 327-0547 and (860) 456-7790, respectively.