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In 2010, there were 41,733 Medicare appeals filed with administrative law judges (ALJs). By 2015, the number had increased to 432,534, a jump of 936 percent. The number of ALJs handling this appeals load has remained more or less constant at 77.  

In 2010, the ALJ system (Level 3 appeals) already was showing symptoms of being overloaded. More than one-third (36.7 percent) of ALJ decisions were being turned in late, beyond the statutory time frame allowed in Medicare regulations. By 2014, only around 3 percent of ALJ decisions were being made on time (96.4 percent were late). 

What will the system look like in 2020? 

If the current growth rate of Level 3 appeals holds, then in 2020 there will be over a million appeals. However, since virtually all ALJ decisions are currently being made late, we can guess that unless there is substantial change, the appeals system will have collapsed completely long before then. If we use a logarithmic approximation, we can assume that the growth rate in number of appeals will drop, so by 2020 there would be around 565,000 appeals to process. But there is no indication whatsoever that the growth in appeals will taper off anytime soon, so this likely is wishful thinking. And even at that level, still the system would be broken. 

One way to cope with this problem is to hire more ALJs. If the current 77 ALJs clearly are not enough, then how many will be required by 2020? 

Let’s calculate. ALJs receive the same benefits as other federal employees. That is, 26 vacation days and 10 national holidays. If we also account for weekends, then ALJs can be expected to work a maximum of 227 days per year (not counting sick days.) So at the 2014 appeal rate, our ALJs as a whole would need to be making decisions on 1,905 appeals per day. This translates to about 25 appeals per day, per ALJ, and assuming no bathroom breaks, that’s about 3.5 appeals per hour, or 17 minutes’ worth of attention per appeal. This clearly does not work, because just a hearing alone can take a few hours, or even a few days.

But how many ALJs are needed? Mature ALJs may be expected to hold between 45-60 hearings per month. Since there are about 19 working days per month, this translates to between 2.4 and 3 hearings per day. 

This translates to between 545 and 681 hearings per year. So, assuming each case receives only a single hearing of 1-2 hours, then at the 2014 rate of 432,534 appeals, the Office of Medicare Hearings and Appeals (OMHA) currently needs between 635 to 794 ALJs – about 10 times the current number. 

Now, if we look at 2020 and make the same assumptions, then the ALJs would need to process 4,758 appeals per day. This would require between 1,586 to 1,982 ALJs. This would mean between 20 and 26 times more ALJs than we currently have.

What would that cost? The 2017 budget request for OMHA is $250 million, which is 2.4 times what is budgeted for OMHA in 2016. If we assume that the cost of OMHA roughly correlates with the number of ALJs, then by 2020, should it handle the appeals load, OMHA will cost between $2 and $2.7 billion dollars per year to run (in 2016 dollars), so the actual number will be much higher. 

And all of this assumes that every ALJ works at full speed and gives a total time of around two hours for each appeal, including the review of documents, hearings, legal analysis, and writeups of decisions. This is hopelessly optimistic. 

If we extend the quota of time for each appeal to an average of one day, which still is optimistic, unless there are many shortcuts, then there still would need to be 60 to 78 times the current number by 2020.

What this probably means is that the Medicare appeals system is broken, and can never be fixed, at least with the current appeals model. 

Of course, there are a number of efforts being made to get rid of the appeals backlog. There are three types of proposed actions: 

  1. Reduce the number of claims denied, so the number of appeals will drop.
  2. Try to reduce the number of decisions at lower levels that are appealed.
  3. Increase capacity or modify appeals procedures.

These efforts will take several years to put in place, and they are unlikely to turn around the growing backlog. Given the explosive growth of appeals, these efforts are like trying to put out a forest fire with a water pistol.

This is going to require some out-of-the-box thinking. Probably the most promising solution would be to replace the ALJs and the entire staff that support them with artificial intelligence (AI). This may sound like science fiction, but recent advances in AI have started to have dramatic effects in financial services by allowing massive layoffs of middle-level management that used to make decisions.

But that’s another story. 

About the Author

Edward M. Roche is the founder of Barraclough NY LLC, a litigation support firm that helps healthcare providers fight against statistical extrapolations.

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