Medicare attorney fee reimbursement

Summary#

This bill would change Medicare law so certain durable medical equipment (DME) suppliers can get their attorney fees and litigation costs paid when a contractor’s denial of payment is later reversed on final appeal. The payment duty would fall on the Medicare contractors involved (medicare administrative contractors, unified program integrity contractors, and qualified independent contractors), not on the supplier or the Secretary. The stated goal is to make suppliers whole when a contractor’s initial denial is found to be wrong.

• Who is eligible: A supplier must have been a small business at the time of the initial denial and must win a favorable final appeal heard by the Office of Medicare Hearings and Appeals (OMHA) where the administrative law judge finds the initial denial clearly erroneous, unsupported by substantial evidence, or not in line with law/guidance in effect at the time.
• What costs are covered: Reasonable attorney fees (using the lodestar method) and other litigation costs that are normally recoverable by a prevailing party.
• Which contractors pay: The contractor that made the initial determination must pay. If another contractor affirmed the denial during the administrative process, the two contractors split the fees evenly.
• Process and timing: The DME supplier must apply to the ALJ within 30 days of the favorable final appeal and serve the contractors; contractors have 30 days to respond; the ALJ must decide fee awards within 60 days and that decision cannot be appealed.
• Exceptions: No fee award if the denial was due to supplier failure to provide required documentation or to follow billing rules, or when the contractor applied current law or local coverage rules in effect at the time.
• Implementation deadline: The Health and Human Services Secretary must write implementing regulations within two years; the changes apply to contracts entered into after January 1 of the year after those regulations are issued.

What it means for you#

• DME suppliers (small businesses):

  • If you win a favorable final appeal at OMHA and the ALJ finds the contractor’s initial denial was clearly wrong, you can apply to have reasonable attorney fees and litigation costs paid by the contractor.
  • You must apply within 30 days of the favorable appeal decision and show evidence of the fees and costs.
  • You will not get fees if you failed to give required documents or follow billing rules, or if the contractor applied valid local coverage rules or law in effect at the time.

• Medicare contractors (MACs, UPICs, QICs):

  • May have to pay awarded attorney fees and litigation costs when a DME supplier wins a qualifying final appeal.
  • If a contractor affirmed an initial denial, it shares the fee bill evenly with the contractor that issued the initial denial.
  • Contractors will face a non-appealable ALJ decision setting the fee amount and must pay as ordered.

• Medicare program / Secretary (CMS):

  • The Secretary must issue regulations within two years to implement the new rule.
  • The bill removes the Secretary’s ability to indemnify contractors for these specific fee awards (meaning the Secretary cannot promise to pay contractors for these fee awards).

• Patients / beneficiaries:

  • The bill does not change coverage rules directly. Any effect on patients would be indirect (for example, if contractor behavior changes).

Expenses#

No publicly available information on a formal fiscal estimate or cost numbers was included in the bill text or materials.

• Contractors will pay any attorney fees and litigation costs awarded under the new rule. If multiple contractors are involved, the award may be split.
• The Secretary will need to create regulations, which will involve administrative work and some implementation cost.
• Because the Secretary cannot indemnify contractors for these fee awards, contractors (not CMS) would bear these specific payments. The bill does not say whether contractors could seek higher contract prices in the future to cover this risk.
• Possible indirect costs (not quantified here): contract administration, changes to contractor practices, or litigation-related workload increases.

Proponents' View#

• The bill appears intended to compensate small DME suppliers for legal costs when a contractor’s denial is later found to be incorrect.
• Supporters may argue this could deter incorrect denials and improve fairness in the appeals process for small suppliers.
• It could reduce the financial barrier for small suppliers to pursue appeals by shifting fee risk away from them.
• The bill includes safeguards: exclusions where the supplier failed to meet documentation or billing requirements, and a clawback if the supplier obtained the appeal result through fraud.

Opponents' View#

• One concern is that shifting fee payments to contractors could raise contractors’ costs, which could have downstream effects on contract pricing or contractor behavior.
• The bill does not include a fiscal estimate, so the size and frequency of fee awards — and the overall budget impact — are unclear.
• This might encourage more appeals or more litigation tactics aimed at triggering fee awards, increasing administrative and legal workload.
• The decision on fee amounts is not appealable, which could worry contractors about lack of review over potentially large awards.
• The rule applies only after the Secretary issues regulations and to new contracts entered after a specified date, so timing and real-world rollout are unclear.

What is unclear: How often ALJs will find initial determinations “clearly erroneous” under this standard; the likely dollar amounts of awards; and how contractors or CMS will adjust contracting or oversight practices in response.