The Jimmo v. Sebelius Settlement

The unwritten policy called the "improvement standard" used by Medicare Contractors to deny any therapy that does not result in measurable functional improvement has been thrown out by a Federal Judge. This means that Medicare beneficiaries who require skilled maintenance services cannot be denied those services in the home health, nursing home or outpatient setting. This settlement became effective January 24, 2013 with the signing of the Settlement Agreement in the Jimmo v. Sebelius Medicare Improvement Standard case.

CMS has been tasked to educate its contractors and to change its documentation, policies, guidelines and instructions. In the meantime, if medically required therapy that has been prescribed by your physician in treatment of your lymphedema has been denied on the basis that there is no expected functional improvement, file an appeal.

It will be very interesting to see how this law will affect the implementation of the new therapy reimbursement policies scheduled for 2014, which may be based on demonstration of functional improvement.

The CMS fact sheet follows.

Jimmo v. Sebelius Settlement Agreement Fact Sheet


On January 24, 2013, the U. S. District Court for the District of Vermont approved a settlement agreement in the case of Jimmo v. Sebelius, in which the plaintiffs alleged that Medicare contractors were inappropriately applying an "Improvement Standard" in making claims determinations for Medicare coverage involving skilled care (e.g., the skilled nursing facility (SNF), home health (HH), and outpatient therapy (OPT) benefits). The settlement agreement sets forth a series of specific steps for the Centers for Medicare & Medicaid Services (CMS) to undertake, including issuing clarifications to existing program guidance and new educational material on this subject. The goal of this settlement agreement is to ensure that claims are correctly adjudicated in accordance with existing Medicare policy, so that Medicare beneficiaries receive the full coverage to which they are entitled.


In the case of Jimmo v. Sebelius, the Center for Medicare Advocacy (CMA) alleged that Medicare claims involving skilled care were being inappropriately denied by contractors based on a rule-of thumb "Improvement Standard" - under which a claim would be summarily denied due to a beneficiary's lack of restoration potential, even though the beneficiary did in fact require a covered level of skilled care in order to prevent or slow further deterioration in his or her clinical condition. In the Jimmo lawsuit, CMS denied establishing an improper rule-of-thumb "Improvement Standard." The Court never ruled on the validity of the Jimmo plaintiffs' allegations.

While an expectation of improvement would be a reasonable criterion to consider when evaluating, for example, a claim in which the goal of treatment is restoring a prior capability, Medicare policy has long recognized that there may also be specific instances where no improvement is expected but skilled care is, nevertheless, required in order to prevent or slow deterioration and maintain a beneficiary at the maximum practicable level of function. For example, in the regulations at 42 CFR 409.32(c), the level of care criteria for SNF coverage specify that the ". . . restoration potential of a patient is not the deciding factor in determining whether skilled services are needed. Even if full recovery or medical improvement is not possible, a patient may need skilled services to prevent further deterioration or preserve current capabilities."

The Medicare statute and regulations have never supported the imposition of an "Improvement Standard" rule-of-thumb in determining whether skilled care is required to prevent or slow deterioration in a patient's condition. A beneficiary's lack of restoration potential cannot, in itself, serve as the basis for denying coverage, without regard to an individualized assessment of the beneficiary's medical condition and the reasonableness and necessity of the treatment, care, or services in question. Conversely, coverage in this context would not be available in a situation where the beneficiary's care needs can be addressed safely and effectively through the use of nonskilled personnel.

Thus, such coverage depends not on the beneficiary's restoration potential, but on whether skilled care is required, along with the underlying reasonableness and necessity of the services themselves. Any Medicare coverage or appeals decisions concerning skilled care coverage must reflect this basic principle. In this context, it is also essential and has always been required that claims for skilled care coverage include sufficient documentation to substantiate clearly that skilled care is required, that it is in fact provided, and that the services themselves are reasonable and necessary, thereby facilitating accurate and appropriate claims adjudication.


The Settlement Agreement - No Expansion of Medicare Coverage:

The Jimmo v. Sebelius settlement agreement itself includes language specifying that "Nothing in this Settlement Agreement modifies, contracts, or expands the existing eligibility requirements for receiving Medicare coverage."

The settlement agreement is intended to clarify that when skilled services are required in order to provide care that is reasonable and necessary to prevent or slow further deterioration, coverage cannot be denied based on the absence of potential for improvement or restoration. As such, any actions undertaken in connection with this settlement do not represent an expansion of coverage, but rather, serve to clarify existing policy so that Medicare claims will be adjudicated consistently and appropriately.

Forthcoming Activities:

CMS plans to conduct the following activities under the terms of the settlement agreement:

Clarifying Policy - Updating Program Manuals

The first action CMS will undertake as specified in the settlement agreement will be revising the relevant program manuals used by Medicare contractors. The Medicare program manuals will be reworded for clarity, so as to reinforce the intent of the policy. Specifically, in accordance with the settlement agreement, manual revisions will clarify that coverage of therapy "...does not turn on the presence or absence of a beneficiary's potential for improvement from the therapy, but rather on the beneficiary's need for skilled care."

Educational Campaign - Informing Stakeholders

The next step CMS will take will be an educational campaign for contractors, adjudicators, and providers and suppliers. CMS will disseminate to these recipients a variety of written materials, including:


CMS will also conduct national conference calls with providers and suppliers as well as Medicare contractors, Administrative Law Judges, medical reviewers, and agency staff, to communicate the policy clarifications described herein and answer questions.

Claims Review

In addition, to ensure beneficiaries receive the care to which they are entitled, CMS will engage in accountability measures, including review of a random sample of SNF, HH, and OPT coverage decisions to determine overall trends and identify any problems, as well as a review of individual claims determinations that may not have been made in accordance with the principles set forth in the settlement agreement.

According to the terms of the settlement agreement, CMS will complete the manual revisions and educational campaign by January 23, 2014, which is within one year of the approval date of the settlement agreement.