FAIR DME Appeals Act
- Sponsor
- Sen. Cassidy, Bill [R-LA]
- Committees
- Finance Committee (primary)
- Last action
- Jul 22, 2026
Bottom line
The bill shifts the financial burden of legal fees for incorrectly denied Medicare claims from small business DME suppliers to the Medicare contractors responsible for those denials, aiming to improve claims accuracy.
What it actually does
This bill amends the Social Security Act to require Medicare administrative contractors (MACs), unified program integrity contractors (UPICs), and qualified independent contractors (QICs) to pay the reasonable attorney fees and litigation costs for small business durable medical equipment (DME) suppliers. This payment is mandated when a supplier successfully appeals an initial payment denial to the Office of Medicare Hearings and Appeals (OMHA), and an administrative law judge (ALJ) determines the initial denial was clearly erroneous or lacked substantial evidence. The bill also specifies that the Secretary of Health and Human Services will not indemnify these contractors for such payments, meaning the contractors themselves bear the financial responsibility.
Proponents argue
Supporters argue that this bill will protect small business DME suppliers from the significant financial strain of appealing incorrect payment denials, which can be prohibitive for smaller entities. They contend that by making contractors financially liable for their errors, the bill will incentivize more accurate initial claims determinations, reducing the need for costly appeals and fostering a fairer administrative process for providers.
Opponents contend
Critics might contend that this bill could increase administrative costs for Medicare contractors, potentially leading to higher contract bids and indirectly increasing federal expenditures in the long run. They may also argue that the provisions for when fees are not paid (e.g., supplier documentation failures) are insufficient, or that the non-appealable nature of the ALJ's fee determination could lead to inconsistencies or unfair outcomes for contractors.
The bill is relatively short and focused, making it accessible for a reader to understand its core provisions within a reasonable timeframe.
Section 2(a), adding Section 1869(j)(1)(A) to the Social Security Act
Mandatory Payment of Legal Fees for Incorrect Denials
This provision requires Medicare administrative contractors (MACs), unified program integrity contractors (UPICs), and qualified independent contractors (QICs) to pay the reasonable attorney fees and litigation costs of small business durable medical equipment (DME) suppliers. This payment is triggered if the supplier wins a final appeal at the Office of Medicare Hearings and Appeals (OMHA), and the administrative law judge (ALJ) finds the initial denial was clearly erroneous, lacked substantial evidence, or violated applicable law. The fees cover all stages of the appeal process up to the OMHA hearing.
Supporters argue
Proponents argue this provision creates a strong incentive for Medicare contractors to make accurate initial determinations, as they will face direct financial consequences for erroneous denials. This will reduce the burden on small businesses and streamline the appeals process by encouraging better initial decision-making.
Critics contend
Opponents might argue that this provision could lead to an increase in administrative overhead for contractors, as they must now track and potentially pay these fees. They may also express concern that it could create a chilling effect, making contractors overly cautious in denying claims even when legitimate concerns exist, potentially increasing Medicare fraud or improper payments.
Tradeoffs
The provision balances the goal of protecting small businesses from unfair financial burdens against the potential for increased costs and administrative complexity for Medicare contractors. It aims to improve claims accuracy but introduces new financial liabilities for the entities performing claims review.
Section 2(a), adding Section 1869(j)(2) to the Social Security Act
Exclusions from Fee Payment Eligibility
This section specifies conditions under which a small business DME supplier will *not* be eligible to receive legal fee payments, even if they win a final appeal. These exclusions include cases where the initial unfavorable determination resulted from the supplier failing to provide required documentation, failing to comply with billing or submission requirements, or if the contractor's initial denial was based on current law or guidance that later changed, or on a local coverage determination in effect at the time.
These subsections explicitly state that the Secretary of Health and Human Services will not indemnify Medicare administrative contractors (MACs), unified program integrity contractors (UPICs), or qualified independent contractors (QICs) for any reasonable attorney fees or litigation costs they are required to pay to DME suppliers under the new Section 1869(j).
Section 2(b), (c), and (d) amending Sections 1874A(d)(4), 1893(e), and 1869(c)(5) of the Social Security Act
Why it matters:This is standard legislative practice to amend existing statutory sections related to contractor liability and indemnification. It ensures consistency with existing legal frameworks rather than creating a new, isolated rule.
Case for: Supporters argue that this non-indemnification is critical to the bill's intent, as it ensures the financial burden for incorrect denials falls directly on the contractors. This direct financial accountability is intended to be the primary driver for improving claims accuracy and reducing erroneous denials.
Case against: Critics might argue that by preventing indemnification, the bill could significantly increase the financial risk for these contractors, potentially leading to higher contract bids in the future as they factor in this new liability. This could indirectly increase costs for the Medicare program or lead to contractors being overly cautious in their reviews.
Estimated impact: Shifts the financial risk of paying legal fees for incorrect denials entirely to the Medicare contractors, rather than allowing them to be reimbursed by the federal government.