THE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES has issued a report with criticisms of Medicare Advantage programs and how they operate.

The report issued by the department’s Office of Inspector General (OIG) found that 13 percent of the denials or prior authorizations should have been approved under Medicare coverage rules. In addition, 18 percent of payment requests were improperly denied.

According to the OIG: “These denials can delay or prevent beneficiary access to medically necessary care [and] create an administrative burden for beneficiaries or their providers.”

Examples of denials of authorizations

The report was based on a study of a random sample of 250 denials of prior authorization requests from 2019 by 15 of the largest managed care organizations. The OIG review team included health care coding and billing professionals and a panel of physicians who determined if services were medically necessary.

Among the most common improper denials of authorizations were requests for MRIs and CTs.

For example, eight months after a Medicare beneficiary was discovered to have an adrenal lesion of 1.5 cm, the beneficiary’s physician requested a follow-up MRI, but the managed care organization said the beneficiary would have to wait at least one year because the lesion was too small to warrant a follow-up. The physician panel determined the documentation demonstrated that the follow-up MRI was medically necessary.

In another case, a managed care organization denied a request for a walker for a 76-year-old beneficiary with polio syndrome. The rationale was that under the organization’s clinical criteria, the beneficiary was not eligible since the beneficiary had received a cane within the last five years. The reviewers determined the organization had misinterpreted local coverage criteria and “the walker was medically necessary given the beneficiary’s history, risk of falling and physical therapy notes.”

The Kaiser Family Foundation conducted a study of Medicare Advantage denials of prior authorization requests. The foundation found that 11 percent of denials were appealed and that 82 percent of those were fully or partially overturned.

AMA concerns about denials

The American Medical Association said that the rate of successful appeals raises “concerns about the appropriateness of many initial denials.”

Past president of the AMA Jack Resneck, M.D., commented that “prior authorization remains a major obstacle to timely and necessary care for our patients and an overwhelming burden to physicians.”

In an AMA survey of 1,001 physicians, one-third of the physicians reported that prior authorization requirements led to serious adverse events in patient care. Physicians also criticized plans for requiring ineffective step therapy and unnecessary office visits before authorizations were approved.

In response to these criticisms, two of the largest Medicare Advantage insurers, UnitedHealthcare and Cigna Healthcare, said they will reduce prior authorization requirements between 20 and 25 percent. Resneck said he was “cautiously optimistic that patients and physicians will begin to feel some relief from the prior authorization burden under these plans.”

Proposed remedies

The OIG suggested that the Centers for Medicare & Medicaid Services (CMS) provide more specific clinical criteria for making medical necessity reviews. In addition, the Inspector General suggested updating auditor protocols and auditor training to provide added emphasis on clinical criteria. CMS has agreed with these suggestions.

Congress also has gotten involved. In 2023, a bipartisan bill was introduced called the “Gold Card Act.” Under the act, a physician would be exempted from requirements for Medicare Advantage prior authorizations if 90 percent of the physician’s prior authorization requests had been approved in the preceding year. The bill applies to items and services, but not drugs.

Growth in Medicare Advantage

Of the 65.7 million people enrolled in Medicare, 51 percent are enrolled in Medicare Advantage plans (data from 2023). With Medicare Advantage plans, the federalgovernment pays a fixed amount of money each month to private health care plans, and the private plans then pay for the enrollees’ coverage, including hospital and physician services.

Under traditional fee-for-service Medicare, the physicians and hospitals are paid directly by Medicare. Coverage usually includes added services such as prescription drugs and care for dental, vision and hearing. Some plans even include meals and transportation for health care.

A drawback of Medicare Advantage is that the patient is generally limited to providers that are in the plan’s network, whereas a patient in traditional Medicare maychoose any provider in the u.S. that accepts Medicare.

As noted earlier, Medicare Advantage plans often impose prior authorization requirements. Traditional Medicare generally does not.

Incentives to contain costs

The type of Medicare plan in which a patient enrolls affects incentives to contain costs. In Medicare Advantage plans, higher monthly rates are paid to plans for patients with more health risks. After the patient is enrolled in a plan, the amount of revenue is fixed, and the financial incentive for the plan is to reduce expenses that would take away from profits. Aggressive use of prior authorization requirements may serve the plan’s financial interests, but also frustrate patients and providers as well as impose health risks.

In traditional Medicare, the fee-for-service structure does not incentivize reducing care to the same degree. Generally, under fee-for-service, performing more services results in more revenue, particularly for physicians. However, Medicare’s payment system of Diagnostic Related Groups (DRGs) serves to contain costs for care that is delivered in hospitals.

The ongoing challenge is to balance incentives and regulations to promote quality of care, efficiency and cost containment. •