As the Centers for Medicare & Medicaid Services (CMS) has contracted with private health insurance plans for the provision of managed care options under the Medicare Advantage (MA) program, these plans have not unexpectedly brought commercial insurance’s utilization management practices to Medicare. Chief among these is prior authorization, the process under which health plans can refuse payment for treatment or services unless healthcare providers secure plan approval first. Designed to prevent the delivery of inappropriate or low-value care, prior authorizations can also be leveraged as a cost-saving measure by establishing the health plan, not the clinician, as the gatekeeper to care.

As the MA model has become the preferred choice of Medicare beneficiaries, the use of prior authorizations by MA organizations has come under increased scrutiny.

CMS instituted new restrictions on prior authorizations in MA in a final rule released in April. But for patient advocates, legislators, and even some in the Office of the Inspector General (OIG) of the Department of Health and Human Services (HHS) CMS’s changes don’t go far enough in protecting MA members from inappropriate denials or guaranteeing the agency access to the data it needs to properly assess the extent and impact of prior authorizations requirements.

Background

Of the nearly 60 million current Medicare beneficiaries, over half are enrolled MA plans. This reflects a significant shift in beneficiary preference in the last decade. In 2013, less than a third (29%) of Medicare-eligible Americans opted for MA.

Heavily advertised and typically offering supplemental coverage for dental, vision, and/or hearing services, as well as prescription drug coverage, today’s MA plans seem to present easy “one-stop options” in a confusing Medicare landscape. Many beneficiaries have also been enticed by the inclusion of such unexpected perks as gym memberships, meal delivery and pest control services in some MA plans.

However, most MA enrollees are not aware of the ways in which MA’s managed care model differs from fee-for-service or traditional Medicare, especially in limiting access to care.

Prior authorization in traditional Medicare is limited to hospital outpatient services, non-emergent repetitive ambulance transports, durable medical equipment supplies, and home health episodes of care. But CMS has granted MA organizations broad discretion in their use of prior authorizations.

According to a KFF analysis, almost all (99%) of current MA enrollees are in plans requiring prior authorization for at least some services. While prior authorizations are more likely to be required for higher cost services such as chemotherapy and inpatient hospital stays, 6% of MA enrollees were in plans requiring prior authorizations for preventative services.

Unfortunately, evidence suggests that MA organizations may be employing prior authorizations arbitrarily or unfairly.

In 2015, more than half of MA organization audited by CMS were cited for inappropriate denials of prior authorization requests. The OIG subsequently expressed concern that the capitated payment structure under which MA plans are paid a fixed amount per member per month—regardless of the amount of care rendered per enrollee—may incentivize plans to limit beneficiary access to care in order to maximize profits.

While traditional Medicare has been faulted for incentivizing the overuse of services, under MA’s managed care model plans make money by providing fewer services. And the model has worked for them. The gross margins per enrollee realized by MA organizations are more than double the margins per enrollee in either the individual/non-group market or the fully insured group/employer market.

In addition, under the Affordable Care Act CMS is required to make quality bonus payments (QBPs) to those MA organizations which achieve at least four stars in its 5-star quality rating system. For some plans in some years, QBPs have ranged as high as $55 per member per month.

Of course, profits and QBPs are essential to encouraging health plans’ participation in the MA program. And the Better Medicare Alliance, which represents MA plans, points to a Milliman analysis which estimated the value of reduced cost sharing and additional benefits under MA plans at $123 per member per month, or $32.5 billion annually.

As Lisa M. Grabert observed in Senate testimony earlier this year, “Health financing involves a series of tradeoffs most important of all for the beneficiary, but also for policymakers and taxpayers. Appropriate and healthy debate over the use of these tools, especially prior authorization, is critical to the decision-making process around health financing.”

OIG scrutiny

In a 2022 report, the OIG chronicled “widespread and persistent problems” in MA organizations’ treatment denials. Among these was the finding that 13% of prior authorization denials were “for services that met Medicare coverage rules.” Essentially, patients were denied coverage for services they would have received if they had been enrolled in traditional Medicare and/or providers were denied payment for services rendered in good faith under both Medicare coverage rules and an individual MAO’s payment rules.

While CMS allows MA organizations to make coverage decisions based upon internal policies, it also specifies that these must be “no more restrictive than original Medicare’s national and local coverage policies.” Yet the OIG found that MAOs frequently made denials based on opaque internal criteria.

For the OIG, these denials raised three primary concerns. Foremost among these was that inappropriate denials delayed access to medically necessary care. The OIG also recognized the financial burdens incurred by MA enrollees who opted to pay for care out-of-pocket—a significant issue given that the most Medicare beneficiaries live on fixed incomes and have limited savings. Finally, the OIG acknowledged the administrative burdens imposed upon those patients and providers who chose to appeal denials.

These concerns are echoed by provider organizations.

The American Medical Association reports that “Surveys of physicians have consistently found that excessive authorization controls required by health insurers are persistently responsible for serious harm when necessary medical care is delayed, denied, or disrupted.” And, according to Anders Gilberg, VP for government affairs of the Medical Management Group Association (MGMA), “Medical groups now identify prior authorization in the MA program as more burdensome than commercial insurance and Medicaid.”

MGMA’s grievance was supported by the OIG’s finding that MA organizations often rejected prior authorization requests for insufficient documentation even when there was adequate supporting information in the patient record.

Such errors, the OIG concluded, could be attributed to both human and systems errors.

According to KFF, while only 11% of MA denials were appealed, most appeals (84%) were successful. The high rate of partial or fully favorable reconsiderations calls into question the basis upon which denials are made and raises the uncomfortable possibility that denials may be a stalling tactic.

CMS takes action

On April 12, CMS released the final rule regarding changes to prior authorizations in Medicare Advantage. The agency expressed confidence that the rule would ensure that MA enrollees had the same access to medically necessary care that they would receive in traditional Medicare.

Under the rule:

• Prior authorization policies for coordinated care plans may only be used to confirm the presence of diagnoses or other medical criteria and/or ensure that an item or service is medically necessary based on standards specified in this rule.
• Approval granted through prior authorization processes must be valid for as long as medically necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient’s medical history, and the treating provider’s recommendation, and plans must provide a minimum 90-day transition period when an enrollee who is currently undergoing an active course of treatment switches to a new MA plan.
• MA plans must comply with national coverage determinations (NCDs), local coverage determinations (LCDs), and general coverage and benefit conditions included in traditional Medicare laws.

Discussing the decision, CMS Administrator Chiquita Brooks-LaSure said that she had been influenced after “hearing some of the stories about people’s surgeries being delayed, people not getting the care that they need because of these processes.”

Work left to do

Senator Richard Blumenthal (D-CT) is among those who believe that CMS did not go far enough in prior authorization reform. Chairing the Permanent Subcommittee on Investigations’ hearing on Examining Health Care Denials and Delays in Medicare Advantage last month, Blumenthal stated that “the big insurance companies that run Medicare Advantage plans have been failing seniors when they need treatment and care.” He went on to fault MA organizations for relying on proprietary algorithms to predict the need for patient care rather than allowing doctors or other clinicians to make informed coverage decisions.

Patient advocates such as Christine Jensen Huberty of the Greater Wisconsin Agency on Aging Resources have expressed frustration that coverage denials are frequently upheld by Quality Improvement Organizations (QIO) with minimal or no explanations.

In addition, KFF contends CMS still needs to require detailed service level reporting on delays and denials. The availability of such data would make it easier for beneficiaries to make decisions regarding which plans would be best for them and allow CMS to better assess health equity in MA programs.

The push for prior authorization reform in MA continues. Under the Improving Seniors’ Timely Access to Care Act which was passed in the House last year, MA organizations would be required to establish an electronic prior authorization program with the ability to provide real-time decisions in response to requests for items and services that are routinely approved and to  annually publish specified prior authorization information, including the percentage of requests approved and the average response time.

As Senator Blumenthal observed, “a new rule is only as good as (MA organizations) being willing to change their real-world practices.”