Does Medicare Advantage Require Prior Authorization?
Are you considering enrolling in a Medicare Advantage plan? Before making a decision, it’s crucial to understand the coverage options and potential limitations. One common concern is whether Medicare Advantage plans can deny coverage because they require prior authorization.
Medicare Advantage plans, or Medicare Part C, are offered by private insurance companies approved by Medicare. These plans provide all the benefits of Original Medicare (Parts A and B) and often include additional benefits such as prescription drug coverage and dental, vision, and hearing services.
We will delve into the specific circumstances in which a Medicare Advantage plan requires prior authorization and could potentially deny coverage, the appeals process for denied claims, and what steps you can take to ensure you receive the coverage you need. By understanding the ins and outs of Medicare Advantage plans, you can make an informed decision about your healthcare coverage. So, let’s unlock the truth together and navigate the world of Medicare Advantage plan prior authorization.
What is the Purpose of Prior Authorization?
Prior authorization (or Pre-Authorization) is a utilization management tool used to contain costs. It consists of a third party, usually employed by the insurance company, making determinations about a request for service. The third party, who may be a doctor, nurse, or non-medical staff, approves or denies a request based upon predetermined criteria.
• Is the service covered?
• Is it a duplicate?
• Does the request contain the proper codes and supporting documentation?
• Is the service “medically necessary” as defined by CMS’s standard of care?
The purpose of Medicare Advantage plans requiring prior authorization is to ensure that the medical procedures are necessary and that the payer (insurance company) and patient are not wasting money.
Health care involves a great deal of money. There are three primary interested parties: the patient, who wants to pay as little as possible, the doctor, who provides a service for a fee, and the insurance company, which protects the patient from overwhelming healthcare costs for a premium.
Each has different and conflicting interests. Each is making a cost-benefit analysis to determine if the activity is worth it.
The patient wants good care for minimal cost. The doctor wants to be paid as much as possible for skills and services rendered. The insurance company wants to provide protection at the lowest cost to itself to maximize profit. Each is attempting to protect its interests. The insurance company uses prior authorization to make sure the service is, in fact, medically necessary so it does not waste money on unnecessary services.
The tradeoff is that prior authorization creates a barrier that potentially delays care and adds to its cost. There is also the potential that needed healthcare is wrongly delayed or withheld.
Medicare Advantage Utilizes Prior Authorization
Like commercial health insurance your employer purchases for employees, Medicare Advantage requires prior authorization for a majority of procedures, tests, and treatments, especially the more costly treatments. If approval is not granted, the insurer does not pay. There is an appeal process; however, many do not utilize the appeal process.
Traditional Medicare does not employ utilization management tools like prior authorization except in a few instances. The lack of any supervision of the medical necessity of services and payments has resulted in some high-profile cases of fraud, waste, and abuse. The only mechanism to combat abuse is self-reporting, whistle blowers, and fraud hotlines.
Optimally, prior authorization deters patients from getting care that is not truly medically necessary, reducing costs for both insurers and enrollees. Prior authorization requirements, however, can also create hurdles and hassles for beneficiaries and their physicians and may limit access to both necessary as well as unnecessary care. It also adds the burden of expense to providers who pay staff to work with insurance companies through the prior authorization process.
Data suggests that Medicare Advantage members save an average of $1,965 per year in total health expenditures compared to fee-for-service Traditional Medicare. Medicare Advantage members have lower hospitalization rates and fewer readmissions than their Traditional Medicare counterparts.
Does Original Medicare Utilize Prior Authorization?
From its inception, Traditional Medicare (Original Medicare) has not used prior authorization. There was little, if any, oversight until the electric wheelchair scandal.
A Washington Post article published in August 2014 highlighted the massive fraud of Medicare’s resources. The article chronicled the sensational scams and trials of many Medicare swindlers. The outrageous theft of public funds and the massive fraud shamed CMS to amend its regulations to finally require pre-authorization for some “durable medical equipment,” i.e., electric wheelchairs.
Bureaucrats inside CMS admitted they knew how the wheelchair scheme worked as early as 1998. However, it was not until 15 years later that officials finally did enough to curb the practice significantly. Durable medical equipment—electric wheelchairs—is the only exception to the “reasonable and necessary” practice. They must be preapproved.
The Government Accountability Office (GAO) examined a prior authorization program that CMS ran in seven states in 20212. During the short duration of the program, Medicare saved $1.9 billion. The GAO recommended that CMS continue to study the subject and implement a prior authorization program for all of Original Medicare in its 2018 published study. CMS discontinued the program.
The Effect of Medicare Advantage Denials
There may be severe consequences when a Medicare Advantage Organization (MAO) denies authorization for a procedure.
- Patient access to medical care is delayed or denied.
- Potentially, it results in the patient paying out of pocket for something Medicare should have covered.
- It causes an administrative burden for the patient and providers because they must devote resources to an appeal.
None of these have positive consequences and are a cause of frustration with Medicare Advantage for some.
How Common is Medicare Advantage Prior Authorization Denials?
The Kaiser Foundation examined CMS data from MAOs from 2021. They found that more than 35 million prior authorizations were submitted to Medicare Advantage insurers. Over 2 million prior authorization requests were fully or partially denied by the insurance companies.
The percentage of prior authorization requests and denials depends upon individual plans. They are not identical. Of the 2 million denials, some were partial denials, totaling 380,000.
Partial denials would be, for example, physical therapy sessions. The physician requests 10 sessions, but only 5 are granted. That leaves 1.6 million prior authorizations completely denied. The average for Medicare Advantage plans as a whole was less than 6 percent, with individual MAO falling slightly above or below that average.
How About Appeals of Prior Authorization Denials?
Each Medicare Advantage plan has an appeal process. Data from the same group revealed that only 11 percent (or 212,000) of appeals were made, including partially and fully denied requests. The
insurance companies overturned 82 percent (or 173,000) of the appeals.
The high number of repeals was cause for concern. Are Medicare beneficiaries being unjustly denied services? Are the insurance companies creating unfair obstacles to reduce costs?
The study’s data, however, do not describe in detail the causes of the denials. In general conversations with insurance carriers, the authors discovered that prior authorizations are denied for a number of common reasons.
- Incorrect coding and insufficient documentation
- Less intrusive or costly services were not first tried.
- The provider was not in the network
- Service is not covered
- Human error
All of these reasons may result in a denial of service, but the data does not identify the various causes, some of which are easily rectified upon review or appeal.
We have thousands of clients who call us when there are issues. I am amazed at how often the provider’s back office does not file the proper paperwork, use the correct codes, or include essential documentation such as X-rays or tests.
Then, when the pre-authorization is denied, the insurance company is blamed, and the subject is dropped. The back office is understaffed, doesn’t have the time, and doesn’t sufficiently understand the insurance company’s processes, so they cut their losses and move on to other cases. Sometimes, the provider moves on to the less costly treatment, knowing that it will be immediately approved.
How Many Are Denied Coverage Unnecessarily?
The Office of Inspector General (OIG) for the Department of Health & Human Services published a report in April 2022 regarding the denial of medically necessary services by some Medicare Advantage Organizations (MAO). The study discovered that MAOs denied services to Medicare beneficiaries on some MAO plans even though the prior authorization request did meet the standard for Medicare coverage rules.
The OIG study sample was taken from 15 of the largest MAOs during the week of June 1-7, 2019. The sample size was 500—250 prior authorizations and 250 denials of claims. Eventually, the number was reduced to 430 as the data was further sifted.
The OIG dug into the details of each of the 430 cases. In the course of the review of the cases, OIG found a conflict in the standards.
Conflict in Standards
CMS has its own guidance regarding the standard of care. The MAOs, however, have developed their own internal clinical criteria that go beyond Medicare coverage rules even though the case would pass CMS’s standards. In the past, CMS has left the MAOs to develop their own criteria where CMS is unclear. For example, a less intrusive or costly treatment may be required before a more expensive service is authorized by the MAO. Physical therapy may be more appropriate first before an MRI is prescribed.
Second, MAOs indicated that some prior authorization requests did not have enough documentation to support approval, yet OIG reviewers found that the existing beneficiary medical records were sufficient to support the medical necessity of the services.
On payment requests, the OIG found that the MAOs denied 18 percent of the cases that would have met the Medicare coverage and MAO billing rules. Most of these payment denials in the sample were caused by human error during manual claims processing reviews (e.g., overlooking a document) and system processing errors (e.g., the MAO’s system was not programmed or updated correctly).
In the end, OIG determined that 13 percent of the 250 prior authorization cases studied should not have been denied based upon CMS stands (or approximately 32 individuals).
How Many Denied Coverage Should Be Approved?
If we combine the two studies, Kaiser Foundation and Office of Inspector General for the Department of Health & Humana Services—we actually get an idea of who should have been approved.
The Kaiser Foundation consists of 35 million prior authorizations, with less than 2 million being denied, which is a 5 percent denial rate.
The OIG’s study discovered that only 13 percent of those denied should have been approved.
So, when we apply the average of 13% of wrongly denied prior authorization requests to the 2 million denials in the Kaiser study, that is approximately 260,000 individuals who should have been approved but were not out of 36 million prior authorization requests.
That means out of 36 million prior authorization requests, only 0.7 percent were wrongly denied coverage. In other words, 99.3 percent of prior authorizations are processed correctly.
I find that an incredibly high degree of accuracy.
Appeals and Reconsiderations for Denied Coverage
The appeals process for denied coverage with Medicare Advantage plans involves several levels, each with its own deadlines and requirements. Understanding these steps can help you navigate the process effectively and increase your chances of a successful appeal.
Redetermination
The first level of appeal is the “Redetermination” process. You must submit a written request to your Medicare Advantage plan within a specified timeframe, usually 60 days from the date of the denial letter. Include all relevant documentation and explain why you believe the service or procedure should be covered. The plan must review your appeal and provide a written decision within 30 days.
Reconsideration
If your appeal is denied at the redetermination level, you can proceed to the second level, known as a “Reconsideration.” This involves submitting a request to an independent review entity contracted by Medicare within 60 days of receiving the redetermination denial. The review entity will conduct a thorough review of your case, including any additional evidence you provide, and issue a written decision within 60 days.
Administrative Law Judge
If your appeal is still denied at the reconsideration level, you have the option to request a hearing before an administrative law judge (ALJ). This request must be made within 60 days of receiving the reconsideration denial. The ALJ will hold a hearing, either in person or by video conference, where you can present your case. The ALJ will issue a written decision within 90 days.
Medicare Appeals Council
If you are dissatisfied with the ALJ’s decision, you can further appeal to the Medicare Appeals Council. This request must be made within 60 days of receiving the ALJ’s decision. The council will review your case and issue a written decision.
Federal District Court
The final level of appeal is to seek judicial review in a federal district court. This step involves filing a lawsuit against the Medicare Advantage plan in a federal court. It’s important to consult with legal counsel if you reach this stage, as the process can be complex.
Bottom Line: Medicare Advantage Prior Authorization Is a Required Tool
No one writes a blank check. When money is being spent, there is oversight. When there is a lot of money from a lot of people, there will be a lot of accountability. The Medicare Advantage oversees that taxpayers’ and beneficiaries’ money is spent in accordance with the norms and procedures that CMS has laid down. Medicare Advantage requires prior authorization to protect resources and
clients, but like any institution that is carrying out millions of actions among thousands of people, there are errors. The appeals process is supposed to remedy those errors, but in an imperfect world, not always.
Currently, no one has complete and adequate data to give an accurate idea of inappropriate Medicare Advantage denials, but the data and studies recently done show that the level of error is incredibly low.
