Medicare Advantage is required to cover “all services that are covered by Part A and Part B of Medicare.” In other words, while Medicare Advantage insurers are permitted to offer additional benefits that are not available in Traditional Medicare, they may not deny coverage of the “basic benefits” that are available in Traditional Medicare. In determining whether a particular service or procedure would be available under traditional Medicare, Medicare Advantage insurers may rely on several different types of rules and evidence.
By 2023, a majority of those eligible for Medicare were enrolled in a Medicare Advantage plan, representing more than 30 million of nearly 60 million Medicare-eligible seniors. In 2008, the three largest Medicare Advantage insurers enrolled 32 percent of Medicare Advantage beneficiaries; by 2023, the three largest Medicare Advantage insurers (UnitedHealthcare, CVS, and Humana) enrolled 58 percent of all Medicare Advantage beneficiaries.
Despite the surge in enrollment, a growing number of hospitals and healthcare provider networks say Medicare Advantage insurer practices make it challenging to stay in business. A March 2024 survey of health systems revealed that 19 percent had stopped accepting one or more Medicare Advantage plans in 2023, and that 61 percent of health systems are either considering ceasing to accept all Medicare Advantage patients within the next two years, or will definitely do so. In March of this year, for example, Connecticut’s Bristol Hospital announced that it was eliminating 60 positions, a decision the hospital’s president attributed to delays in payment and coverage rejections by Medicare Advantage insurers.
Prior Authorization in Medicare Advantage
Both traditional Medicare and Medicare Advantage must cover services that are “reasonable and necessary for the diagnosis or treatment of an illness or injury.” Under Traditional Medicare, patients receive care at Medicare-certified facilities, and the facility or a provider then submits a report of their costs to Medicare Administrative Contractors for processing and reimbursement determination. These facility or provider claims are also subject to various compliance and auditing efforts to prevent improper payments. Because they take place after care (and sometimes after payment) has been provided, these processes are sometimes called “retrospective review.” Medicare Advantage insurers, by contrast, frequently require patients and providers to obtain prior authorization before receiving care.
In 2022, Medicare Advantage insurers received more than 46 million prior authorization requests, and either fully or partially denied about 3,400,000 of them, or about 7.4 percent. While prior authorization is not a verdict on what course of treatment a patient must pursue, a denial often forces a patient to either pay for the service out of pocket—if they can afford to—or forgo it entirely. Patients have the right to appeal denials but, in 2022, patients sought reconsideration of less than 10 percent of denied requests.
The American Journal of Managed Care found that the share of Medicare Advantage enrollees in a plan requiring prior
authorization for at least one category of healthcare services was 72.6 percent in 2019, which was similar to the rate it had been in 2009. But by 2023, the Kaiser Family Foundation reported that 99 percent of Medicare Advantage enrollees were in a plan requiring prior authorization for some services.
The expansion of prior authorization has created friction for providers and patients, and faces a backlash within the medical field. A 2023 survey of physicians from the American Medical Association found that 73 percent of physicians reported that the number of prior authorizations for medical services had increased somewhat or had increased significantly in the last five years. The survey also found that 78 percent of physicians reported that prior authorization sometimes led to abandoned treatment, and that 24 percent said that the practice had led to a “serious adverse event” for patients in their care. Media reports on hospital and provider groups that have stopped accepting Medicare Advantage patients cite “excessive prior authorization denial rates,” along with an allegedly slow pace of Medicare Advantage insurer reimbursement for claims that are approved, as the primary reason.
Post-Acute Care
Medicare Advantage beneficiaries have consistently had lower utilization rates of post-acute care services than Traditional Medicare beneficiaries. HHS OIG’s 2022 audit noted that stays in post-acute care facilities were among the most likely areas for wrongfully denied prior authorization requests. In particular, Medicare Advantage insurers “denied requests for transfers to post-acute care facilities that met Medicare coverage rules, claiming that beneficiaries’ needs could be met at a lower, less costly level of care.” Although Medicare Advantage insurers do not have to pay the rates set by Traditional Medicare and can negotiate different rates with facilities, it is likely that they can still experience significant cost savings by moving beneficiaries to lower levels of care.
The U.S. Senate Permanent Subcommittee on Investigations’ analysis of data obtained from UnitedHealthcare, Humana, and CVS shows that, across all three companies, prior authorization requests for post-acute care services for Medicare Advantage enrollees were denied at substantially higher rates than prior authorization requests for other types of care.
HHS OIG’s 2022 report noted that one of the most common sources of problematic prior authorization denials involved Medicare Advantage insurers claiming “that the patients did not need intensive therapy or skilled care, and that their needs could be met at a lower level of care, such as home health services at the patient’s residence,” even when these less intense options “were not clinically sufficient to meet the patients’ needs.”
One of the key concerns identified in the 2022 HHS OIG audit was that Medicare Advantage insurers frequently claimed that patients, whose providers had recommended a placement into a particular type of post-acute care facility, could be safely treated in a less-intense—and less costly—setting, even if these alternatives were not “clinically sufficient to meet the patient’s needs.”
The Subcommittee stated that this should not distract from the fact that it is insurers who are using prior authorization to protect billions in profits while forcing vulnerable patients into impossible choices. This is particularly troubling when recent analyses indicate that Medicare Advantage is more expensive than Traditional Medicare, with one assessment concluding that, in 2024, the government spent 22 percent more to fund Medicare Advantage plans than it would have had those beneficiaries been enrolled in Traditional Medicare.
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