Prior authorization in Medicare Advantage remains in the policy spotlight as 2024 regulations take effect

Healthcare policymakers and stakeholders continue to mull the need for guardrails to ensure optimal customer service among Medicare Advantage (MA) health plans.

The American Hospital Association wrote a Nov. 20 letter to CMS stating that MA plans are looking to skirt policies designed to ensure straightforward coverage of essential healthcare services. These policies, finalized earlier this year, are set to begin with the 2024 contract year. One provision stipulates that MA plans have to comply with any coverage and benefit criteria established in Medicare fee-for-service.

Based on feedback from hospitals, the AHA stated in its letter that “certain MAOs [Medicare Advantage organizations] have indicated they do not intend to make changes to their utilization management programs in response to the new rule. In other cases, it appears some plans are making changes to the terminology they use in denial letters that may be intended to circumvent recent CMS rulemaking.”

Among examples cited in the letter, plans have suggested they will continue to go beyond traditional Medicare criteria to determine whether to cover inpatient admissions.

“We are deeply concerned that these practices will result in the maintenance of the status quo where MAOs apply their own coverage criteria that is more restrictive than traditional Medicare … resulting in inappropriate denials of medically necessary care and disparities in coverage between beneficiaries in MA and those in the traditional Medicare program,” the letter states.

Policymakers eye changes

Concerns about MA plan practices have been resonating in policy circles, especially since a 2022 report by the HHS Office of Inspector General found that 13% of denied prior authorization requests should have been covered according to Medicare’s criteria.

Among various proposed policies, a recently introduced bipartisan bill in the Senate would require transparent reporting by MA plans on the amount of spending that goes toward patient services and on beneficiaries’ out-of-pocket spending.

On the House side, 30 representatives wrote to CMS in early November to urge the agency to ramp up its oversight of plans’ use of AI and algorithmic software tools in coverage decisions.

“Medicare Advantage plans are entrusted with providing medically necessary care to their enrollees,” the House letter states. “While CMS has recently made considerable strides in ensuring that this happens, more work is needed with respect to reining in inappropriate use of prior authorization by MA plans, particularly when using AI/algorithmic software.”

The Medicare Payment Advisory Commission (MedPAC) used part of its November meeting to examine MA practices around prior authorization. The discussion was intended to set the stage for future policy recommendations.

Lawrence Casalino, MD, PhD, a MedPAC member, noted that 80% of MA health plan denials are approved on appeal.

“Why was the wrong decision [initially] made so often?” he said.

He also wondered about the variation in denial rates, which MedPAC found to range from 2% to 21% among the top six plans.

One caveat: Although even health plan advocates have said the process could be more efficient, using prior authorization to dissuade patients from getting care is not always detrimental.

“There is a lot of care that people shouldn’t get,” said Michael Chernew, PhD, MedPAC chair and professor of healthcare policy at Harvard Medical School.

The impact on health equity

The proposed rule establishing standards for MA health plans and Part D plans for the 2025 contract year includes provisions to address prior authorization and other types of utilization management (UM), although not to the same extent as in the 2024 rule.

The 2025 rule would require an MA plan’s obligatory UM committee to include someone with expertise in health equity and to each year conduct an analysis that examines the impact of prior authorization on enrollees who:

• Receive the low-income subsidy or are dually eligible for Medicare and Medicaid, or
• Have a disability

The analysis would complement UM standards described in the 2024 rule, including that an MA plan may not apply utilization management to basic or supplemental benefits unless such policies and procedures have been approved by the UM committee. Metrics would need to compare prior authorization outcomes between enrollees who do and don’t have the specified risk factors, and results would need to be freely and easily accessible online.

The health equity analysis “may assist in ensuring that MA plan designs do not deny, limit or condition the coverage or provision of benefits on a prohibited basis (such as a disability) and are not likely to substantially discourage enrollment by certain MA eligible individuals with the organization,” the proposed rule states.

CMS also is using the rule to affirm its authority to collect detailed information from MA and Part D plans. As an example of the type of data it may seek to obtain, the agency cites “decision rationales for items, services or diagnosis codes to have better line of sight on utilization management and prior authorization practices.”

Comments on the proposed rule are due by Jan. 5 at regulations.gov.