Medicare Advantage prior authorizations have few friends. Doctors hate them. Patients hate them. Politicians say they hate them and introduce bills to curb them. But how onerous are they really?
Less than many people think. But they still create opportunities for insurance companies to maximize profits at the expense of needed care. And they can be improved.
Prior authorizations are the way MA managed care plans pre-approve some procedures before they’ll pay for them. Typically, these are for costly care such as rehab at a skilled nursing facility, inpatient hospital stays, or expensive drugs. Or maybe you have to wait for the insurance company to greenlight the MRI your doctor ordered after you fell and twisted your knee.
These approvals are becoming increasingly controversial because insurers are relying more and more on artificial intelligence to approve or reject requests for care. AI could improve the system but, for now, it is another matter for concern—and a target for critics.
A Sensible Idea But…
The idea behind prior authorizations is perfectly sensible. One reason health care in the US costs so much is that we buy too much of it, and a lot of what we buy is unnecessary. For the most part, traditional fee-for-service Medicare still rewards providers for ordering tests and procedures since the more they order, the more money they make. And one way to control costs is for insurance companies to refuse to pay for treatment that does not benefit patients.
That’s the theory, at least. And it may work to some degree. For example, one study found that MA members received about 9 percent less low-value care than those in traditional Medicare.
But other research found that some plans did a better job of weeding out unnecessary care than others. And government pays MA plans more to care for similar patients than traditional Medicare. While those prior authorizations may boost margins for insurance company shareholders, they may not be saving taxpayers any money.
Thus, goes the narrative, doctors waste enormous time arguing with insurance companies to get them to approve procedures and tests. Patients, who by definition are sick and under stress, jump through endless hoops and suffer long waits while the plans delay and deny,
All this came to a head last December when UnitedHealthcare CEO Brian Thompson was shot to death on a New York City Street, allegedly by someone angry at health insurance practices. Thompson’s death set off a social media frenzy by people who justified the killing in part because of MA pre-authorizations.
The Reality
How frequently do insurance company pre-approvals interfere with medical care? The answer is: They do, but not as often as you might think.
In a new survey of the existing research, the Center for Health Insurance Reform at Georgetown University found that prior authorization denials are relatively rare, and that appeals are overwhelmingly successful.
But the report also found that insurance companies sometimes refuse to pay for care that Medicare allows and often do a poor job of informing patients and providers of their decisions in a clear and timely way.
In 2023, insurance companies did about 50 million prior authorization reviews, an average of about two for each enrollee. As physicians point out, that’s a lot of time haggling on the phone and filling out paperwork.
But there was a lot of variation among plans. For example, Kaiser Permanente reviewed only an average of 0.5 requests for care for each patient, while Humana and Anthem required 3.1 approvals per patient.
By comparison, traditional Medicare required only about 400,000 prior authorizations.
Denials
MA plans fully or partially denied only about 6.4 percent of their prior authorization reviews, down from 7.4 percent in 2022 but up from 2019 and 2021. Nearly all the care that was reviewed was pre-approved.
Still, in 2022, the Department of Health and Human Services inspector general concluded that plans denied coverage for about 13 percent of cases where they should have paid under Medicare rules.
Even where payment is initially denied, patients have the right to appeal. And in 2023 they got favorable outcomes from those appeals more than 80 percent of the time. However, patients appealed only about 11 percent of denials, both because the process is so cumbersome and because plans sometimes don’t send timely notices of denials.
Fixing Problems
As a result, policymakers have suggested several changes.
In 2024, the Centers for Medicare and Medicaid Services (CMS) proposed new rules to require more plan transparency for prior authorizations and denials. It is not clear whether the Trump Administration will adopt those rules.
In addition, last year a group of Democrats and Republicans in the House and Senate cosponsored a bill to improve prior authorization transparency and require plans to accelerate their approval decisions. Sen. John Thune (R-SD), who is now the Senate Majority leader, was among the sponsors.
MA plans don’t abuse the prior authorization process nearly as much as social media suggests. But neither is the process always in the best interest of patients and their providers. More transparency would be a good way to begin to improve the system.
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