Medicaid Payment and Reimbursement

‘Concerns about access to care’ raised by OIG findings on prior authorization policies in Medicaid managed care

Obstacles posed by denials and appeals processes in managed Medicaid also have spurred an investigation by the Medicaid and CHIP Payment and Access Commission.

August 1, 2023 11:55 am

A year after highlighting problems with prior authorization in Medicare Advantage (MA), the HHS Office of Inspector General (OIG) has shined a spotlight on the same issue in Medicaid managed care.

In the title of a new report, OIG says high rates of prior authorization denials by some Medicaid health plans “raise concerns about access to care.” Hindrances include the procedures established by Medicaid managed care organizations (MCOs), a lack of oversight by state Medicaid programs and limited access to external medical reviews.

“In recent years, allegations have surfaced that some MCOs inappropriately delayed or denied care for thousands of people enrolled in Medicaid, including patients who needed treatment for cancer and cardiac conditions, elderly patients, and patients with disabilities who needed in-home care and medical devices,” the report states, referencing several published articles, including one in the Los Angeles Times and another in the Des Moines Register.

Such reports led to a request from Congress that OIG delve into “whether MCOs meet their obligations to serve people enrolled in Medicaid.”

What the data show

OIG looked back at health plan data from 2019, selecting seven parent companies that operated 115 MCOs in 37 states, with 29.8 million enrollees.

As a group, the MCOs denied 12.5% of requests for prior authorization of services. Twelve MCOs, serving 2.7 million enrollees, had denial rates above 25%. In comparison, health plans in MA, where CMS has stronger oversight, denied 5.7% of prior authorization requests.

Of 12 Molina Healthcare MCOs reviewed for the report, seven had prior authorization denial rates of more than 25%. Anthem had three MCOs in that tier, and Aetna and UnitedHealthcare had one each.

“Despite the high number of denials, most state Medicaid agencies reported that they did not routinely review the appropriateness of a sample of MCO denials of prior authorization requests,” the report states.

Yet of the 37 states surveyed, 30 said they had found administrative problems with MCO prior authorization denials and appeals processes between 2017 and 2019. Common issues across MCOs and states were decisions that exceeded the required time frames or lacked key supporting information.

State appeals processes aren’t always a source of relief because in 23 of the 37 states, there is no mechanism for submitting a denial to an independent medical reviewer (four of the 23 said they either were implementing such a process or considering doing so). The absence of that option puts Medicaid managed care beneficiaries at a disadvantage relative to enrollees in MA, which OIG reported last year has its own challenges with prior authorization.

The appeals process in Medicaid often comes down to an MCO’s internal review of a denial. MCOs upheld 64% of appealed denials in 2019. Of those that were upheld, patients subsequently utilized their right to a state administrative hearing in only 2% of cases.

Recommendations for improvements

CMS should require states to have more oversight of prior authorization by Medicaid MCOs, OIG wrote in the report. CMS did not say whether it concurred with that set of recommendations, but the agency did agree that working with states to identify and address MCOs with excessive rates of denials would be worthwhile.

The Medicaid and CHIP Payment and Access Commission (MACPAC) announced in January it would be conducting a study of denials and appeals in Medicaid managed care. In initial findings derived from interviews with beneficiaries, MCOs and state agencies, MACPAC reported in April that “denial notices can be lengthy and lack critical information.”

Meanwhile, although the 60-day appeal timeline is viewed as adequate, stakeholders wonder whether MCOs can conduct objective reviews of their own denials.

The issue of prior authorizations may dissuade providers from enrolling with Medicaid because they’re on the hook for the cost of care when payment is denied, Heidi Allen, PhD, a MACPAC commissioner and associate professor at Columbia University’s School of Social Work, said during an April meeting. That’s different from commercial health insurance, wherein the costs for denied care fall on the consumer, she noted.

“Considering the provider’s perspective on this is really important, since this may be a significant reason why providers don’t want to work with Medicaid,” she said.

An attempt at technical upgrades

A CMS proposed rule published in December is designed to improve some of the technical upstream issues and other problems involving prior authorization.

The rule would mandate that Medicaid MCOs — along with state Medicaid agencies, MA plans and health plans in the Affordable Care Act’s federally facilitated insurance marketplaces — streamline processes related to prior authorization, among other requirements, starting in 2026.

Those entities would need to implement an HL7 FHIR application programming interface to automate the following processes for providers:

  • Determining whether a prior authorization is required
  • Identifying prior authorization information and documentation requirements
  • Facilitating the exchange of prior authorization requests and decisions via electronic health records or practice management systems

Payers would need to include a specific reason for denying a prior authorization request, regardless of the method used to transmit the decision. A decision would need to be sent within 72 hours for expedited requests and seven calendar days for standard requests. In its report, MACPAC noted that MCOs sometimes take up to 14 days to decide.

Payers also would need to publicly post aggregated data for prior authorization metrics such as denial rates, which providers could consider when selecting payer networks.

The deadline to comment on the rule was in March. CMS is mulling over technical issues raised during the feedback process as it determines how to proceed with the final rule. For instance, AHIP submitted a 79-page comment letter that noted the proposed standards for electronic transactions could conflict with other regulations.


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