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Blog | Medicare Payment and Reimbursement

Coverage denials based on medical necessity are far more likely to arise from Medicare FFS rules than from MA plan policies

Blog | Medicare Payment and Reimbursement

Coverage denials based on medical necessity are far more likely to arise from Medicare FFS rules than from MA plan policies

Coverage rules based on Medicare national and local determinations were the most likely source of claim denials in one Medicare Advantage plan.

When Medicare Advantage (MA) beneficiaries receive a coverage denial stemming from medical necessity criteria, Medicare fee-for-service rules are a more likely source compared with MA supplementary guidelines, according to a new study.

For a study (login required) published in the January issue of Health Affairs, researchers examined MA claims in Aetna’s database from 2014 through 2019. They found that 1.4% of services and 0.68% of total spending were denied, with rates rising over time (the study did not examine prior authorization requirements).

Among the denials, coverage rules in the traditional Medicare program (i.e., Medicare fee-for-service) accounted for 85% of denied services and 64% of denied spending, with Aetna MA rules accounting for the remainder.

The researchers found significant variation in denials rates based on service type and provider type, with lab services — especially in Medicare fee-for-service — and hospital outpatient providers being affected the most.

Laboratory claims “tend to be denied because they lack appropriate diagnosis codes,” the researchers wrote. “Medicare has instituted extensive diagnostic coding requirements for laboratory services; the most recent Medicare manual on laboratory diagnostic coding is more than 2,000 pages long. In contrast, MA insurer restrictions tended to affect rarer, higher-price services including chemotherapy.”

Among MA-based denials, the most common reasons were for services classified as experimental or investigational (61%) or as lacking proven efficacy (20%).

Of note, the researchers found 5,058 unique procedure codes in the denied claims. The most frequent was for glycosylated hemoglobin (A1C) testing, which was seen in 9% of denials.

The researchers reported that Aetna had 995 clinical policy bulletins in which it described coverage rules, while Medicare had 348 national coverage determinations (issued by CMS administrative staff) and 1,007 local coverage determinations (issued by Medicare administrative contractors for their specific jurisdictions).

One caveat to the findings, the researchers noted, was that even though a denial may have been attributed to Medicare FFS coverage rules, Aetna theoretically could be enforcing those rules more stringently than would be seen in traditional Medicare.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (nhut@hfma.org).

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