Medicare Advantage Plans Attract Scrutiny

• May 12, 2022
• Jennifer Boese

In our “What to Watch in Health Care in 2022” blog we listed growth and scrutiny of the Medicare Advantage (MA) program. Growth comes from a ballooning Medicare-eligible population (driven by baby boomers) and more flexibility. Scrutiny comes from generally higher costs to the federal government than traditional fee-for-service (FFS), coverage and payment denials, and administrative burden.

Prior authorization, denial scrutiny

Providers have long expressed problems with MA plans due to prior authorizations and denials, both of which recently came to the forefront in a Department of Health & Human Services Office of the Inspector General (HHS OIG) report. In just a one-week period in 2019, the HHS OIG study sampled the top 15 MA plans nationally and found 13% of prior authorization requests that met Medicare coverage requirements were denied, as were 18% of payment claims that met coverage and billing requirements.

“For an annual context, if these [Medicare Advantage Organizations] MAOs denied the same number of prior authorization requests (1,631) in each of the other 51 weeks of 2019, they would have denied 84,812 beneficiary requests for services that met Medicare coverage rules that year…. For an annual context, if these MAOs denied the same number of payment requests (28,949) in each of the other 51 weeks of 2019, they would have denied 1.5 million payment requests that met Medicare coverage rules and MAO billing rules that year.” — HHS OIG report

If you’re interested in which ones those were, the prior authorization denials in HHS OIG’s review that met Medicare coverage rules were:  

CATEGORY	EXAMPLES
Imaging	MRI, CT
Discharge to post-acute	Skilled Nursing Facility, Inpatient Rehab Facility
Injections	Joints, spine
Durable Medical Equipment	Manual wheelchair, walker
Physician Services	Radiation oncology
Surgery	Reverse total arthroplasty

How about payment denials that in HHS OIG review met billing and coverage rules?

CATEGORY	EXAMPLES
Imaging	X-Ray, MRI
Surgery	Breast reconstruction, cardiac, intestinal obstruction
Therapy	Physical therapy, skilled nursing home visit
Inpatient admission	Hospitalization after ER visit
Ambulance transport	To hospital, to health care facility
Physician services	Radiation treatment consultation, eye exam/treatment
DME	Home nebulizer rental, wheelchair rental
Radiation treatment	Delivery of radiation, intensive modulated radiation
Others	Electrocardiogram, chiropractic, labs

HHS OIG categorized the denial causes: MAOs using their own clinical criteria that is not contained in Medicare coverage rules; MAOs requesting unnecessary documentation; and MAOs making manual review errors and system errors. It should be noted that some of the denials were ultimately reversed, covered and/or paid due to provider dispute or after an MAO received OIG’s request for data on a claim. That said, OIG still questioned whether these denials prevented or delayed necessary care.

HHS OIG recommended three regulatory reforms, to which the Centers of Medicare & Medicaid Services (CMS) concurred.

1. CMS should issue new guidance on the appropriate use of MAO clinical criteria in medical necessity reviews.
2. CMS should update its audit protocols to address the issues identified in this report, such as MAO use of clinical criteria and/or examining particular service types.
3. CMS should direct MAOs to take additional steps to identify and address vulnerabilities that can lead to manual review and system errors.

For hospitals, physicians and other providers, the OIG’s findings aren’t necessarily new news, but they do add another layer to why regulators, stakeholders and providers are calling for reforms. On the legislative front, there are also proposals in Congress like the proposed legislation on prior authorizations, the Seniors’ Timely Access to Care Act of 2021 (H.R.3173 and S.3018). HR 3173 just passed the 290 cosponsor threshold, which sets up the possibility for the bill to move directly to the Consensus Calendar on the House floor.

MA payment scrutiny

Denials and prior authorization burdens are one reason for scrutiny. Another reason is cost. MA plans are reimbursed on a per member per month (capitated) rate that is based on a variety of factors, ranging from the local county of plan members, how much the plan bids to cover its members compared to a benchmark rate, risk adjustments due to acuity of individuals covered, quality ratings and more. When bids are lower than the benchmark rate (which most are) then the plan gets a share of the difference (called the rebate) which it then uses to offset premiums, co-pays and provider supplemental benefits.

From a beneficiary standpoint this is attractive because of potentially lower premiums and co-pays coupled with increased access to supplemental benefits, like dental coverage, wellness benefits or hearing exams and aids. Ultimately, the more efficient a plan is, the more savings accrue to that plan (and hopefully to beneficiaries). However, according to the Medicare Payment Advisory Commission (MedPAC) research, the efficiencies and savings are not passed on to the federal government.

In its June 2021 report to Congress, MedPAC said:

“…in spite of the apparent relative efficiency of MA, no iteration of private plan contracting has yielded net aggregate savings for the Medicare program. The Commission estimates that Medicare currently spends 4 percent more for beneficiaries enrolled in MA than it spends for similar enrollees in traditional fee-for-service (FFS) Medicare.”

That’s both a short-term and long-term problem.

The most recent report of the Medicare Trustees shows that 40% of Medicare eligibles are in an MA plan with that number only expected to grow. Further, due to how Medicare pays for hospital insurance (Part A) of Medicare, the trust fund will be insolvent by 2026 without reforms. So, if more and more individuals decide to move into MA plans, which is projected, and MA plans cost more than FFS, this fact alone means Medicare itself will cost more and more each year. Add on the burgeoning Medicare eligible population over the next decade, increasing health care costs in general and we have a problem.

While there continues to be support for MA and capitation, many are urging some reforms. MedPAC continues to recommend changes to MA capitation rates, the quality bonus program and MA encounter data accuracy and completeness. In addition to advocating for reforms to prior authorizations and denials, providers have expressed concerns with network adequacy and MA contracting.

What health care providers can do now, how CLA can help

While MedPAC and Congress may be analyzing what to do, some health care providers are not waiting. In the past few years, we have seen senior living providers moving forward as MA plans themselves through what are called Institutional Special Needs Plan (SNPs are a sub-type of MA plans). Since they have the experience managing this population and may be bypassed for lower cost settings, becoming a SNP allows them to have more control. Various health systems have already moved into the health insurance world with provider-sponsored plans, including MA and SNPs. And in general, providers are looking at ways to better understand (or harness) their own data, such as:

• Total cost of care
• Average length of stay
• Hospital readmission rates
• Service areas, demographics
• Common denials seen
• Reason for denials (lack of documentation, medical necessity, coding)

MAOs have this data and are making determinations on this. It’s in providers’ best interest to understand their data as well. Doing so allows them to pinpoint issues, target resources at solutions, counter inappropriate denials (or avoid them altogether) and position themselves better compared to competition and for contracting.

CLA can help with SNPs, data, revenue cycle and more. Reach out today.  

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