Prior Authorization Policy Discussions in Original Medicare and Medicare Advantage

PRIOR AUTHORIZATION: THE GOOD AND THE BAD 

Prior authorization requires individuals and providers to obtain approval from a health plan before a service is covered and sparks ongoing debate and discussion. Prior authorization began in the 1980s to slow down overspending and discourage unnecessary medical services. In Medicare Advantage, insurers use prior authorization to ensure the right type of care is provided, reduce unnecessary spending, and stop providers from overusing unnecessary services. When used effectively, prior authorization can lower premiums and reduce out-of-pocket costs for patients. It can also add a level of safety review for medications and reduce medical service claim denials from providers.  

On the other hand, prior authorization can also deny necessary health care services without reason, delay access to care, and put high administrative burdens on providers. A health care provider’s office can spend an average of 2 business days per week completing the prior authorization paperwork.  In 2022, insurers denied 13% of prior authorizations requests that met Medicare coverage rules.  Prior authorization denials may lead to individuals abandoning treatment. Conversely, physicians also report that prior approval denials often result in additional office visits. These denials often pushed patients to more health services and drove up overall health care spending. 

PROPOSALS FOR REFORM  

Over the last couple of years, Congress and the Center of Medicare and Medicaid Services (CMS) have discussed ways to improve prior authorization in Medicare Advantage. These conversations stem from the high rate of successful appeals of denied prior authorization, which indicates that individuals often receive coverage for medical services after initially being denied. That high rate raised concerns that Medicare Advantage plans deny services and payments too frequently, prompting widespread calls for reform.  

Congress hosted hearings and introduced multiple bills aimed at increasing transparency and reforming prior authorization. Lawmakers have designed bills to improve timelines of prior authorization, clarify the criteria for what services need to have prior authorization, and exempt certain providers from prior authorization requirements.  Some members of Congress have proposed banning prior authorization all together.  

Under the Biden Administration, CMS published three rules to address prior authorization in Medicare Advantage. One rule clarified that Medicare Advantage plans may only require prior authorization to confirm medical necessity of a service. It also ensured that prior authorization in Medicare Advantage cannot result in more restrictive coverage than Original Medicare. Another rule shortened the plan’s response time for prior authorization requests from 14 days to 7 days. The third rule directed Medicare Advantage plans to evaluate the effects of prior authorization on enrollees with certain risk factors.  

In addition to federal reforms on prior authorizations in Medicare Advantage plans, states can create their own laws about prior authorization. For example, Pennsylvania sets the standard time frame for Medicare Advantage plans to respond to 2 days for urgent needs and 5 days for standard needs.  

Recently, U.S. Department of Health and Human Services (HHS) Secretary Kennedy and CMS Administrator Dr. Oz gathered multiple health insurance companies to discuss streamlining prior authorization in private health insurance plans. These companies pledged to standardize electronic prior authorization submissions, reduce the number of medical services needing prior authorization, honor existing prior authorization approvals when individuals are transitioning between health insurances, enhance transparency around authorization decisions and appeals, minimize delays in care with real time approvals, and ensure medical professionals review all clinical denials.  

INTRODUCING PRIOR AUTHORIZATION INTO ORIGINAL MEDICARE 

Original Medicare currently requires prior authorization for only a few specific services.  While there are many discussions on how to improve prior authorization in Medicare Advantage, up until now, the tactic has not been used within Original Medicare.  Recently, however, CMS launched a new Innovation Center Model that expands prior authorization requirements under Original Medicare.  

Through the Wasteful and Inappropriate Service Reduction (WISeR) Model, CMS will partner with private companies to test whether enhanced artificial intelligence (AI) can expedite the prior authorization process for 17 services under Original Medicare. These services include procedures that CMS considers costly or of minimal benefit to beneficiaries. A licensed human clinician decides if a service meets Medicare requirements and issues any denial of service. Unlike other demonstration models that allow voluntary participation, CMS mandated WISeR Model provider participation in six states: Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. 

Multiple groups of stakeholders, including lawmakers and provider groups expressed concerns that the WISeR Model could restrict access to care, lower care quality, and increase administrative burdens. Democratic lawmakers sent letters to Dr. Mehmet Oz, the administrator of CMS, inquiring how CMS will protect beneficiaries and providers under the WISeR Model. They also raised transparency concerns, noting the lack of clarity around how AI will be used to implement prior authorization.  

Both lawmakers and Medicare beneficiaries worry that the WISeR Model will expand to all Original Medicare services. Provider groups fear that providers will be unaware that the model affects them, since private companies will handle prior authorization, not the providers themselves. Another concern is that the AI companies may have incentives to deny individuals’ services due to Medicare planning to pay them with a share of savings generated by denials.  

WHAT NEXT 

Prior authorization presents a complex challenge for Medicare beneficiaries. Avisery closely monitors policy discussions that impact prior authorization in both Medicare Advantage and Original Medicare. Although Illinois does not participate in the WISeR Model, Avisery plans to track updates to the demonstration and assess whether it might influence future policies affecting Medicare beneficiaries in Illinois.