New Rules Take Aim at Medicare Advantage Prior Approvals

The Centers for Medicare and Medicaid Services has finalized a rule that limits Medicare Advantage plans' ability to reopen and modify an earlier inpatient hospital prior approval decision.

The new rule is likely just the first stab at changing the rules on prior authorization in light of CMS Administrator Mehmet Oz's earlier comments about limiting their use.

Under this rule, MA plans cannot use clinical information that becomes available after an initial approval to reopen that approval decision for inpatient services, except in cases of "obvious error or fraud."

The new provision addresses a growing issue of some MA insurers withdrawing approval for inpatient services after the services have been rendered, leading to distressful situations for affected beneficiaries. If a plan approves an inpatient admission, it will have to honor the decision.

The American Medical Association, in a 2024 blog post on its website, raised the problem of MA insurers reversing earlier authorization decisions, alleging that they sometimes "decide to back out of paying or try to recoup payment already made" after care has been provided.

"Insurers will frequently cite vague reasons such as overpayment on their part, a redetermination that approved care was not medically necessary, or incomplete paperwork," the AMA said in its post.

Leveling the appeal playing field

The final rule also clarifies that the procedures for appealing an MA prior authorization decision apply to all plan decisions affecting care, regardless of when the decision is made (before, during or after service).

This provision closes an appeals loophole by clarifying that the definition of "organization determination" — decisions subject to appeal and notification requirements — includes MA plan decisions made concurrent to a beneficiary's receipt of services.

MA insurers made nearly 50 million prior authorization determinations in 2023, the most recent data available. In the same year, insurers fully or partially denied 3.2 million prior authorization requests — or 6.4%.

According to a study by KFF, just 11.3% of prior approval denials by MA insurers were appealed in 2023. Despite this low rate, 82% of appeals resulted in decisions being fully or partially overturned.

Comparatively, just 29% of appeals for coverage denials by Traditional Medicare were overturned.

More rulemaking ahead?

Despite Secretary of Health and Human Services Robert F. Kennedy Jr.'s and Dr. Oz's support of Medicare Advantage, observers expect that more rulemaking on prior authorization will be forthcoming.

One of the top issues will likely be the use of artificial intelligence in making prior approval decisions.