When someone is deciding between Medicare Advantage (Medicare Part C) and Original Medicare (Medicare Part A and Part B), the more common considerations include:
Provider networks: Medicare Advantage beneficiaries are usually restricted to using the doctors and hospitals the plan provider has under contract in a network to provide services – unless they’re willing to pay an upcharge for using out-of-network services. Original Medicare beneficiaries can go to any provider nationwide that accepts Medicare.
Referrals and prior authorizations: Medicare Advantage beneficiaries often need referrals from their primary care physician to see specialists and prior authorizations for specific services – or face having to cover the cost of the service themselves. Original Medicare very rarely requires referrals or authorizations.
Premiums and cost-sharing: On the plus side, Medicare Advantage typically has the potential for lower out-of-pocket spending, especially when compared with Original Medicare beneficiaries who don’t purchase optional Supplement Insurance (Medigap). Those beneficiaries are responsible for 20% of the Medicare-approved cost of services, with no upper limit. Also, nearly 70% of Medicare Advantage plans covering prescription drugs charge a zero-dollar premium beyond the Part B premium everyone pays. Original Medicare beneficiaries also must purchase stand-alone prescription drug coverage, which 87% of Medicare Advantage plans included in 2022.
Focusing on the cost of coverage is essential; you have to be able to afford it. However, few people think about the impact on your health of needing prior authorization to access services. That is what we will look at today.
What is prior authorization?
Prior authorization is a system developed to ensure that medical services – whether from doctors, testing facilities or hospitals – are medically necessary and of sufficient value. The process is referred to as “managing utilization.”
Medicare Advantage is a private plan alternative to Original Medicare’s Part A (hospital insurance) and Part B (medical insurance) offered by private insurance companies. These companies contract with Medicare to provide beneficiaries with at least what Original Medicare offers. In return, the federal government provides the insurer with a specific dollar amount per beneficiary covered, so insurers are motivated to avoid unnecessary expenses.
There is a positive side to managing costs. By doing so through prior authorizations (as well as through referrals and the use of provider networks), these companies have enough profit to reduce cost-sharing and to be able to offer extra benefits that Original Medicare can’t. These benefits often include dental, vision, hearing and fitness coverage.
Prior authorization is part of nearly all Medicare Advantage plans and typically affects relatively costly services. For example, these can include Part B (doctor-administered) drugs, advanced imaging services (such as MRIs), skilled nursing facility stays and stays in post-acute facilities (such as inpatient rehabilitation facilities).
They are also required for other services, such as those that have experienced fraud (like durable medical equipment) or disproportionately rapid growth (like home health). They are often required before accessing certain insurers’ extra benefits – such as hearing and eye exams, comprehensive dental services and transportation. Authorizations are rarely required for preventive services.
How does prior authorization affect your health care coverage?
A report by the Department of Health and Human Services Office of Inspector General indicates concern about organizations focusing more on profits than on patient access to care. The report says, “Denying requests that meet Medicare coverage rules may prevent or delay beneficiaries from receiving medically necessary care.”
So, how often are requests denied? In 2021, Medicare Advantage plans denied two million – out of 35 million – prior authorization requests (or 6%). However, the volume of prior authorization requests – as well as of denial rates – vary from insurer to insurer.
Medicare offers an appeal process if your prior authorization is denied. However, only about 11% of denials were appealed. It’s important to note that 82% of those appealed resulted in the full or partial overturning of the denial – which implies they were incorrectly denied in the first place.
Takeaway action step: The reversal rate is high enough that, once you have chosen a Medicare Advantage plan, it makes sense to identify in your plan documentation how your specific plan’s appeals process works, including what forms to use. Doing so will help you respond quickly if you ever have a prior authorization denied by your insurer.
The Centers for Medicare & Medicaid Services (CMS) is examining the possible “cost” of overly restrictive prior authorization requirements in terms of patient outcomes. It seeks to understand more about how and why requests are being denied. As enrollment in Medicare Advantage grows, CMS is working to develop legislation it would like to see passed to address its concerns.
Until then, the burden of avoiding denials of prior authorizations lies with you.
How can you minimize being affected by prior authorization?
It’s challenging to figure out how a specific insurer – or specific insurer’s plan – performs when it comes to granting or denying access to certain services. Too many factors come into play, such as the behavior of plan doctors and the specific medical areas where requests are being denied.
In the absence of transparency, one workaround is to find a proxy (or substitute) measurement for that information. Perhaps the best approach when selecting a plan is to focus on the star rating of the Medicare Advantage plans you are considering. All Medicare Advantage plans are rated using one to five stars, with one star meaning “poor” performance, three stars meaning “average,” and five stars meaning “excellent.”
Plan satisfaction is an aspect of the rating. While it’s not a guarantee, selecting a plan provider as close as possible to a 5-star rating should help protect you from excessive use of prior authorizations. (Unfortunately, quality ratings are given at the contract level, not for the individual plan.)
Takeaway action step: Stars are given based on the previous year’s data, so an insurer’s rating can change from year to year. Be sure to look at the star rating of an insurer as you examine the plans available to you each Annual Enrollment Period (October 15 to December 7).