Investigators Find High Rates of Denials Among Some Medicaid Managed Care Plans

Nearly 87 million Americans now rely on Medicaid, the federal-state health insurance program for low-income people for their healthcare. A report released this month by federal investigators found that private insurance companies deny millions of healthcare service requests with little oversight from the states.

For-profit companies insure about three-quarters of Medicaid recipients. States hire managed care organizations (MCOs) to provide services to low-income people. Doctors see their patients, make treatment recommendations, and submit them to the companies for a "prior authorization of services." The companies must approve the service before a doctor can treat a patient.

Investigators from the Inspector General's Office of the U.S. Department of Health and Human Services examined prior authorization patterns among 115 MCOs operating in 37 states, which enrolled nearly 30 million people in 2019. They found that Medicaid MCOs denied one out of every eight requests for prior authorization of services. 12 of the 115 MCOs in the review had prior authorization denial rates greater than 25 percent-twice the overall rate.

Despite the high number of denials, investigators reported that states did not routinely review the appropriateness of denials and didn't collect and monitor data on these decisions. "The absence of robust oversight of MCO decisions on prior authorization requests presents a limitation that can allow inappropriate denials to go undetected." Although all State Medicaid agencies are required to offer fair hearings as an appeal option, they can be challenging to navigate and burdensome, so patients seldom use them.

Under the payment system for Medicaid MCOs, companies receive a fixed amount per enrollee regardless of the number of services a company provides a patient. The investigators pointed out that this payment system could incentivize insurers to deny care, especially to patients with expensive cancer and heart disease conditions and people with disabilities who need in-home care and medical devices, to increase profits.

According to the report, half of Medicaid enrollees are people of color. "People of color and people with lower incomes are at increased risk of receiving low-quality health care and experiencing poor health outcomes, which makes ensuring access to care particularly critical for the Medicaid population."

  The report found that the Medicaid denial rate is roughly double the rate under Medicare Advantage, a similar program for people over 65. Investigators pointed out that Medicare enrollees have automatic external reviews of denials to appeal decisions. "These differences in oversight and access to external medical reviews between the two programs raise concerns about health equity and access to care for Medicaid managed care enrollees," investigators said.