Managed Care

The Medicare and Medicaid programs offer managed care through the Medicare Advantage (MA) program (Part C) and individual state Medicaid managed care programs, respectively. Managed care plans enter into contracts with a network of health care providers and medical facilities. Any savings associated with a managed care plan often correlates to the level of restrictions the plan applies to an enrollee’s costs and health benefits, such as narrow networks that may exclude a patient’s caregiver or preferred hospital.

Savings also accrue to many MA (and Medicaid managed care) plans by implementing payment policies inconsistent with Medicare FFS payment policies, for example: inappropriate prior authorization, which also leads to denials of post-acute care; inappropriate medical necessity claims denials (with no use of the Medicare FFS two-midnight rule), downcoding and retroactive reclassifications; post payment review; inappropriate use of observation care; limited and often non-transparent networks; cumbersome, outdated and non-standardized appeals processes; burdensome documentation requests; and inconsistent black box audit standards. Further, MA plans are paid by Medicare for bad debt, but this rarely is passed through to health care providers.

And yet, MedPAC’s “long-standing assessment [is] that, when properly compared, Medicare spends more overall for enrollees in Medicare Advantage than the program would have spent for similar beneficiaries enrolled in traditional FFS Medicare.”

In April 2022, the Department of Health & Human Services Office of Inspector General (OIG) released a study called Some Medicare Advantage Organization (MAOs) Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care. The study, which echoed the conclusions of a similar report in 2018, found that MAOs often delay or deny Medicare Advantage beneficiaries’ access to services, even though the requests met Medicare coverage rules and would have been approved for these beneficiaries under original Medicare.

The OIG recommended that CMS: (1) Issue new guidance on the appropriate use of MAO clinical criteria in medical necessity reviews. (2) Update its audit protocols to address the issues identified in the report, such as MAO use of clinical criteria and/or examining particular service types. (3) Direct MAOs to take additional steps to identify and address vulnerabilities that can lead to manual review errors and system errors.

FAH advocates for federal policies that level the playing field between MA and Medicare FFS beneficiaries. During the 117th Congress, the FAH joined a large coalition in support the Improving Seniors’ Timely Access to Care Act of 2021. The legislation, which has been introduced in the House and Senate with strong bipartisan support, would establish prohibitions, requirements and streamlined standards relating to prior authorization processes under MA plans. Action taken at the state level through departments of insurance and departments of managed care varies depending on state law and regulations. FAH continues to monitor key state actions taken in response to plans for the purpose of assessing opportunities to address these issues at the federal level.