Medicare Advantage Coverage Denials: Frequency, Reasons, and Cost Savings Identified

Coverage denials in Aetna’s Medicare Advantage (MA) plans were characterized according to reason for denial, amount of spending denied, and other factors, which could shed light on how plans address the overuse of services, according to authors of a recent study.

“Noncovered medical services are not readily identifiable in in the data sets traditionally used in health policy research such as adjudicated insurance claims or medical expenditure surveys,” authors of the study said. “For example, although denied claims appear in standard Medicare claims data sets, there is no distinction between claims denied for medical necessity reasons and claims denied for administrative reasons such as redundant claim submissions.”

“As a result, little is publicly known about the fundamental features of coverage denials such as frequency, amount of associated spending, types of services and providers facing denials, reasons for denial, and whether denials are increasing over time,” authors wrote.

Authors analyzed claims by Aetna’s MA beneficiaries from 2014 through 2019, resulting in a sample of 2,884,583 beneficiaries and 6,987,217 beneficiary-years. Claims data included diagnoses and health care utilization, as well as age, sex, Medicaid dual eligibility, and sociodemographic characteristics such as income and race.

“The focus of our study was services denied for failing to meet a ‘reasonable and necessary’ standard according to Medicare or MA insurer coverage criteria,” authors noted. “These services were denied after they were performed, unlike denials issued during a prior authorization review.”

The sample yielded 5,638,416 denied claims which were associated with $416 million in denied spending—or .81 denials (95% CI: .81, .81) and $60 of denied spending (95% CI: 59, 60) per beneficiary annually. Findings also showed that 31.7% of beneficiaries were denied at least 1 service each year (95% CI: 31.7, 31.7).

Denied claims corresponded to 1.4% of total services (95% CI: 1.39, 1.41) and .68% of total spending (95% CI: .67, .70).

Most denials were due to Medicare coverage rules, which accounted for 85% of denied services and 64% of denied spending. Remaining denials were due to Aetna MA coverage rules.

Denial rates increased over the course of the study period, from 1.28% to 1.47% of total services (15% relative increase) and .51% to .83% of total spending (60% relative increase).

Denials by Aetna were categorized as “cosmetic; experimental or investigational; not a treatment of disease; without proven efficacy; related to a primary denied service; and without supporting medical records provided.” Most denied services were experimental or investigational (61%) or without proven efficacy (20%).

Denied services were also classified by type. Laboratory procedures were most commonly denied, comprising 76% of services and 36% of spending denied under Medicare, and 31% of services and 18% of spending denied under the MA insurer. Authors noted that these data were largely due to claims lacking appropriate diagnosis codes.

Oncologic procedures and drug administration followed at 14% and 13% of spending denied under MA insurer rules, respectively.

Denied spending was also analyzed across providers. Findings indicated the following distribution:

• Hospital outpatient departments: 34.7%
• Laboratories: 20.4%
• Emergency departments: 5.3%
• Family practice providers: 3%
• Cardiologists: 2.5%

“Although denied spending was less than 1 percent of annual spending, this rate grew over time, and aggregate denied spending totaled hundreds of millions of dollars during [2014-2019],” authors wrote. “Our findings provide initial evidence on the restrictiveness of government and private insurer medical necessity policies in Medicare, which led to payment denial for modest but nontrivial portions of medical services and spending.”

Reference:
Schwartz AL, Chen Y, Jagmin CL, et al. Coverage denials: government and private insurer policies for medical necessity in Medicare. Health Affairs. 2022;41(1). doi:10.1377/hlthaff.2021.01054