Prior authorization denial is represented by a folder containing a denied insurance claim

A review by the Office of the Inspector General (OIG) has found that in 2019 some Medicaid managed care organizations (MCOs) denied thousands of prior authorization requests for elderly, chronically ill, and disabled patients who required in-home care.

The organizations investigated by the OIG denied 12.5% of, or 1 in 8, prior authorization requests in 2019. This amounted to denials of 2.2 million requests, according to the report. By comparison, Medicare Advantage, which has been criticized for having high rates of prior authorization denials, rejected 5.7% of requests.

Chart illustrating prior authorization denials
Some managed care organizations (MCOs) had denial rates greater than 25% in 2019. Credit: Office of the Inspector General

Denial rates varied widely among these MCOs, but the majority had a rate under 20%. However, there were outliers: Among the 115 MCOs examined, 12 organizations — serving around 2.7 million people — had denial rates over 25%.

“The wide variation in denial rates emphasizes the need for targeted state oversight of prior authorization denials to ensure that enrollees are not being inappropriately denied care,” the OIG said in the report.

Chart displaying MCO denial rates
Aetna and UnitedHealthcare each had a managed care organization with a denial rate over 25% in 2019. Credit: Office of the Inspector General

According to the OIG, a lack of oversight by the states is to blame. Among 37 states included in the sample, only 22 use MCO denial data to inform their oversight processes. The other 15 do not have any systems in place to track or trend denial data such as denials for service types or enrollee categories. Furthermore, most states did not regularly do “appropriateness reviews,” which can identify when prior authorization was denied for services that are medically necessary or covered by insurance.

The review identified some problems that allowed improper denials of prior authorization. Some MCOs had unqualified staff deciding whether or not to approve requests, while others were basing decisions on “incorrect criteria.” These problems, said the report, are a particular cause for alarm if appropriate reviews are not in place.

In many cases, independent medical reviews can be conducted to dispute a denial, but this process is only available in 14 of the 37 states investigated. Within these 14 states, very few denials actually went to review, raising questions of whether MCOs are making enrollees and providers aware of this option, according to the OIG.

“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,” said the OIG in the report. “Given these findings, more action is needed to improve the oversight of denials in Medicaid managed care and to ensure that enrollees have access to all medically necessary and covered services.”