Traditional Medicare plan holders have typically not had to wait for prior authorization before receiving medical treatment.
Until now.
The Centers for Medicare & Medicaid Services (CMS) recently announced a new program to test prior authorization requirements for certain services in six states starting Jan. 1.
The states — New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington — will apply prior authorization evaluations to more than a dozen services.
CMS says the pilot program is intended to root out “fraud, waste, and abuse,” but as Medicare Advantage members know well, prior authorization can lead to frustrating delays in care.
CMS will contract with private companies to deploy “enhanced technologies, including artificial intelligence (AI)” to conduct the authorization reviews.
It won’t apply to in-patient or emergency services or treatments “that would pose a substantial risk to patients if significantly delayed,” according to a CMS press release. Specific services that will require prior authorization are skin and tissue substitutes, electrical nerve stimulator implants, and knee arthroscopy.
There is genuine concern about the costs of some of these items and services. A recent New York Times article highlighted pricey medical products, including paper-thin bandages made of dried bits of placenta, for Medicare patients.
The Biden administration had approved a plan to limit Medicare’s coverage of the bandages, known as skin substitutes, which were reportedly being sold for roughly $10,000 per square inch. An updated Medicare policy proposes setting a significantly lower payment rate.
The new prior authorization program “is focused on reducing wasteful spending, which is an important goal for Medicare,” Jeffrey Marr, a health economist at the Brown University School of Public Health, told Yahoo Finance.
“I expect that the use of prior authorization in this model is likely to reduce the overall level of Medicare spending,” he said. “Selecting potentially low-value services is a critical part of setting up a well-functioning prior authorization system.”
The key question for CMS to address is whether prior authorization can work in traditional Medicare in a way that does not deny or discourage high-value care that improves beneficiaries’ health, Marr said.
One red flag: “The companies that will make the prior authorization decisions will be paid a percentage of the savings that they generate for Medicare. This creates an incentive for participants to deny a high share of services,” he said.
How often do prior authorizations pop up for seniors with Medicare and Medicare Advantage plans?
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In traditional Medicare, services that often require prior authorization include certain outpatient hospital services, non-emergency ambulance transport, and durable medical equipment.
For 2023, under 400,000 prior authorization reviews for traditional Medicare beneficiaries were submitted to CMS, according to KFF data.
Medicare Advantage plans, which are offered by private insurers, are a different story. Almost all Medicare Advantage enrollees — 99% according to KFF research — must receive prior authorization for some services. These are typically higher-cost services, such as inpatient hospital stays, skilled nursing facility stays, chemotherapy, and other drugs.
That common practice, combined with AI used to scan these requests, is a thorny issue.
“Prior authorization processes and requirements, including the use of artificial intelligence to review requests, may result in administrative hassles for providers, delays for patients in receiving necessary care, and in some instances, denials of medically necessary services, such as post-acute care,” according to Jeannie Fuglesten Biniek, co-author of the KFF report.
To allay that fear, CMS noted in the announcement: “While technology will support the review process, final decisions that a request for one of the selected services does not meet Medicare coverage requirements will be made by licensed clinicians, not machines.”
The prior authorization program will not alter Medicare coverage or payment rules, for now, but other services may be added later.
There has been pushback.
More than a dozen members of Congress sent a letter on Aug. 7 to CMS administrator Dr. Memet Oz to urge him to “put patients and providers first by cancelling” the model and requested more details about how the program will be implemented.
“The use of prior authorization in Medicare Advantage shows us that, in practice, [this proposal] will likely limit beneficiaries’ access to care, increase burden on our already overburdened healthcare workforce, and create perverse incentives to put profit over patients,” the lawmakers wrote.
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In an odd juxtaposition, a week prior to trumpeting this new Medicare pre-authorization model, the administration announced that it had a non-binding commitment from insurance plans to reduce prior authorization in Medicare Advantage.
In late June, the Department of Health and Human Services announced an initiative coordinated with companies including Aetna, Blue Cross Blue Shield, Humana, and UnitedHealthcare, to streamline prior authorization processes for patients covered by Medicare Advantage. Under the initiative, electronic prior authorization requests would become standardized by 2027.
“Pitting patients and their doctors against massive companies was not good for anyone,” US Health and Human Services Secretary Robert F. Kennedy, Jr. said in a statement. “We are actively working with industry to make it easier to get prior authorization for common services such as diagnostic imaging, physical therapy, and outpatient surgery.”
Oz added: “These commitments represent a step in the right direction toward restoring trust, easing burdens on providers, and helping patients receive timely, evidence-based care.”
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming “Retirement Bites: A Gen X Guide to Securing Your Financial Future,” “In Control at 50+: How to Succeed in the New World of Work,” and “Never Too Old to Get Rich.” Follow her on Bluesky.
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