Traditional Medicare coverage rules make up the bulk of denied services and spending compared to a Medicare Advantage plan, according to a new study in the latest Health Affairs issue.
The study, led by the University of Pennsylvania, Harvard University and CVS Health, relied on Medicare Advantage claims that were denied for beneficiaries enrolled with Aetna from 2014 through 2019. In total, the authors identified $416 million worth of denied spending, or $60 of denied spending per beneficiary annually. Traditional Medicare coverage rules made up 85% of denied services and 64% of denied spending, while Aetna’s MA plans made up the rest.
In total, the sample included nearly 3 million beneficiaries. The study did not include services that were denied during a prior authorization process.
The theoretical benefit of excluding certain low-value services from coverage is to reduce spending while discouraging medically unnecessary services, the authors wrote in their report. The legal standard for Medicare coverage is that services be “reasonable and necessary,” though clinical effectiveness evidence is not required. The authors of the study wrote that until now, little has been publicly known about variants like types of services facing denials, reasons for denial and whether the denials are increasing over time. The study aimed to identify these and other measures.
The study found that most denials were for lab services, and nearly a third of beneficiaries received one or more denied services a year. Denial rates increased slightly over time, though the portion of denied spending attributable to Medicare rules decreased.
Aetna’s MA coverage rules were broken into six categories: cosmetic, experimental or investigational, not a treatment of disease, without proven efficacy, related to a primary denied service or without supporting medical records provided.
The most common denied service under Aetna’s Medicare Advantage plans was experimental or investigational (61%), followed by or without proven efficacy (20%). The most common type of service denied was a lab procedure (31% of services denied under Aetna MA, and 76% of services denied under Medicare).
Among the share of spending denied, lab services accounted for 36% under Medicare and 18% under Aetna MA, followed by oncologic procedures (14%) and drug administration (13%).
Hospital outpatient departments accounted for more than a third of denied spending, followed by labs, which made up one-fifth. Emergency departments made up just over 5%.
The most frequent code of denied claims was for glycosylated hemoglobin testing, which tends to be common and inexpensive, the authors wrote. These lab claims tend to be denied due to a lack of appropriate diagnosis codes, with the latest Medicare manual on lab diagnostic coding being more than 2,000 pages long. Aetna MA restrictions, meanwhile, tend to affect more rare and expensive services like chemotherapy, the study found.
“By describing the scope and distribution of coverage denials in Medicare Advantage, our study provides a glimpse into how this managed care tool has been shaped and wielded,” the authors wrote.