A recent Health Affairs study found that Traditional Medicare coverage denials account for a significantly larger share of denied healthcare services and spending than Medicare Advantage (MA) plans. The findings provide valuable insights into the types of services most frequently denied, the reasons behind claim denials, and the financial impact on healthcare providers and beneficiaries.
Understanding these trends can help medical billing teams improve coding accuracy, strengthen documentation, and reduce Medicare claim denials.
Study Overview
Researchers from the University of Pennsylvania, Harvard University, and CVS Health analyzed Medicare Advantage claims denied for Aetna beneficiaries between 2014 and 2019.
The study examined nearly 3 million beneficiaries and identified approximately $416 million in denied healthcare spending—equivalent to about $60 per beneficiary annually.
Notably, services denied during the prior authorization process were not included in the analysis.
Traditional Medicare Accounts for Most Coverage Denials
The study found that Traditional Medicare coverage rules were responsible for the majority of denied claims.
Key findings include:
- 85% of denied services were based on Traditional Medicare coverage rules.
- 64% of denied spending resulted from Traditional Medicare policies.
- The remaining denials were attributed to Aetna’s Medicare Advantage coverage requirements.
These findings suggest that standard Medicare coverage policies have a greater influence on overall claim denials than plan-specific Medicare Advantage restrictions.
Why Medicare Denies Coverage
Medicare covers healthcare services that are considered reasonable and medically necessary.
Claims may be denied when services fail to meet Medicare’s coverage requirements or lack sufficient clinical documentation.
According to the study, Medicare denial rates increased slightly over the study period, although the proportion of denied spending associated with Medicare coverage rules declined over time.
Common Reasons for Medicare Advantage Denials
The study categorized Aetna Medicare Advantage coverage denials into six primary reasons:
- Experimental or investigational services
- Cosmetic procedures
- Services not considered treatment for disease
- Services without proven clinical effectiveness
- Services related to another denied claim
- Insufficient supporting medical documentation
Among these categories, experimental or investigational services accounted for 61% of all Medicare Advantage denials, while services without proven efficacy represented 20%.
Laboratory Services Face the Highest Denial Rates
Laboratory testing represented the largest category of denied healthcare services.
The study found:
- 76% of Medicare-denied services involved laboratory procedures.
- 31% of Medicare Advantage denադյալ services involved laboratory testing.
Laboratory claims also accounted for the largest share of denied spending under Traditional Medicare, representing approximately 36% of total denied costs.
One of the most frequently denied laboratory services was glycosylated hemoglobin (HbA1c) testing, often due to incomplete or incorrect diagnosis coding.
Because Medicare’s laboratory diagnostic coding policies are highly detailed, coding errors frequently result in claim denials even for relatively low-cost tests.
Higher-Cost Services More Often Denied Under Medicare Advantage
Unlike Traditional Medicare, Medicare Advantage plans more commonly denied specialized and higher-cost services.
These included:
- Chemotherapy services
- Experimental treatments
- Drug administration
- Advanced oncologic procedures
These denials were generally based on plan-specific coverage criteria rather than standard Medicare billing rules.
Hospital Outpatient Departments Experience Significant Denied Spending
Hospital outpatient departments accounted for the largest share of denied healthcare spending.
The study reported:
- More than one-third of denied spending occurred in hospital outpatient departments.
- Laboratory services represented approximately one-fifth of denied spending.
- Emergency department services accounted for just over 5% of denied expenditures.
These findings demonstrate the financial impact that Medicare coverage denials can have on healthcare organizations.
How Providers Can Reduce Medicare Coverage Denials
Healthcare organizations can improve reimbursement and reduce denied claims by strengthening documentation and coding practices.
Best practices include:
- Verify Medicare coverage requirements before submitting claims.
- Assign accurate ICD-10-CM diagnosis codes.
- Ensure documentation supports medical necessity.
- Review laboratory billing guidelines carefully.
- Monitor payer-specific Medicare Advantage coverage policies.
- Perform routine coding audits.
- Educate providers on documentation requirements.
- Track denial trends and implement corrective actions.
Effective denial management helps improve reimbursement rates while reducing administrative burden across the revenue cycle.
Conclusion
The latest research shows that Traditional Medicare coverage denials account for most denied healthcare services and spending, with laboratory testing representing the largest source of denied claims. While Medicare Advantage plans tend to deny fewer services overall, they more frequently restrict expensive or investigational treatments. By improving coding accuracy, strengthening clinical documentation, and maintaining compliance with Medicare billing guidelines, healthcare providers can reduce denials, improve reimbursement, and enhance revenue cycle performance.
