OIG Report Finds High Rates Of Prior Authorization Denials In Medicaid Managed Care


In 2019, the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services (HHS) found that one in every eight prior authorization requests was denied by Medicaid managed care organizations.

Dive Brief:

A recent report by the HHS’ Office of the Inspector General suggests that due to high rates of prior authorization denials and limited state oversight, certain beneficiaries of Medicaid managed care may face difficulties accessing essential medical care.

In the study, Managed Care Organizations (MCOs) were found to have denied one out of every eight prior authorization requests in 2019, with some organizations showing denial rates surpassing 25%. This data reflects the most recent available information.

The OIG’s report further highlights that many state Medicaid agencies did not regularly monitor whether prior authorization denials were appropriate, which resulted in the unnoticed prevalence of high denial rates. Additionally, the appeals process for beneficiaries seeking coverage after a denial was found to be less comprehensive compared to Medicare Advantage, potentially making it burdensome for beneficiaries to pursue their coverage rights.

Dive Insight:

Managed Care Organizations (MCOs) play a significant role in the Medicaid landscape, with states paying them a fixed amount to provide care for low-income Americans enrolled in the program.

As of July 2020, approximately 72% of enrollees received their care through risk-based MCOs, and in fiscal year 2021, Medicaid paid these organizations a substantial sum of around $377 billion, as per the report.

While MCOs are expected to ensure access to necessary care, implement program controls, and avoid unnecessary costs, the capitated payment models used in Medicaid managed care can create an incentive for insurance companies to deny service authorizations in order to increase profits, as highlighted by the OIG.

The report singled out Healthcare Company, one of the largest Medicaid managed care insurers, for having an unusually high concentration of MCOs with denial rates exceeding 25%.

In contrast to Medicaid managed care, Medicare Advantage (MA), a similar program for Medicare enrollees, had a much lower prior authorization denial rate. In 2019, Medicaid MCOs denied 12.5% of prior authorization requests, while MA plans only denied 5.7% of requests.

MA also surpasses MCOs in terms of appeal levels. If a MA plan upholds a denial, it automatically undergoes a review by a CMS contractor, who can overturn the plan’s decision. Enrollees in MA have access to two more levels of appeal.

On the other hand, Medicaid managed care beneficiaries have access to only one level of appeal, a state fair hearing, although 14 of the 37 states studied offer an external medical review option as well. However, only 5% of upheld denials went through the external review process, indicating a lack of awareness or difficulty navigating the procedure for both patients and providers.

The differences in oversight and access to external medical reviews between Medicaid managed care and MA raise concerns about health equity and access to care for Medicaid managed care enrollees, as noted by the OIG.

Interestingly, within the same state, MCOs often displayed varying prior authorization denial rates, suggesting that oversight and program details alone were not the sole factors contributing to these discrepancies, according to the OIG’s findings.

As a recommendation, the OIG suggests that the CMS should require states to review samples of prior authorization denials in Medicaid managed care organizations, collect data on organizations’ decisions, issue guidance on oversight to states, mandate automatic external reviews of upheld denials, and collaborate with states to identify organizations that may be inappropriately denying services.