Kaiser Family Foundation on rising denial rates for prior authorization

Prior authorization is a widely used practice in healthcare, but it often frustrates both providers and Medicare Advantage (MA) health plans. Clinical laboratories, which frequently need prior authorization for molecular diagnostics and genetic tests, might benefit from insights gained in a recent study on denial rates and successful appeals.

The process of prior authorization is intended to manage spending and prevent the provision of unnecessary or low-value services. However, it has faced criticism for potentially creating barriers to necessary care. Concerns have been raised that prior authorization requirements, including the use of artificial intelligence for reviewing requests, can lead to delays and obstacles in accessing essential treatments.

MA plan enrollees typically need prior authorization for high-cost services such as inpatient stays, skilled nursing care, and chemotherapy. While insurers argue that prior authorization helps control utilization and reduce healthcare costs, providers contend that the process is time-consuming and delays patient care.

Key Findings of the Study

• The study reviewed data from Medicare Advantage insurers submitted to CMS, focusing on prior authorization requests, denials, and appeals from 2019 to 2022. It also looked at how these factors varied among different Medicare Advantage insurers in 2022.
• The number of prior authorization requests surged by 24.3% in 2022, reaching 46 million, up from 37 million in 2019. Of these requests, over 90%—or 42.7 million—were fully approved.
• However, around 7.4% of requests, totaling 3.4 million, were fully or partially denied by insurers in 2022. This represents an increase from previous years: 5.8% in 2021, 5.6% in 2020, and 5.7% in 2019.
• Approximately 9.9% of these denials were appealed in 2022, a rise from 7.5% in 2019 but still below the 10.2% seen in 2020 and 10.6% in 2021. More than 80% of appeals led to either partial or full overturning of the original denials. Despite this, delays in authorization can still have negative impacts on patients’ health.

Providers Opt Out of Medicare Advantage Market

With nearly 33 million Medicare Advantage members and about 40 plan options available in 2025, the market is substantial. However, due to challenging authorization requirements and high denial rates, many healthcare systems are frustrated. A recent survey found that 19% of systems stopped accepting Medicare Advantage plans in 2023, and 61% are considering dropping them within two years.

Federal lawmakers have introduced new rules to address these issues:

• Rule One (effective June 5, 2023): Aligns Medicare Advantage prior authorization criteria with traditional Medicare.
• Rule Two (effective April 8, 2024): Improves electronic prior authorization processes and response times.
• Rule Three (effective June 3, 2024): Requires evaluation of prior authorization policies’ impact on patients with social risk factors.

Healthcare providers and clinical laboratories are advised to review their denial and appeal rates and reconsider their contracts with Medicare Advantage plans.