Changes to Medicare Pre-Approval Requirements
Residents in Washington and five other states enrolled in traditional Medicare will soon need to seek pre-approval for specific health services. This is somewhat reminiscent of the hurdles faced with commercial insurance plans, but it’s an unusual step for traditional Medicare.
The Centers for Medicare & Medicaid Services have announced that this pre-approval mandate, effective January 1, is designed to cut costs related to unnecessary or low-value care. It has already been tested in six states: New Jersey, Ohio, Arizona, Texas, and Oklahoma. If successful, it could extend to additional states.
This pre-approval process means doctors must get approval from the insurer before performing certain procedures. Generally, Medicare Advantage and other commercial insurance plans commonly require this kind of advance approval for high-cost treatments, such as hospital admissions or certain therapies.
In traditional Medicare, however, the requirement has mostly been limited to specific scenarios, like ambulance usage and some medical devices.
Matthew Fiedler, a senior fellow at the Brookings Institution, noted that this approach marks a significant change, allowing for broader and more systematic use of prior approval in traditional Medicare.
The pilot program will initially focus on 17 services that are often overused or subject to fraud. These services include spinal fusion procedures, knee surgeries for osteoarthritis, stimulation devices for Parkinson’s disease, and certain costly skin substitutes.
Some of these treatments have shocked observers due to their exorbitant prices. For instance, a report revealed that Medicare was billed $21,000 for a square inch of placental skin grafts, contributing to over $10 billion in expenditures last year for such products.
To implement this new system, CMS will use advanced technologies, including artificial intelligence, contracting private firms to evaluate requests, which will influence clinician decisions regarding coverage.
However, critics have raised concerns about the way these private contractors are compensated, as their payment is tied to how much they reduce spending.
Fiedler acknowledged that it’s reasonable for Medicare to explore new cost-control measures but emphasized the need for thoughtful incentive structures. Contractors might be driven to deny requests beyond what’s necessary due to their payment model.
He also pointed out that while CMS has the flexibility to adjust targeted services during the pilot phase, a nationally adopted model could lock in certain practices, making future changes difficult.
The push for pre-approval aligns with efforts from the previous administration to address waste and fraud in federal programs.
As Medicare spending hit $1 trillion in 2023, accounting for 21% of U.S. medical expenses, the financial strain of an aging population poses ongoing challenges for the program.
A federal advisory group revealed that around $5.8 billion was spent on services considered “low value” in 2022, which typically yield minimal health benefits.
Fiedler noted that, while the government has long sought to limit spending, broad pre-approval requirements have not been widely adopted due to political concerns and provider apprehensions. This new pilot program is a notable shift toward a more rigorous spending management approach.
Concerns About Medicare Advantage and Approval Denials
The push for prior approval has sparked controversy in Medicare Advantage programs due to fears of excessive red tape, care delays, and service denials. A watchdog report from 2018 found many inappropriate denials, highlighting that 13% of rejected requests met Medicare guidelines.
Brian Keizer, a health policy analyst, cautioned that these pilots could undermine traditional Medicare’s strength: its simplicity. He said issues already seen in Medicare Advantage should not be transferred to traditional Medicare without fixing the existing problems first.
Keizer added that previous approvals in Medicare Advantage have not been effective, saying it’s counterproductive to expand a flawed system.
Gretchen Jacobsen from the Commonwealth Fund expressed concern that advance permissions could increase workloads for healthcare providers. While aimed at reducing unnecessary care, she emphasized the importance of ensuring that patients aren’t negatively impacted through delayed or denied treatment.
She underlined the need for ongoing transparency regarding data on delays and denials, so healthcare providers and patients can monitor the program’s effectiveness in meeting its goals.
Meanwhile, backlash against the pilot program is building in Congress. Recently, over a dozen House Democrats urged CMS to reconsider the initiative, citing concerns about increasing physician burnout and limiting patient access.
CMS selected these six states based on factors like patient volume and geographic considerations, though critics argue that Washington and the other states had little choice in participating. There’s a growing feeling that these new restrictions contradict earlier promises to reduce prior approvals in Medicare Advantage.
