U.S. Representative Frank Pallone, Jr. (D-New Jersey), Energy and Commerce Committee ranking member, announced Thursday that he is investigating the “high rates” of prior authorization denials by Medicaid managed care health plans. 

Prior authorization is an insurance practice that requires patients to receive approval for some healthcare services before they receive the care. The practice is often blamed for causing delays in patient care.

The investigation is in response to a recent report by the Office of Inspector General that found Medicaid Managed Care Organizations (MCOs) denied 12.5% of prior authorization requests (or one out of eight) in 2019. Meanwhile, the Medicare Advantage prior authorization denial rate was 5.7% in 2019. The OIG report analyzed seven MCO parent companies that operated 115 MCOs across 37 states and covered nearly 30 million people in 2019.

“I’m deeply troubled by reports that Medicaid managed care plans denied an average of one out of every eight requests for treatment, more than double the rate of service denials in Medicare Advantage,” Pallone said in a statement.  

“Medicaid is a lifeline for over 80 million people, including children, people with disabilities, seniors, and hardworking families,” he continued. “This report strongly suggests that some private insurance plans, which states have contracted with to provide health care coverage to their residents, may be improperly denying access to critical services in order to maximize their profits.”

Pallone added that the Medicaid MCOs need to be held accountable for these high prior authorization denial rates.

“I applaud the Office of the Inspector General for their important work on this report and for shining a light on these alarming practices,” he said. “I will be contacting each of these health insurance companies directly for additional information and questions regarding their prior authorization practices. It is essential that these state contracted plans are upholding their responsibility to patients and their families.” 

The OIG analysis found that of the 115 MCOs it looked into, 12 of them had prior authorization denial rates above 25%. In addition, most state Medicaid agencies didn’t regularly review the “appropriateness” of denials, nor did they collect data on the denials, the report discovered.

“The absence of robust oversight of MCO decisions on prior authorization requests presents a limitation that can allow inappropriate denials to go undetected in Medicaid managed care,” The OIG said.

The OIG also found that Medicare Advantage plans have better CMS oversight of prior authorization denials than Medicaid MCOs, including requiring Medicare Advantage plans to provide data on their denials.

The agency made several recommendations to CMS, including requiring states to review a sample of MCO prior authorization denials on a regular basis, as well as mandating states to collect data on MCO prior authorization denials.

Photo: Valerii Evlakhov, Getty Images