Medicaid Managed Care Organizations (MCOs) denied one out of eight prior authorization requests in 2019, according to a new report from the Office of Inspector General (OIG).

The OIG review included seven MCO parent companies that operated 115 MCOs across 37 states and covered 29.8 million people in 2019. The organization received a congressional request to review MCOs and their prior authorization practices.

“Medicaid managed care organizations play an increasingly important role in ensuring that people with Medicaid have access to medically necessary, covered services,” the OIG stated. “In recent years, allegations have surfaced that some MCOs inappropriately delayed or denied care for thousands of people enrolled in Medicaid, including patients who needed treatment for cancer and cardiac conditions, elderly patients, and patients with disabilities who needed in-home care and medical devices.”

The OIG’s review found that of the 115 MCOs it analyzed, 12 had prior authorization denial rates above 25%. 

The organization also discovered most state Medicaid agencies don’t “routinely review the appropriateness of a sample of MCO denials of prior authorization requests, and many did not collect and monitor data on these decisions.”

“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.

While patients and providers can submit an appeal for prior authorization denials, there are several challenges, according to the OIG. For example, most state Medicaid agencies don’t have a way for patients and providers to send a denial to an external medical reviewer who can examine if the denial was incorrect. In addition, administrative hearings for appeals can “be difficult to navigate and burdensome on Medicaid patients,” the report said. Only a small number of prior authorization denials were appealed by Medicaid enrollees.

The OIG discovered that there is better CMS oversight of prior authorization denials by Medicare Advantage plans. For example, CMS reviews a sample of denials each year, and Medicare Advantage plans are required to provide data on their denials and appeals. Medicare Advantage beneficiaries also have access to automatic and external medical reviews.

“These differences in oversight and access to external medical reviews between the two programs raise concerns about health equity and access to care for Medicaid managed care enrollees,” the OIG stated.

To resolve these issues, the OIG made five recommendations to CMS:

• States should be required to review the “appropriateness” of a sample of MCO prior authorization denials on a regular basis.
• States should be required to collect data on MCO prior authorizations.
• CMS should provide guidance to states “on the use of MCO prior authorization data for oversight.”
• States should be required to provide automatic external medical reviews of prior authorization denials.
• CMS should work with states “on actions to identify and address MCOs that may be issuing inappropriate prior authorization denials.”

The OIG said that CMS agreed on the last recommendation, but “did not indicate whether it concurred with the first four recommendations.”

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