A New Rule for Prior Authorization
The Biden administration released a new proposal for addressing the headache known as prior authorization, a process wherein a health plan approves getting a certain medical service.
A fact sheet released yesterday outlined that related health plans must help automate the prior authorization process. So what exactly is the purpose of prior authorization, and how does this new proposal impact health members.
Many health plans require patients to get the approval of the plan to use certain covered medical services. This process is called prior authorization, preauthorization, or precertification.
The reason that health plans perform this is to prevent what are deemed the usage of "unnecessary" medical services -- those which may not be considered necessary for the well-being of the patient. Health plans aim to reduce the cost of medical services that they must cover by preventing members from "overusing" medical services.
This practice is widespread. Virtually all members of Medicare Advantage health plans (basically privately-operated Medicare plans) are in plans that require prior authorization for some services like stays at skilled nursing facilities, diagnostic procedures, home health, opioid treatment, and psychiatric specialty care, to name a few examples.
As one would expect, this imposes a barrier to receiving healthcare for millions of Americans. Typically, for many of these specific medical services, a care provider must submit a request to the health plan for prior authorization. The provider must provide enough evidence that the service is necessary, and that request for preauthorization must be approved.
It goes without saying, the health plan can always chose to deny the authorization, which means that not only does the provider have all the work for requesting authorization go to waste, but a patient may be out of luck in getting an important treatment or medical service.
For Medicare Advantage members, who are largely over the age of 65 and may face a host of medical complications, this barrier to accessing healthcare is a huge headache.
One report from the Office of the Inspector General (OIG) under the Department of Health and Human Services (HHS) determined that 13% of preauthorization denials under Medicare Advantage plans were for services that traditional Medicare would otherwise approve. The same report identifies a higher burden of proof that the provider must submit, and it's clear that this process with a lack of transparency is used to cut corners on promised medical services at the expense of the plans' members.
Proposed solutions to the difficulty of the prior authorization process have been numerous.
One California law prohibits health plans from implementing their own company-specific clinical rules for determining the necessity of medical care, hence reducing the variance of requirements for demonstrating necessity across health plans.
Enforcement of the Mental Health Parity and Addiction Equity Act (MHPAEA) has led to requirements on more health plans to eliminate prior authorization for specific mental health treatments on the grounds that certain services were not being considered with the same weight of other medical service requests.
Proposed transparency laws seek to require health plans to release data on how much prior authorization is approved, denied, and appealed. Some states have gone further to require the same details on mental health authorization requests, and the Affordable Care Act (ACA) already requires that no pre-authorization is required for emergency treatments.
The Centers for Medicare and Medicaid Services outlined a specific proposal with a number of provisions to streamline the process.
For one, health plans will have to make application programming interfaces (APIs) for data on prior authorizations. These API's would enable software vendors to create functionality that lets providers screen whether certain procedures require prior authorization and conduct the process through electronic health records using data provided by a health plan's API's.
These requirements also require payers to specify the reason for denying requests and require that all prior authorization request decisions be returned within a week (3 days for urgent requests).
If finalized, the rule would take effect in 2026 with the goal of making it easier for patients and doctors know what medical services they can receive at a faster rate. The rules on specifying reasons for denial would also hopefully enable better appeals and cut back on health plans denying requests that otherwise should be approved.
To encourage providers to adopt software that utilizes these new API's, the rule would also make the use of such software a measure of performance under the category for "Promoting Interoperability" under the Merit-Based Incentive Payment System (MIPS) program, which gives additional federal funds to care providers that treat Medicare patients and hit favorable performance and quality targets.