Coverage Denials for Medical Necessity Rules in Medicare

Research Objective Coverage policy may be an important tool to reduce spending while discouraging low-value medical services. Government and private insurers may also differ in their scope of coverage restrictions for suspected low-value services. However, basic facts about coverage denials are unknown because denials are not identifiable in standard research datasets. In this study, we characterized fundamental features of coverage denials for medical necessity using data on all claims denied by a large Medicare Advantage health insurer. Study Design We analyzed medical benefit claims for Medicare Advantage beneficiaries. We detected all claims that were denied for failing to meet medical necessity rules. Some rules were made by the government (i.e. national or local coverage determinations) and other rules were made by the private insurer. We measured the frequency of denials, associated spending, affected service types and provider specialties, the reasons for denials, and temporal trends in denials. We also quantified differences between denials due to government coverage rules and denials due to private insurer coverage rules. Population Studied We analyzed 2014–2019 claims for all Medicare Advantage beneficiaries enrolled with the health insurer Aetna. Our sample included 2.9 million unique beneficiaries (mean age = 73, 56% female, 5% Medicaid dual eligible). Principal Findings There were 0.84 denials per beneficiary per year (95% CI 0.83–0.84), corresponding to 1.45% of claims (95% CI 1.44–0.46), with 31.8% of beneficiaries affected each year (95% CI 31.8–31.9). Denied claims accounted for $64 per beneficiary per year (95% CI 63–65), or 0.73% of medical spending (95% CI 0.71–0.76). Denial rates increased over time, from 0.59% of spending in 2014 to 0.85% of spending in 2019 (p?