Medicaid MCOs Deny Care at an Alarming Rate, Federal Audit Finds

Avery Hurt

July 27, 2023

Federal auditors have found that Medicaid managed care organizations (MCOs) denied, on average, one of every eight prior authorization requests in 2019, echoing recent concerns about similar denials for Medicare patients.

The investigation was conducted in response, in part, to allegations in the media that MCOs in several states had inappropriately denied care to thousands of Medicaid enrollees.

The audit was conducted by the Office of Inspector General (OIG) of the US Department of Health and Human Services. Investigators examined 115 MCOs that are operated in 37 states by seven parent companies: Aetna, AmeriHealth Caritas, Anthem, CareSource, Centene, Molina Healthcare, and UnitedHealthcare.

For 12 of the MCOs, denial rates were 25% or more, twice the average rate. For seven of Molina Healthcare's 12 MCOs, prior authorization denial rates were greater than 25%. Aetna and UnitedHealthcare each operated at least one MCO in which the prior authorization denial rate was greater than 25%.

Little Accountability

"These allegations were particularly concerning because many Medicaid managed care enrollees are people of color (50 percent of enrollees) and have low incomes," the report noted. "People of color and people with lower incomes are at increased risk of receiving low-quality health care and experiencing poor health outcomes."

AHIP, a health insurance trade association, told Medscape that it has not issued an official statement. However, a representative from the organization has been quoted in other outlets as stating that insurers already "are held accountable through extensive oversight" by federal and state governments.

The federal audit did not find that such oversight was typical, however. The OIG interviewed Medicaid directors in 37 states. Most (22) said they did not routinely review prior authorization denials; 13 said they did not conduct any reviews; and nine said reviews were conducted on an ad hoc basis. States that did scrutinize insurers found "inappropriate denials for medically necessary drug therapy, health screening services for children, and inpatient hospital services," according to the audit. The report also noted that some of the MCOs allowed inadequately trained staff to make decisions about prior authorization requests.

Appeals were not common; only 11% of denials were appealed. When decisions were appealed, 64% were denied a second time as well.


The OIG made several recommendations for policies that the Centers for Medicare & Medicaid Services (CMS) could adopt to address the problem:

  1. Require states to regularly review the appropriateness of a sample of MCO prior authorization denials.

  2. Require states to collect data on MCO prior authorization decisions.

  3. Issue guidance to states on the use of MCO prior authorization data for oversight.

  4. Require states to implement automatic external medical reviews of upheld MCO prior authorization denials.

  5. Work with states to identify and address MCOs that may be issuing inappropriate prior authorization denials.

According to the report, CMS stated that it is committed to partnering with states to strengthen the monitoring and oversight of MCOs. CMS indicated that it concurred with the last recommendation; as of yet, it has not said whether it concurs with the first four.

Recurring Headache

Prior authorization woes are one of the most common complaints of physicians. A 2022 survey by the Medical Group Management Association found that 88% of medical practices said prior authorization requirements were "very or extremely burdensome."

The American Medical Association has put the addressing of prior authorization at the top of its Recovery Plan For American Physicians, noting that the system poses both administrative and clinical concerns. "Prior authorization is costly, inefficient and responsible for patient care delays. The AMA stands up to insurance companies to eliminate care delays, patient harm and practice hassles," the AMA states on its website.

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