Coverage Denials: Government And Private Insurer Policies For Medical Necessity In Medicare

Little is publicly known about coverage denials for medical services that do not meet medical necessity criteria. We characterized the extent of these denials and their key features, using Medicare Advantage claims for a large insurer from the period 2014-19. In this setting, claims could be denied because of traditional Medicare's coverage rules or additional Medicare Advantage private insurer rules. We observed $416 million in denied spending, with 0.81 denials and $60 of denied spending per beneficiary annually. We found that 1.40 percent of services were denied and 0.68 percent of total spending was denied, with rates rising over time. Traditional Medicare's coverage rules accounted for 85 percent of denied services and 64 percent of denied spending; the remaining denials were due to additional Medicare Advantage insurer rules. Denial rates varied greatly across service type and provider type, with the most denials being for laboratory services and hospital outpatient providers. Traditional Medicare and Medicare Advantage insurer coverage policies each addressed different sources of medical spending; together they contributed to the denial of a modest but nontrivial portion of payments.