Jack Karns: Medicare Advantage denials draw federal attention

According to the Centers for Medicare and Medicaid Services (CMS), 70.3 million people are enrolled in the federal Medicare program, with just over 51%, or about 36 million individuals, participating in Advantage programs. This compares to just 19% covered by Advantage in 2007, the first year that these plans were available. In North Carolina, out of 2.26 million Medicare insureds, 6 out of 10 are covered by Advantage plans.

These Advantage programs are run by a host of private health insurance companies, with some of the largest being Humana, CVS/Aetna and UnitedHealthcare, and they have been subject to criticism for the practice of requiring a "prior authorization" for a host of medical services and procedures.

While prior authorization is designed to control the cost of healthcare services and to prevent unnecessary medical treatment, the Office of Inspector General of the Department of Health and Human Services issued a stunning report last June outlining how prior authorization denial of requests for skilled nursing facilities by Advantage firms were unfairly and illegally restrictive. The OIG examined requests handled by 19 Medicare Advantage organizations for skilled nursing or rehabilitation care that were denied at a rate of 12%, while only 18% of those denials were appealed.

The absolutely striking aspect of the OIG report came after investigators evaluated these denials and found that 95% of those decisions were reversed on internal appeal. We can only imagine how many other skilled nursing facility prior authorization denials should have been reversed had they merely been appealed.

Another factor in the prior authorization controversy is that Medicare Advantage organizations can determine eligibility and appeals in-house or they may hire outside contractors to do this work, but any decision remains the responsibility of the hiring insurance company. These contractors are not government agencies, as they work for the Medicare Advantage organization and not CMS.

This independent contractor status may legally confer the right to review Medicare Advantage organizations' prior authorizations, but federal law requires that Medicare Advantage organizations have established oversight measures to monitor compliance with CMS regulations. So concerned has CMS become about this prior authorization problem for skilled nursing facilities, as well as all other eligibility denials, that beginning this year, Medicare Advantage organizations must collect and transmit information detailing internal corporate criteria for processing prior authorizations.

The June 2026 HHS report provides ample reason for introducing this new requirement. The OIG examined prior authorization requests by various outside Medicare contractors and found that one of them denied one-third more skilled nursing facility requests than the others and its reversal rate exceeded the overall 95% rate mentioned above. The report did not issue any conclusions that the company had intentionally denied necessary medical care to patients and it must be pointed out that a high percentage of denials is not, in and of itself, sufficient to conclude illicit behavior.

If private companies are to be allowed to sell Medicare Advantage programs to insureds using contractors that have a virtual 100% denial rate of prior authorization requests, then regulatory safeguards must be put in place. At the end of the day, the federal government's preference that people sign up for Advantage programs ahead of traditional Medicare is palpable. And I advise consumers to remember that these Medicare Advantage organizations are for-profit corporations with shareholders who must be satisfied with their return on investment and that have CEOs who earn multi-millions of compensation dollars each year.

In 2025, UnitedHealthcare received total revenue valued at $2.9 billion while paying its CEO a total of $20.4 million in cash, stocks and other assets. This presents a fundamental friction within our health insurance system which is exacerbated when high-denial contractors cut corners so boldly that Medicare eligibility rules are blatantly disregarded.

The U.S. healthcare system is a curious mix of nonprofit hospitals, for-profit insurance companies, anxious investors and excessive prior authorization denials in certain instances and, in the end, the need to provide quality medical care to U.S. residents. Managing these clearly competing interests is an ongoing effort as political adversaries joust as to whether healthcare should be afforded in a so-called "Medicare for All" format. While that is a subject for another day, the hard realities of Medicare Advantage denials require attention now, and especially in light of the Kaiser Family Foundation's estimate that by 2036 some two-thirds of all Medicare beneficiaries will be enrolled in Advantage plans.