In short: most Medicare Advantage plans require approval in advance, called prior authorization, before they will pay for some services. Federal watchdogs and members of Congress have questioned how often those requests are denied and how long decisions take. This article explains what the concerns are, what rules plans must follow and what you can do if a request for your own care is denied.
The Core of the Controversy
Medicare Advantage (Part C) plans receive a fixed monthly payment from the federal government for each enrollee. Watchdogs have pointed out that this creates a potential incentive to limit services, and most plans use prior authorization (PA) for at least some care. After a report from the HHS Office of Inspector General (OIG) found that some denied requests met Medicare coverage rules, and after congressional inquiries into the use of predictive tools, CMS issued the CMS-4201-F final rule. Under that rule, MA plans must follow Traditional Medicare coverage rules for basic benefits, may use internal criteria only in limited circumstances, and must base medical necessity decisions on the individual patient rather than on an algorithm alone.
More than half of eligible Medicare beneficiaries are now enrolled in a private Medicare Advantage (MA) plan. Low or $0 monthly plan premiums and extras such as dental, vision and fitness benefits are a large part of the appeal.
Those benefits come with trade-offs. Original Medicare lets patients see any provider that accepts Medicare and requires prior approval for only a small number of services. Medicare Advantage plans are managed care plans. Most use prior authorization, which means the plan must approve certain services in advance, such as some scans, a stay in a rehabilitation facility or certain medications.
In recent years, doctors, hospitals and patient groups have complained that prior authorization in Medicare Advantage delays care, particularly transfers from hospitals to skilled nursing or rehabilitation facilities. Those complaints have drawn bipartisan attention from Congress, the Department of Health and Human Services (HHS), and the Centers for Medicare & Medicaid Services (CMS).
1. What the OIG Found: The 13% Figure
A widely cited source in this debate is a 2022 report from the HHS Office of Inspector General (OIG), report OEI-09-18-00260.
The OIG reviewed a sample of prior authorization and payment denials issued during one week in 2019 by 15 of the largest Medicare Advantage organizations. Note that the 13% figure describes the share of sampled denials that met coverage rules; it is not the overall rate at which requests are denied. Among the findings:
- 13% of the prior authorization denials reviewed met Medicare coverage rules. In other words, the OIG’s reviewers concluded the services likely would have been approved under Traditional Medicare.
- 18% of the payment denials reviewed met Medicare coverage rules and the plans’ own billing rules.
- Certain services stood out. The report highlighted advanced imaging such as MRIs, stays in post-acute facilities after a hospitalization, and injections among the denied requests that met coverage rules. In some cases plans applied clinical criteria that are not part of Medicare’s coverage rules, or asked for documentation the reviewers considered unnecessary.
Because MA plans are paid a fixed amount per enrollee (capitation), the OIG noted that the payment model can create an incentive to deny access to services, and it recommended that CMS issue clearer guidance and strengthen oversight. Plans respond that prior authorization helps prevent unnecessary or low-value care.
2. Predictive Tools and AI in Utilization Management
Congress has also looked at the use of predictive software in coverage decisions. A Senate Permanent Subcommittee on Investigations inquiry examined how several large Medicare Advantage insurers handled requests for post-acute care and raised concerns about the role of automation and predictive tools.
Critics, including plaintiffs in pending lawsuits, allege that some plans relied on software that estimates an “expected length of stay.” As a hypothetical illustration, a tool might predict that a patient with a hip fracture needs 12 days in a nursing facility; the concern is that coverage would then be ended around day 12 even if the therapist reports that the patient cannot yet walk safely. The insurers involved dispute that their tools are used to make coverage decisions in that way.
For families, a notice that coverage is ending can mean choosing between paying privately for more days in the facility and taking a relative home sooner than the care team advises. Our article on AI in claim denials looks at this issue in more detail.
3. The Federal Response: CMS Final Rule (CMS-4201-F)
In 2023, CMS finalized rule CMS-4201-F, which clarified how MA plans may use prior authorization and coverage criteria.
Beginning with the 2024 plan year, the rule includes the following guardrails. This is a general summary; see CMS.gov or Medicare.gov for current details:
A. The “Not More Restrictive” Standard
Under 42 C.F.R. § 422.101(b), a Medicare Advantage plan must follow Traditional Medicare’s coverage rules for basic benefits, including National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). A plan may create its own internal coverage criteria only when Medicare’s rules are not fully established, and those criteria must be based on published clinical evidence and made publicly available.
B. The Two-Midnight Benchmark
Hospitals and patients have long complained about inpatient admissions being reclassified as observation stays, which can change what the patient owes. CMS stated that MA plans must follow the two-midnight benchmark used in Traditional Medicare: in general, an inpatient admission is appropriate when the admitting physician expects the patient to need hospital care that crosses at least two midnights and the medical record supports that expectation.
C. No Decisions Based on an Algorithm Alone
CMS has said that plans may use algorithms or software to assist, but a medical necessity decision must be based on the individual patient’s circumstances. A denial based on medical necessity must be reviewed by a physician or other appropriate health care professional with expertise in the relevant field.
D. Continuity of Care for Approved Treatment
Under the rule, an approved prior authorization must remain valid for as long as medically necessary to avoid disruptions in care, consistent with coverage criteria and the treating provider’s recommendation. Enrollees who switch plans while in an active course of treatment also get a transition period, generally at least 90 days, before the new plan can require a fresh authorization.
4. What Beneficiaries Can Do: Why an Appeal Is Worth Considering
Even with these rules, much depends on whether patients use their appeal rights. Federal reviews and independent analyses have found that a large majority of appealed Medicare Advantage denials are overturned, yet only a small share of denials are ever appealed.
- Get the denial in writing: When a plan denies a request, it must send a written notice explaining the reason and how to appeal. If your coverage for a skilled nursing facility, home health or outpatient rehabilitation stay is ending, you should receive a Notice of Medicare Non-Coverage (NOMNC).
- Use the fast appeal: If you think you are being discharged from a hospital too soon, or your facility coverage is ending too soon, you can request a fast appeal through the Quality Improvement Organization (QIO) named on your notice. The deadlines are short, so call right away. If you ask on time, you generally are not charged for the days while the QIO reviews the case, apart from your usual cost-sharing.
- Involve your doctor: Ask your doctor to send a supporting statement and, where the plan offers it, to request a peer-to-peer review with the plan’s medical director.
5. A Worked Example (Hypothetical)
This example is hypothetical and simplified.
A Medicare Advantage member is in a skilled nursing facility after a stroke. On a Tuesday, the facility hands her daughter a Notice of Medicare Non-Coverage saying the plan will stop covering the stay after Thursday.
- Tuesday: The daughter reads the notice and finds the QIO phone number and the deadline for a fast appeal, which is typically by noon of the day before coverage ends. She calls that afternoon.
- Tuesday and Wednesday: She asks the therapist and physician to make sure the chart reflects her mother’s current abilities and the skilled care still being provided, and she tells the QIO reviewer the same.
- Thursday: The QIO issues its decision. If it agrees with the family, coverage continues. If not, the notice explains the next level of appeal and the date financial responsibility begins.
The outcome is not guaranteed either way. The point is that the family acted within the deadline and made sure the reviewer saw current, specific information.
6. Questions to Ask Your Plan
- Does this service require prior authorization, and has my provider submitted the request?
- What coverage criteria are you applying, and where can I read them?
- How long will a standard decision take, and can my doctor request an expedited one?
- If the request is denied, how do I appeal and what is the deadline?
- How long does an approval last, and will it cover my whole course of treatment?
- If I change plans, will my current treatment continue during a transition period?
7. Common Mistakes to Avoid
- Missing a fast-appeal deadline. For facility and hospital discharges, the window can be a day or two.
- Assuming a denial means Medicare does not cover the service. Ask what rule the plan relied on.
- Leaving it all to the facility. Staff can help, but you or your representative usually have to request the appeal.
- Choosing a plan on premium alone. During open enrollment, compare networks and prior authorization requirements too. If you are thinking about leaving Medicare Advantage, read whether you can switch back to Original Medicare first, because Medigap rules can limit your options.
- Not asking for help. Your State Health Insurance Assistance Program (SHIP) offers free counseling.
Frequently Asked Questions
Does Original Medicare use prior authorization?
Only for a limited set of services, although CMS has been testing wider use in some areas. Medicare Advantage plans use it much more broadly.
How quickly must a Medicare Advantage plan decide?
Plans must decide expedited requests within 72 hours. Timeframes for standard requests have been shortened by recent federal rules; check Medicare.gov or your plan’s Evidence of Coverage for the current standard.
Who can file an appeal?
You, a representative you appoint, or your doctor on your behalf.
What happens if the plan upholds its denial?
The case is automatically sent to an independent review entity, and further levels of appeal are available after that.
Where can I get free help?
Contact your SHIP, call 1-800-MEDICARE, or see our guide to filing an expedited appeal.
The Bottom Line
Medicare Advantage can offer lower upfront costs and extra benefits, and it comes with more utilization management than Original Medicare. Federal oversight reports and recent CMS rules have tightened the standards plans must follow when they review requests for care. If your plan denies or cuts short care your doctor recommends, read the notice, act quickly on the deadlines and use the appeal process.
This article is educational information, not legal, medical or financial advice.