CMS Launches Prior Authorization Pilot in Traditional Medicare to Control Costs

Starting January 1, traditional Medicare enrollees in Washington, New Jersey, Ohio, Arizona, Texas, and Oklahoma may be required to obtain prior authorization for specific medical services. This pilot program, implemented by the Centers for Medicare & Medicaid Services (CMS), aims to reduce expenditures on unnecessary or low-value care by extending an authorization process traditionally used in Medicare Advantage and commercial insurance plans to traditional Medicare. Prior authorization involves clinicians obtaining insurer approval before conducting certain medical procedures, a practice previously limited in traditional Medicare to services like ambulance transport and some medical equipment.

The pilot targets 17 services identified as prone to overuse or fraud, including cervical spinal fusion surgeries, arthroscopic knee procedures for osteoarthritis, nerve stimulation devices for Parkinson’s disease and sleep apnea, incontinence control devices, and costly skin and tissue substitutes. Notably, some skin grafts billed to Medicare have raised concerns due to high prices; Medicare reportedly spent more on these products than on ambulance services or anesthesia in recent years.

CMS plans to engage private contractors to review prior authorization requests, utilizing enhanced technologies such as artificial intelligence for efficiency, while ensuring final decisions rest with clinicians. However, the compensation model for these contractors, partially based on the amount of spending they reduce, has prompted caution among some experts. Matthew Fiedler, senior fellow at the Brookings Institution, emphasized the importance of appropriate incentives to prevent potential over-denials of service requests.

The initiative represents a significant shift toward broader use of prior authorization within traditional Medicare, reflecting growing federal efforts to curb waste, fraud, and abuse in the program. Medicare’s escalating costs, which reached $1 trillion in 2023 and account for 21% of national healthcare expenses, underline the urgency of exploring cost control strategies, especially as the aging population increases demand.

Critics highlight the risks of expanding prior authorization, citing experiences in Medicare Advantage where red tape, delays, and inappropriate denials have been documented. Reports indicate a substantial portion of denials in Medicare Advantage may be improper, exacerbating concerns about patient access and provider burden. Health policy analysts urge CMS to address these issues in Medicare Advantage before applying similar measures to traditional Medicare.

Additional concerns focus on the administrative workload for healthcare providers, with experts pointing out the need to balance cost containment with timely access to necessary care. Transparency is recommended, including regular publication of data on authorization denials and delays to evaluate the pilot's impact on patient outcomes and healthcare costs.

The pilot has also encountered legislative pushback, with a group of House Democrats expressing worries that it might impede access to care, increase physician burnout, and incentivize profit motives over patient needs. CMS selected pilot states based on patient volume, contractor readiness, and geographic diversity, without offering states the option to opt out.

Opposition also notes a perceived inconsistency between CMS's new restrictions on traditional Medicare and recent commitments to reduce prior authorization burdens in Medicare Advantage. The pilot’s outcomes will influence potential expansion to other states and determine whether the approach becomes a permanent feature of Medicare policy.

In summary, the CMS prior authorization pilot for traditional Medicare intends to enhance cost control measures by applying selective pre-approval processes to services susceptible to overuse and fraud. The program underscores ongoing challenges in balancing regulatory oversight, administrative efficiency, and maintaining access to appropriate care within public health insurance programs.