Healthcare Labyrinth blog logo

CMS’ Medicare Advantage Utilization Management Rule Sets A Terrible Precedent

I have mentioned the new 2024 Medicare Advantage (MA) Utilization Management (UM) rule in two of my blogs recently.  But here is a relatively short one to drive home the idea that the rule sets a terrible precedent.

What does the rule do?  It takes external evidence-based criteria off the table in favor of the policies used in the traditional Medicare program. Unless a FFS policy is not fully established, an MA plan must rely strictly on the traditional FFS program criteria instead of outside evidence-based clinical criteria. “Fully established” is not well defined, but CMS likely will argue that the NCDs and LCDs are fully established except in some small and extreme circumstances.

Let’s set my argument up with three points.

First, the rule was a direct result of the aggressive lobbying by provider groups opposed to the growth of managed care in Medicare.  The Biden administration is sympathetic to the concept of unfettered healthcare, whether coverage itself or the services provided.

Second, MA health plans use medical necessity criteria responsibly and have heavy oversight.  You cannot find a more accountable program audit regime out there. In addition, members benefit from multiple levels of plan and external reviews of service requests.

Third, while national coverage determinations (NCDs) and local coverage determinations (LCDs) that are used in the traditional fee-for-service (FFS) program go through evidence-based review and prescribe criteria to determine if something is reasonable and necessary, it is not unreasonable to use additional criteria that goes deeper on the issue of medical necessity. As well, the traditional system evaluates on a retrospective basis rather than upfront as managed care often does.

In essence, what CMS has done by finalizing its rule is to push managed care toward the FFS system, which is wholly unaccountable, is wasteful, and lacks quality. It now has set up a whole bunch of fights with providers over the issue.  Case in point: the American Hospital Association (AHA) and Federation of American Hospitals (FAH) are already attacking United Healthcare over its recently updated policies that rely on external criteria for the medical necessity determination of hospital stays. ( See article here: ) The groups say these violate the NCD and LCD policy, while United Healthcare says not. We will see more attacks from providers on multiple fronts – inpatient, outpatient, medical drugs, and more.  Over time, MA plans likely will be unable to do much of the following:

  • Limit hospital stays, deny certain days, or use traditional concurrent review practices
  • Limit the scope and duration of certain outpatient services
  • Move services to a less costly place of service or level of care
  • Except in small areas, require less costly services to be tried first

In essence, by taking policies from a retrospective FFS world and applying them to a managed care world, CMS has put a stake through the heart of managed care’s ability to save money.  The adoption of NCD and LCD in MA encourages the same bloat and unaccountability that the FFS system has.  MA plans will soon find that authorizations based solely on NCD and LCD are not worth it and abandon PA almost entirely.

As costs in managed care go up, so will go the myriad of additional supplemental benefits built into the MA system. These benefits came about because MA can save against the FFS benchmark spending and plan are required to direct the savings to additional benefits.

Back to the AHA and FAH: what motivates this special interest in the debate? The more it can poke holes in managed care’s compliance with NCD and LCD, the more managed care has to give in to allow expensive hospital inpatient and outpatient procedures.  Technology is making many of these traditional hospital-based procedures easily and safely performed in ambulatory settings, in physician offices, or at home.  The new rule helps reverse this in Medicare Advantage. So hospitals’ attacks are really a sinister ploy; they are more about survival and keeping the old expensive system up and running.  And, oh by the way, over 50% of physicians are now owned by hospital systems.  These docs are already doing their hospital bosses’ bidding by moving services to higher cost settings.  The new rule endorses and further emboldens the trend.

Taking this to the logical extreme, the rule will make managed care more costly and diminish the clear value it has.  American healthcare costs as a percentage of gross domestic product (GDP) already far exceed what we see in other developed countries. (Even with that, our quality is at the bottom of the rankings.)  Finally, with the MA value gone and costs out of control, it is much easier for Capitol Hill to argue that MA has not lived up to its mission and terminate the program in favor of solutions that are not private-entity oriented – aka, beef up the traditional FFS system with all sorts of new benefits and eventually migrate to Medicare for All. 

You may call my argument a stretch, but we have seen notable policies the past few years, including this one, that undermine the MA program. Taken together, they certainly could lead to the result I outline. To stop it, MA plans now have to foster other ways, in collaboration with trusted providers, to ensure savings continue as compared with the FFS system.

CMS should have taken the opposite approach. Rather than mandate the use of FFS policies, it could have embraced what private plans do to save money, mandate that plans publish the criteria they use, and further ramp up the oversight and audit of the utilization management process.

#medicare #medicareadvantage #priorauthorization #utilization management #ffs #hospitals #cms #2024rule #ncd #lcd

— Marc S. Ryan

Leave a Reply

Your email address will not be published. Required fields are marked *

Available Now