OIG Report Finds Medicaid MCOs Deny Prior Authorizations at Higher Rates – Is New Rulemaking on the Horizon?

Featuring: Cara Tucker | Legal Counsel-Regulatory

New Report Sheds Light on Medicaid Managed Care Organizations

A recent report from the Department of Health and Human Services (HHS) Office of Inspector General (OIG) found some Medicaid Managed Care Organizations (MCOs) have unusually high rates of prior authorization denials, and there’s limited or no state oversight of these denials.

Looking at 2019 data, OIG found that MCOs generally denied one out of every eight requests for prior authorizations. Among 115 MCOs reviewed, 12 had prior authorization denial rates greater than 25%—twice the overall rate.

For comparison, OIG noted the overall denial rate for Medicare Advantage (MA) plans was only 5.7% of requests in 2019. OIG stated the factors it reviewed “raise concerns that some people enrolled in Medicaid managed care may not be receiving all medically necessary health care services intended to be covered…”

CMS Updates to MA Plan Requirements

The Centers for Medicare & Medicaid Services (CMS) issued a Final Rule in April that requires MA plans to follow traditional Medicare laws for coverage decisions and limits the use of prior authorization, among other changes.

Ensemble Health Partners’ team of subject matter experts recently shared insight into these changes and their potential impact on providers.

For that Final Rule, CMS relied in no small part on an April 2022 report issued by OIG titled, “Some Medicare Advantage Organization Denials of Prior Authorization Requests Raise Concerns About Beneficiary Access to Medically Necessary Care.” Based upon that report, CMS issued new rules to act as guardrails to ensure MA plans use utilization management tools and make associated coverage decisions, in ways that ensure beneficiaries’ timely and appropriate access to medically necessary care.

OIG Recommendations + Potential Actions

Now, a little over a year later, the OIG has issued a similar report, but this time examining the high rates of prior authorization denials by Medicaid MCOs. In its report, OIG recommended CMS require states to exercise more oversight over prior authorization denials through regular review of denial samples, required data reporting from MCOs, issuance of guidance and implementation of automatic requirements for external review. This could lead to future rulemaking from CMS to curb this behavior from Medicaid MCOs.

The OIG’s recommendations primarily focus on state oversight. However, it may be appropriate for additional rulemaking to require states to establish their own guardrails around MCOs. These guardrails would ensure prior authorization decisions align with state Medicaid standards for medical necessity and limit when MCOs may use their own internal coverage criteria to deny beneficiary access to care.

State Obligations + CMS Initiatives for Medicaid Beneficiaries

Under federal law, states must ensure all services covered under each state Medicaid plan are available and accessible to enrollees of MCOs in a timely matter. Federal law also requires contracts between a state and MCO to specify what constitutes “medically necessary services,” and be no more restrictive than what’s used by the state Medicaid program.

Acting on OIG’s recommendations and possibly taking these additional steps, CMS could ensure Medicaid beneficiaries have timely access to medically necessary services similar to its attempt to do for Medicare Advantage beneficiaries.


Cara Tucker has been an attorney for over 10 years, specializing in healthcare and regulatory compliance. She currently serves as legal counsel managing regulatory updates at Ensemble Health Partners, developing legally based strategies and procedures to holistically resolve systemic payor issues to increase revenue, reduce administrative burdens and mitigate risk for providers.

These materials are for general informational purposes only. These materials do not, and are not intended to, constitute legal or compliance advice, and you should not act or refrain from acting based on any information provided in these materials. Neither Ensemble Health Partners, nor any of its employees, are your lawyers. Please consult with your own legal counsel or compliance professional regarding specific legal or compliance questions you have.