Medicare Advantage Plans: A Disadvantage to Patients and Providers

A reader responds to the CMS request for feedback on ways to strengthen Medicare Advantage plans.


On Aug. 1, 2022, the Centers for Medicare & Medicaid Services (CMS) formally posted a notice seeking feedback on ways to strengthen Medicare Advantage (MA) in ways that align with the Vision for Medicare and the CMS Strategic Pillars. Many of the readers of RACmonitor have strong opinions about Medicare Advantage and the panelists on Monitor Monday have often discussed the ambiguities in the regulations governing MA plans. One listener chose to share the comment she submitted to CMS and consented to allowing us to publish it.

As a seasoned utilization management nurse (more than 20 years) who has worked on both the payer and the provider sides of the industry, I have never before seen or experienced the diligence that Medicare Advantage plans have exercised this year to find loopholes and ways to (mis)interpret Medicare language to their advantage and to the disadvantage of Medicare members and providers. Here are a few examples:

  • One of the largest MA plans in the state of Michigan this year informed hospitals that they can take up to 14 days to make a decision to approve or deny an inpatient admission because CMS does not define an inpatient admission authorization request as a “preservice.” Therefore, once the patient is in a bed, it is considered “post-service” and CMS allows MA plans up to 14 days to make a decision on post-service requests for authorization. With national average length of stay (LOS) for inpatient admissions at 4.6 to5 days, this means that many Medicare patients will be discharged without knowing whether their inpatient admission was approved or not. How is this consistent with CMS guidelines that patients should be notified as expeditiously as possible of their admission status?
  • The same large MA plan has published in their provider manual that they do not follow the Two-Midnight rule, because they have documentation that CMS said they do not have to. Consequently, patients can be in observation for greater than 48 hours, and unless the patient meets InterQual criteria on day three, chances are that the patient’s stay will be denied. MA plans insist that the Two-Midnight rule is not a Medicare rule and the MA plan’s decision not to follow the rule is not being more restrictive than Medicare. If the Two-Midnight rule was established as part of the CMS OPPS Final Rule in 2013, why do MA plans say it is not a Medicare rule? When a patient has to stay in observation status beyond a medically necessary second midnight, and be responsible for higher copays and payment for drugs that can be self-administered, isn’t the MA rule more restrictive and more a disadvantage to both the patient and hospital provider? Isn’t Medicare’s definition of inpatient based on the Two-Midnight rule? So how is it that MA plans are allowed to have their own definition of what an “inpatient” is on a Medicare patient – and such definition being based solely on criteria.
  • CMS has never endorsed specific criteria to be used for determining whether a hospital admission is appropriate for payment as inpatient or observation, primarily because of the CMS definition of ‘inpatient” based on the Two-Midnight rule and the decision being “complex medical judgment which can be made only after the physician has considered a number of factors.” MA plans are notorious for denying inpatient admissions based strictly on InterQual or MCG criteria. When asked why, an MA plan stated that they are complying with CMS requirement to use “nationally recognized standards,”  i.e. InterQual or MCG. However, these two most popular criteria do not allow individual patient “medical history and current medical needs, the types of facilities available to inpatients and to outpatients, the hospital’s by-laws and admissions policies, and the relative appropriateness of treatment in each setting,” which are all in the Medicare definition of inpatient. In addition, MA plans apparently are allowed to establish their own set of criteria, such as “short-stay lists,” based solely on diagnosis or length of stay.
  • Another large MA plan in Michigan has recently implemented a policy that forces observation status on patients whose LOS in the hospital is less than 48 hours, regardless of patient’s diagnosis, comorbidities, special circumstances, or attending physician’s decision; the only exceptions to this MA plan’s observation policy is if the patient dies, leaves AMA, elects hospice, or transfers to another acute care setting. How is this MA plan’s forced observation policy not being more restrictive than Medicare and how is this health plan’s definition of an inpatient consistent with Medicare’s definition?
  • Several of the large MA plans here in Michigan perform post-payment audits which they call “Place of Service audits,” which appear to have immediately started after CMS rolled out POS audits. The CMS POS audits were intended to determine if FFS Medicare providers correctly billed the place of service for their services and indeed, there were recoveries made. What MA plans have since done in the guise of POS audits was conduct post-payment audits on hospitals with the rationale that they (the MA plans) need to confirm that inpatient was the appropriate “place of service” for the patient and not observation or outpatient. In essence, with the denials on the back end stating that “Inpatient admission was not medically necessary based on InterQual criteria”, what these MA plans are doing is nothing short of second medical necessity determinations. The worst part of this current practice is that the auditors are targeting inpatient admissions previously approved by the health plan while the patient was in the hospital. The patients, in these cases, received the IM letter and were discharged with the thought that their stay was an inpatient stay that was approved by their MA plan. On the back end, when an MA plan retracts the approval, the patient is to be held harmless, and does not get a denial letter so the hospital provider is left holding the (empty) bag.

Medicare Advantage plans are indeed taking advantage of Medicare/CMS, primarily through interpretation of either CMS language that is not clear, or misinterpreting language that is clear but which they can use to their advantage. The administrative burden of hospital providers in establishing process workflows just to be able to cope with MA plan rules and requirements is tremendous.

When an MA plan posts billions of dollars in profits year after year, while smaller hospitals close because of lack of resources to fight the abuse by MA plans, shouldn’t CMS pay attention and take a closer look at what is really happening on the front lines of the industry? 

The need for more intense scrutiny of MA plan practices, establishing clear guidelines for both payers and providers through transparent communication, and more stringent audits to ensure consistency between MA plan rules with CMS guidelines appear to be warranted. Several MA plans have even dropped their NCQA  accreditation for their Medicare product lines “because there is no regulation by CMS requiring accreditation” and more importantly, accreditation standards appear to be more stringent than CMS.

As a Medicare patient, I will never encourage friends and family to sign up for a Medicare Advantage plan. MA plans have great enticement advertising of “extra” or “supplemental” benefits. What Medicare patients do not know or realize is that if the current challenges that Medicare providers must endure continue, more hospitals may close, more practitioners may not want to participate in Medicare, and Medicare patients will end up paying more out-of-pocket costs.

In the bigger picture, the Medicare members end up losing the care they need and deserve.

If you want to read the request and submit a comment, comments must be submitted to CMS by Aug 31. – Ronald Hirsch, MD

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