How Insurance/PBM industry use PAs to pad their bottom line

The above article that I made a blog post about a couple of days ago, explains how FOR PROFIT insurance/PBM companies can make extra profits on your prescriptions. I recently had our Past D provider HUMANA, decided that a Rx that I had filled in 03/2025 did not need a PA but when I went to refill it 05/2025 that it required a PA because there was a INTERACTION between this med and another med – both I have been taking for years.

Doing some research, I discovered while a Insurance/PBM company does not charge for a PA – BUT – they keep track the cost of handling a PA – range of $11 to upwards in the $40.  The information that I found out was not clear if they add that cost when they require a PA and/or if they only add that cost when they approve a PA. Keep in mind, 90% of PAs are APPROVED.

Apparently, these insurance/PBM companies fold all these estimated costs into what their overall cost to handle a particular group and some definition of a group of pts. 

My particular Rx previously had a copay of $2.07 and I am in my deductible period. So in the March, 2025 refill, Humana paid out ZERO.  I have no idea what Humana Part D will end up billing/costing the feds. 

Delays and Denials in Medicare Advantage

Fixing the Systemic Conflict of Interest

https://jamanetwork.com/journals/jama/fullarticle/2835645

The growth of privatized Medicare is increasing the rates of prior authorizations and claim denials, creating barriers to care, increasing administrative waste, and demoralizing clinicians.¹ At the core of this problem lies a conflict of interest: the Medicare Advantage (MA) insurance companies that profit from denials are entrusted to make neutral determinations of medical necessity as they apply Medicare’s coverage rules. They do not. Unsurprisingly, MA plans serve their financial interests first, and they are increasingly deploying artificial intelligence (AI) to these ends. Now is the time for a systemic fix: Congress should require that an independent third party make coverage and payment decisions, building on the network of Medicare contractors that already fulfill this function in Traditional Medicare (TM).

Privatized Medicare began in the 1970s when Medicare contracted with nonprofit medical group–based health maintenance organizations (HMOs) that sought to improve quality and reduce costs with an integrated model of care. In the 1980s, as part of a shift toward market-oriented solutions, Congress allowed for-profit, insurer-based entities to participate in Medicare’s prepaid option. These insurers contracted with clinicians and medical institutions in network HMOs. With no ability to improve care, they created new administrative functions, such as prior authorization and claims reviews, to control costs.

By the late 1980s, prior authorizations and denials were drawing scrutiny amid a broader backlash to the utilization management tactics of managed care. For example, the Institute of Medicine (now the National Academy of Medicine) warned in 1989 that utilization controls risked delaying or denying necessary care, echoing mounting concerns across government and the medical profession.² Policymakers nonetheless doubled down on managed care in Medicare, with reforms in 1997 and 2003 that created today’s MA program. Proponents defended prior authorization and other utilization controls as essential to lowering costs, and expected that potential abuses would be mitigated by market competition and the appeals process.

Far from it. MA has failed in its central promise of cost containment, now costing more than 20% what TM does, and MA is rife with care denials, delays, and postservice payment downgrades. In contrast to TM, MA plans subject nearly all beneficiaries to some form of prior authorization.³ Based on prior studies, we estimated that MA plans required prior authorization for 50 million services in 2024, or 1 for every 1.5 members, compared with only 400 000, or 1 for every 80 enrollees, in TM. Insurers strategically understaff and slow-walk adjudication of prior authorization to dissuade clinicians from ordering services. As a result, millions of necessary services are delayed by days or weeks. MA insurers denied authorization an estimated 3.2 million times (6.4%) or approximately once for every 10 enrollees. According to the US Department of Health and Human Services Office of Inspector General (OIG), approximately 13% of all MA denials were inappropriate or would be covered in TM.¹ Additionally, the Centers for Medicare & Medicaid Services (CMS) rarely prohibits a service from being preauthorized, allowing plans to simply overwhelm the system with the magnitude of disputes.

MA insurers also refuse to reimburse clinicians and medical institutions for services that patients have already received. According to the OIG, these postservice payment denials average 9.5% of all claims, totaling 56 million claims, or nearly 2 per enrollee in 2018. MA plans also downgrade claims after services are furnished. For example, these insurers often recategorize an inpatient stay to an outpatient visit, effectively overruling the clinician’s decision that a patient needed to be hospitalized. UnitedHealthcare explained that paying the lower outpatient rate decreases their costs by approximately $5 billion per year.⁴

For clinicians and patients, the burden of 50 million preauthorizations, 3.2 million service denials, 56 million claims denials, and 5 million appeals is immense. Medical institutions and clinicians contract with an average of 8 different insurance companies offering 43 different MA plans, each with proprietary criteria and processes. This vast MA administrative superstructure, duplicated for the commercially insured population, contributes to US administrative costs that are as much as 4 times that of certain peer countries.⁵ When a service or payment is denied, patients and clinicians can appeal, but that process is onerous, too. Although they prevail 80% of the time, they appeal only 10% of denials. Therefore, for insurers, this deny-by-attrition strategy yields savings 92% of the time.

Privatized Medicare was not supposed to work this way. MA plans are mandated by law to cover the same benefits as TM and follow Medicare coverage rules. However, MA insurers often refuse to follow them. For example, the OIG found that an MA plan denied follow-up magnetic resonance imaging for a lesion within a year even though Medicare does not impose such a time restriction. Additionally, MA plans are permitted to establish their own internal coverage criteria for services that lack fully established coverage rules. Although plans are instructed to follow the clinical literature, this frequently requires subjective judgments that become motivated by insurers’ financial interests.

More fundamentally, Medicare’s most basic coverage rule—that a given service is reasonable and necessary—often requires a determination of medical necessity that is vulnerable to abuse by conflicted insurers. To take a common example in MA, an older adult patient who experiences a stroke may be stable enough to be discharged to the home or may need institutional care. This determination is highly case-dependent and involves careful clinical judgment, but MA plans are motivated to conclude that expensive institutional care is not medically necessary. MA plans may even be delegating medical necessity determinations to AI, allegedly using AI tools to make thousands of clinical necessity decisions in seconds without considering individual patient needs.⁶

For decades, observers have raised concerns about denials in managed care, researchers proposed various solutions, and regulators have promulgated rules to clamp down on certain conduct. However, these solutions stop short of addressing the core conflict of interest. Fortunately, a solution lies in plain sight. TM uses third-party contractors, known as Medicare Administrative Contractors (MACs), to implement coverage rules, engage in targeted prior authorization, and process and adjudicate claims. They also develop certain local coverage determinations to supplement Medicare’s coverage rules. Although MACs are not perfect, they do have one major advantage over MA insurers: they are not biased toward denying care. MACs are paid a simple administrative fee. They are not at risk for medical costs and have no financial interest in denying services or payments. This process is efficient: CMS spends less than 2% on administrative costs, compared with approximately 13% in MA.

Congress should expand MAC capacity to MA, creating an “MA Administrative Contractor” that is funded by a small fee on MA plans. These contractors would conduct all preauthorization and claims adjudication processes for all MA insurers, neutrally applying current Medicare rules and continuously developing evidence-based and standardized coverage rules. MA insurers would remain responsible for paying clinicians and medical institutions once services were adjudicated by an MA Administrative Contractor. MA Administrative Contractors would replace MA’s opaque and fragmented administrative layer with a low-cost and transparent process. Additionally, they could rapidly enhance digital interfaces and properly steward AI adoption to apply Medicare coverage rules and reduce administrative expenses. CMS could also decide to incorporate insights from MA Administrative Contractors into analogous processes in TM.

Congress should respond constructively to widespread dissatisfaction with prior authorization and denials in the current MA system. Incorporating the existing approach in TM is a promising path forward.

Filed under: General Problems