Medicare Advantage represents more than 55% of the Medicare population, but the program has faced mounting criticism from some health systems, particularly over administrative hurdles such as prior authorization denials and slow payment processes.
Dozens of health systems have terminated Medicare Advantage contracts in recent years, with a select few systems terminating all MA contracts entirely.
Contract disputes between payers and providers came to a head in 2024. According to data from FTI Consulting, in the fourth quarter of 2024, there were 50 contract disputes covered by a traditional media outlet, the highest since the firm began tracking disputes in early 2022. Of these 50 disputes, 32 (64%) involved Medicare Advantage plans.
"Medicare Advantage has its advantages for beneficiaries — it has enhanced benefits, and there's no question that's very attractive. But it's only attractive until they get denied a prior authorization or when they're waiting to be discharged to a post-acute facility, and the algorithms used by the insurer suggest they're not appropriate to be discharged," Rick Pollack, CEO of the American Hospital Association, said on the Becker's Healthcare podcast on Jan. 23.
Between 2022 and 2023, claims denials surged by an average of more than 20% for commercial plans and 55% for Medicare Advantage plans, according to a September brief from the AHA. The trade group pointed to the increased use of machine learning algorithms and other artificial intelligence tools among insurers as one reason behind "skyrocketing" administrative costs for hospitals.
"I think what we really need to focus on are partnerships that allow hospitals, health systems, and other stakeholders — some of them may be insurers — to work together to align these incentives," Mr. Pollack said. "We need meaningful shared savings arrangements to address these hurdles, and it has to come from relationships built on mutual trust and respect. You have hospitals that, in some cases, are service providers of Medicare Advantage plans, but others can be partners in managing the per capita rate or fee in an aligned way that promotes good care. That's the hope, that's the potential, and that's where I hope we can make progress moving forward, including for the patient."
"There are examples where this is happening, but we need to see more of these opportunities coming together. Very often, insurers are reluctant to get involved in these partnerships. I think both sides have to be willing to do it," he concluded.