Medicaid – ScriptSourcing

New Rule Aims to Expedite Prior Authorization Requests

The Centers for Medicare and Medicaid Services has published a final rule aimed at improving how prior authorizations are handled by health insurers. The measure primarily limits the time insurers have to approve or deny requests.

In addressing wait times for prior approvals, the CMS is targeting an issue that’s become a problem for some patients whose health can deteriorate while waiting for their doctor’s request for service to be approved.

Besides setting standards governing how long a health insurer has to approve or deny a request, the new rule also requires them to take steps streamline the prior approval process through technology.

The CMS said when announcing the final rule that it would improve prior authorization processes and reduce the burden on patients, providers and payers, resulting in approximately $15 billion of estimated savings over 10 years.

What the new rule does

Starting in 2026:

Insurers will be required to approve or deny an urgent prior authorization request for medical items and services within 72 hours of receipt.
Insurers will have seven calendar days to approve or deny standard requests for medical items and services. For some payers, this new time frame for standard requests cuts current decision wait times in half.
Carriers must include a specific reason for denying a prior authorization request, which will help facilitate resubmission of the request or an appeal when needed.
To ensure that insurers will be able to handle the new time frames, the rule also requires them to implement a prior authorization application programming interface (API). The interface must facilitate a more efficient electronic prior authorization process between providers and payers by automating the end-to-end authorization process.

The takeaway

The new rule does not take effect until 2026 to give insurers and other payers more time to put in place API systems that can expedite the process.

The end result should be an improved experience for millions of insured patients nationwide, and that they get their requests handled in a timely fashion.

Insurers Make Changes to Prior Approvals Ahead of Rulemaking

After the Centers for Medicare and Medicaid Services proposed new rules aimed at streamlining the prior approval process for most health plans in the U.S., a number of the country’s largest insurers announced their own steps to improve the process.

UnitedHealthcare announced in late March that it would cut the use of prior authorizations by 20% for some non-urgent surgeries and procedures. Starting in the third quarter of 2023, the insurer will remove many procedures and medical devices from its list of services that require prior approval, and continue through the rest of the year for most commercial, Medicare Advantage and Medicaid plans.

Meanwhile, insurance giant Cigna said it has been in the process of reducing the prior authorization for about 500 services and devices. And Aetna is working to automate and simplify prior authorizations.

Market experts expect other insurers to follow suit as frustration over the long wait times and horror stories of patients dying while waiting for approval mount. The bad press and resulting lawsuits, in conjunction with the new rule making is likely to prompt more health insurers to revamp their prior authorization procedures.

The proposed rule

The rule is aimed at tackling one of the biggest headaches for patients and practitioners alike. Waiting for prior authorizations for care, pharmaceuticals or medical devices can lead to delays in care and increased risk of hospitalization from those delays.

The goal of the proposed rule, which would take effect in 2026, is to reduce the bureaucracy around prior authorizations and cut wait times for responses that some providers say sometimes take weeks to get approved.

The specifics of the rule are as follows:

Insurers would be required to render a decision within seven days after a request for a non-urgent service or item (compared to the current 14 days).
If the requested care or item is urgent, the insurer must render a decision within 72 hours.
If the insurer denies the request, it must include a specific reason for doing so.
Most group and individual health plans, Medicare Advantage, Medicaid managed care and state Medicaid agencies would be required to build and maintain a system for electronically approving prior authorizations, known as a “fast health care interoperability resources application programming interface.”
The interface must be able to ascertain whether a prior authorization request is required and “facilitate the exchange of prior authorization requests and decisions” from the provider’s electronic health records or practice management system.

Moves Afoot to Improve Prior Authorization Times, Efficiency

The Centers for Medicare and Medicaid Services has proposed new rules aimed at streamlining the prior approval process for most health plans in the U.S.

Under the proposal, starting in 2026, insurers would be required to render a decision within seven days for a non-urgent service or item (compared to the current 14 days), and 72 hours if it is urgent.

It would also require most group and individual health plans, Medicare Advantage, Medicaid managed care and state Medicaid agencies to implement electronic prior authorization systems by 2026 and streamline their processes for approving care.

The rule is aimed at tackling one of the biggest headaches for patients and practitioners alike. Prior authorization can sometimes take time to receive, often delaying much-needed care. Waiting for approval can have serious consequences, with studies finding:

It often leads to delays in care for serious conditions like cancer.
It often leads to more people being hospitalized as their condition worsens as they wait for care or medicine to be approved.

Prior authorization rules can also be confusing, time-consuming and frustrating for both patients and doctors, with the latter often feeling as if the insurer is questioning their expertise.

Insurers use prior authorization as a cost-containment tool that requires providers to seek approval from them before referring a patient for certain services and prescribing some medications. Studies have found that the number of prior authorization requests has exploded in the last few years, straining the system and delaying care.

The proposed rule

The goal of the rule is to reduce the bureaucracy around prior authorizations and cut wait times for responses that some providers say sometimes take weeks to get approved.

The proposed rule — a revised version of a similar one floated by the Trump administration that was withdrawn due to cost concerns — applies to all Affordable Care Act-qualified health plans, Medicare Advantage plans and state Medicaid programs.

As mentioned above, the time insurers have to approve a prior authorization request would be reduced to seven days, and 72 hours if it is urgent. Additionally, if the insurer denies the request, it would be required to include a specific reason for doing so.

Under the proposed rule, insurers will be required to build and maintain a system for electronically approving prior authorizations, known as a fast healthcare interoperability resources application programming interface (FHIR API).

The FHIR API must be able to ascertain whether a prior authorization request is required and “facilitate the exchange of prior authorization requests and decisions” from the provider’s electronic health records or practice management system.

Some doctor’s groups have said the new rule doesn’t go far enough and that seven days is still too long.

CMS Approves Medicare Coverage of ‘Breakthrough’ Medical Devices

The Centers for Medicare and Medicaid Services has issued new rules that require Medicare to cover medical devices that the Food and Drug Administration designates as “breakthrough” technology.

The rule paves the way for giving Medicare recipients access to the latest technologies four years after they receive market approval by the FDA. The move should greatly speed up the time by which these new devices are covered by Medicare, the approval process of which can be extremely slow.

Under the final rule, the CMS will use the data for these devices during the four years after the FDA approves them, to evaluate them based on clinical and real-world experiences. If the data shows they are effective, the CMS could move to approve them for coverage under Medicare.

The CMS said the rule was necessary because the current process hinders innovative technologies from getting to Medicare beneficiaries. Companies that make the breakthrough devices currently have to receive approval from the FDA and then receive approval for Medicare coverage, which costs them both time and funds.

Examples of breakthrough devices that were approved in 2020 include:

Innovative stents
Heart valve replacements
Advanced lab tests
Automatic defibrillator machines.

To further reduce the time it takes for Medicare to approve a device after FDA approval, the CMS has created a special “breakthrough” approval timeline that the FDA can use to approve innovative devices and potentially life-saving equipment.

Along with the expedited pathway to FDA approval, Medicare may automatically cover FDA-approved products for up to four years. After four years or the given timeframe for coverage, the CMS can reassess whether it will continue covering the device based on patient outcomes.

Qualifying requirements

Covered devices would have to fit Medicare statutory definitions of “reasonable and necessary” for treating patients. To that end, the final rule refines these definitions. Among the requirements, devices would have to be considered:

Safe and effective.
Not experimental or investigational.
Appropriate for Medicare patients, including the duration and frequency that is considered appropriate and whether it is covered by commercial insurers.

The new rule aims to nationalize what some state Medicare systems are already doing and avoid the possibility that a revolutionary new product may receive Medicare coverage in one state, but not another.

Making coverage of breakthrough products national also prevents the product manufacturers from having to approach individual Medicare administrative contractors for local coverage determinations, the CMS said in a press release.

The rule takes effect March 15 and is retroactive for two years before the effective date.

Ohio Auditor’s Report on PBMs Sparks Changes

An audit carried out for Ohio Medicaid found that large pharmacy benefit managers that contract with the state’s Medicaid program have been pocketing a larger and larger share of drug pricing.

In fact, PBMs charged Ohio Medicaid plans 31% more for generic prescriptions than the amount they paid pharmacists for the drugs, the audit found, shedding light on a practice that observers say is being mirrored throughout the country.

The auditor found that the two largest PBMs operating in the state billed Medicaid managed-care plans $223.7 million more for prescription drugs than they paid pharmacy providers in 2017.

The report comes as pressure grows on PBMs to be more transparent about their pricing and costs amid complaints by pharmacies that are barely breaking even or losing money due to the tough contracts they have to enter into with PBMs. Many critics say that PBMs are not passing on the savings to payers when they negotiate lower contracts with pharmacies.

“We know that Ohio is not alone,” Ernie Boy, executive director of the Ohio Pharmacy Association, said in a prepared statement. “Every state and every payer in the country is grappling with these overinflated costs.”

What’s going on

Medicaid doesn’t directly pay pharmacists. Ohio Medicaid pays five private insurance companies to manage Medicaid plans for the state. The insurance companies contract out pharmacy benefits to middlemen, which pay pharmacists to fill prescriptions.

Medicaid and most health plans contract with PBMs to essentially run the drug portion of the health insurance equation. They are supposed to negotiate volume discounts with drug-makers and rates with pharmacies to reduce the overall drug spend by the payers.

PBMs make a good deal of their money from a growing “spread” between what the PBM pays pharmacies and what it charges payers (in this case, the state Medicaid program). The PBM keeps the spread, but most PBMs are not transparent about how much the spread is, leaving both the pharmacies and the payers in the dark.

According to the report, the overall spread in 2017 in Ohio was $224.8 million – with an average spread of 8.9% per prescription. Generic drugs, which comprise 86% of Medicaid prescriptions in Ohio and for which pricing is most opaque, accounted for an overwhelming majority of the spread.

The report found that during the entire study period:

The average spread was $5.71 per prescription.
The average spread for brand-name prescriptions was $1.85.
The average spread for generic prescriptions was $6.14.
The average spread for specialty drugs was $33.49.

Generic drugs account for 86% of Medicaid prescription claims in Ohio.

The auditor stated in its report that PBMs’ administrative fees typically range from $0.95 to $1.90 per prescription.

“Although this figure may not include all of services performed by a (pharmacy benefit manager), it suggests Ohio’s current spread may be excessive and warrants the state taking further action to mitigate the impact on the Medicaid program,” the report stated.

As part of its findings, the auditor noted that pharmacies in Ohio have been shuttering at a brisk pace since Medicaid PBMs have been cutting how much they reimburse them for medications.

Between 2013 and 2017, some 371 pharmacies closed in Ohio, coinciding with significant reimbursement reductions in their PBM contracts. The majority of those closures have taken place since 2016.

As a result of the audit, Ohio’s Medicaid department directed its managed-care organizations to quit their contracts with PBMs, citing the opaque pricing practices.

The state’s five managed-care plans were required to enter into new contracts with companies that were able to manage pharmacy services using a more transparent pricing model by the start of 2019.