Every month, according to published statistics, roughly 1 million Medicare patients spend inpatient days in U.S. hospitals. Of those, nearly one-quarter will be discharged to an acute care facility for rehabilitation. These are patients who require a period of further treatment before safely returning home.
Officially, Medicare covers up to 100 days of such acute care. But now, a federal investigation has revealed that Medicare Advantage insurers are denying rehab care at an alarming rate.
Among the nation’s largest Medicare Advantage insurers, the rate of denial of acute care coverage is far higher than previously reported. This forces patients and their families into a choice: either fight the denial through an appeal process that can prove daunting, or face high costs of rehabilitation care on their own.
Two Major Publications Reveal the Scope of the Problem
This week we came across two articles in major national publications spotlighting this new report. The first is this article from USA Today prepared by reporter Ken Alltucker. He writes,
“Federal reports show that private Medicare Advantage insurers regularly deny older adults’ requests for post-hospital specialized care, with the largest plans rejecting the highest share of long-term and rehabilitation stays.”
This high rate of denial has triggered major concerns about patient access to care, not to mention the financial burdens these coverage denials place on families.
More than Half of Rehab Requests Denied by Big Insurers
The review of Medicare Advantage plans and their refusal of coverage was prepared by the Department of Health and Human Services’ Office of Inspector General.
In a Wall Street Journal article critical of the insurance giants, reporter Anna Wilde Mathews included some of the Inspector General’s statistics to reveal the scope of the problem. (We lack the space for a full recap, so we encourage you to check out the original WSJ article. Note that a subscription may be required.)
Denial Rates Skyrocket When Patients Need Costlier Care
The Wall Street Journal showed the insurance firms with the highest rates of denial for rehab stays in a nursing home setting. (The report is based on data from June 2024.) The highest denial-of-coverage rate came from Molina, who disallowed just over 23 percent of all claims.
Other major firms fared better, including mega-firms like Kaiser, Humana, CVS/Aetna, UnitedHealth, and Cigna. These companies initially denied about 1 in 8 of all requests for rehab in a nursing home setting.
However, Mathews notes, denial rates “were far higher for patients trying to get into the other types of facilities. For long-term-care hospitals, initial rejection rates were as high as 80 percent.”
Investigators Fear Patients are Being Denied Needed Care
In her Wall Street Journal article, reporter Mathews quoted the federal report’s lead author Rosemary Bartholomew. The new investigation, Bartholomew said, “raised concerns that some patients may have been denied medically necessary care.”
Mathews notes that Medicare is supposed to cover a nursing-home stay “if patients still need high-level, skilled care after a hospital admission of three days or more.” But many firms are turning some rehab patients away.
Medicare Advantage Insurers Under Fire for Pre-Approval Rules
Both USA Today and the Wall Street Journal note that these big firms offering Medicare Advantage plans have already come under fire from consumer advocates for their policy of requiring prior approval for most types of care.
USA Today’s Alltucker writes, “Private health insurance companies face scrutiny over the use of ‘prior authorization,’ a common industry tool to vet requests before allowing doctors or health facilities to bill for medical services. Senior advocates and nursing care industry officials say insurers use the cost-cutting tool to deny care older adults need, often shifting the financial and caregiving burden to families.”
Writing in the Wall Street Journal, reporter Mathews explains, “Insurers have long said that their preapproval requirements aim to ensure that patients don’t get unnecessary or harmful care. For seniors enrolled in traditional Medicare, instead of private Medicare Advantage plans, there is generally no need to get the same kind of preapproval.”
Patients Need Extra Care, But Companies Say No
As USA Today explains, Medicare Advantage plans are administered by private insurance companies. Insurers receive a set amount of federal funding per patient, and their profits can rise if they control costs. One key cost-control strategy involves the demand for prior authorization of care, combined with coverage limited to selected networks of hospitals and doctors.
As the Inspector General’s report reveals, when Medicare Advantage firms deny long-term care in specialized hospitals, rehab facilities, or skilled nursing facilities, patients and families face a desperate situation.
“Imagine knowing you’re not ready to go home, you can’t go to the bathroom, you still need help, but they’re [insurance companies] saying no,” Nicole Fallon of the non-profit agency LeadingAge told USA Today. “You’re stressed and you ask, ‘What am I going to do? I can’t take care of myself at home.’”
Bottom-Line Concerns Appear to Drive the Coverage Decision
Both the USA Today and Wall Street Journal articles imply that the decision on whether to approve or deny coverage appears profit-driven.
“For-profit Medicare Advantage plans were more likely to reject service requests than nonprofit Medicare plans,” USA Today’s Alltucker writes. According to the federal report, this suggests that “financial incentives may be partially driving higher denial rates.”
Both articles also note that rehab stays in nursing homes are approved at a far higher rate than more costly care options. Long-term care hospitals are the most expensive care setting, says USA Today, followed by rehabilitation facilities, then skilled nursing homes. In-home care is by far the least expensive option.
Patients at Greatest Risk Require Costlier Levels of Care
The article in the Wall Street Journal observes that long-term care hospitals and inpatient rehab facilities are typically recommended for “fragile patients who need even more high-level care than a nursing home can provide.” Overall, these costlier options were denied coverage in well over half of all cases cited in the federal report, and up to 70 percent for some firms.
“It raises concerns for us that some patients may not be getting access to the care that they need,” report author Bartholomew said.
Appealing the Denial is Frustrating but Often Successful
Patients, their families, and the rehab facilities that provide care all face major frustration when insurance coverage for necessary services is denied. But research suggests that appeals of the denials have a decent chance of success.
USA Today reports, “When older adults appealed, Medicare Advantage plans overturned 36 percent of long-term care hospital denials and 43 percent of rehabilitation denials.”
Results are even better for those denied rehab coverage in a skilled nursing facility. According to the Wall Street Journal article, most people who were denied such coverage didn’t appeal. However, “Of the 18 percent of patients who did appeal, nearly all of them were able to overturn the initial denial of skilled nursing care.”
Some companies were found to have approval rates on appeal of well over 90 percent. Our take-away: when the insurer says no, it pays to fight back.
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