Medicare’s Refusal of Medical Claims Continues to Outpace Private Rate
By Mary Theroux • Thursday December 17, 2009 2:55 PM PDT • 61 Comments
In his speech to Congress on the need to overhaul health care, President Obama asserted:
More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won’t pay the full cost of care. It happens every day.
The following week, Health Care for America Now, a group supporting the Democrats’ health care reform bill, ran a television ad claiming that private health insurance companies: “Deny 1 out of 5 treatments prescribed by doctors.”
When fact-checked by PolitiFact.com, it turned out the statistic had been derived by the California Nurses Association, which broadened its definition of “denial” to include such administrative non-events as a claim having been sent to the wrong insurer. Such snafus occur behind the scenes, and the patient never knows about them because his/her claim is, in fact, subsequently paid by the correct insurer.
And the drumbeat goes on—
Every day in cities and towns across the United States, Americans with insurance are denied medically necessary care by a for-profit insurer. A treatment, test, medication or even a surgical procedure ordered by their physician is denied, all in the name of increasing the bottom line.
—surely leading inexorably to the conclusion that we must take action NOW to pass health care “reform”!
But, when you take the “profit” out of health care, what do you find?
According to the American Medical Association’s National Health Insurer Report Card for 2008, the government’s health plan, Medicare, denied medical claims at nearly double the average for private insurers: Medicare denied 6.85% of claims. The highest private insurance denier was Aetna @ 6.8%, followed by Anthem Blue Cross @ 3.44, with an average denial rate of medical claims by private insurers of 3.88%
In its 2009 National Health Insurer Report Card, the AMA reports that Medicare denied only 4% of claims—a big improvement, but outpaced better still by the private insurers. The prior year’s high private denier, Aetna, reduced denials to 1.81%—an astounding 75% improvement—with similar declines by all other private insurers, to average only 2.79%.
Maybe there’s something to be said for the need to keep your customers satisfied in order to make that profit after all.
Tags: Free Market, Healthcare, Insurance 
I’m wondering WHY Medicare denies more claims than private?
Gov’t inefficiencies and politically-driven decision-making would lead to more expensive services, but why would it necessarily lead to more denials?
Medicare do not have to be viable (make a profit) or even stick to any budget (judging from their constant requirement for more money), so the reasons wouldn’t be financial.
Is is the phenomenon of getting a gov’t service for ‘free’ that might cause more frivolous claims?
Or is their claims process easier than private?
Also, we’ve all read reports of insurance companies incenting staff to find reasons to drop people with expensive conditions (which I’m assuming Medicare is not allowed to do). If we add in the drops by private insurers to their denials, how does that stack up against Medicare?
In any case, higher denials along with higher costs doesn’t sound like a good combo, and if that’s what gov’t controlled healthcare inevitably brings...
PaulaC | Dec 17, 2009 | Reply
Good questions, PaulaC, thank you.
Actually, Medicare is under budgetary pressures. Those pressures are already being exerted on physicians to withhold costly treatments—so the claims denial rate doesn’t actually accurately capture the real gap between government care and private care. For example, Medicare limits cancer patients’ access to Epogen, an effective but expensive medicine, and similarly limits the use of more expensive alternative treatments that doctors might deem better for their patients such as virtual colonoscopies.
The recent recommendation by the U.S. Preventive Services Task Force that women under 50 not have screening mammograms at all, and that those over 50 only have them every-other-year, is an additional sneak preview of how extended government involvement in health care will limit access. The Reid bill specifically references that coverage will be for services approved by the Task Force. Therefore, by definition, if annual mammograms are not approved, they’re not covered.
The new Reid bill additionally explicitly empowers Medicare to limit treatment based on cost, and a new politically-appointed “Independent Medicare Advisory Board” will make the decisions. Never mind what your doctor judges best for you as an individual with your own unique set of health circumstances and needs.
The point of my post, above, is to demonstrate using a fairly straightforward, independent measure, that even in advance of the proposed new provisions, Medicare provides inferior coverage to private insurance, and political claims to the contrary are just so much hooey.
Best wishes,
Mary
Mary Theroux | Dec 17, 2009 | Reply
Wow, this quite interesting. This is sure to give people the confused look.
The_Orlonater | Dec 17, 2009 | Reply
Thanks, Mary for the clarification!
And I agree that private is to be preferred – I do wish that true reform was on the table to open up markets to more competition and lower prices.
We just completed open enrollment for our company, and of course, another increate – an additional $150/mth to keep the same plan. So we go for a higher deductible and less coverage to keep the rate the same.
If I extrapolate out the increase – it will only be a few years before my family’s healthcare costs more than my family’s rent.
PaulaC | Dec 18, 2009 | Reply
Hi Mary-
Any idea if the AMA data further breaks out the denial rates for Part A vs. Part B? I think this is important, since Part A is what most of us consider “true” government-run health insurance, whereas Part B is outsourced to private companies. I clicked through to the AMA study but didn’t see a breakout between A and B.
Thanks for the good work! BL
Bryan Link | Dec 18, 2009 | Reply
Mary, I notice you mention Epogen, a prescription drug. Would that be a matter for Plan D? And if so, might there be a low-level apples and oranges comparison between Plan D denials and Medicare’s medical procedure denials?
Likewise, is there a breakdown for the private insurers’ denials between procedures and prescriptions?
karl | Dec 19, 2009 | Reply
The pool of people covered by Medicare is basically everyone in this country 65 years old and up. In other words, it’s the oldest, sickest, most expensive group of people to insure.
It’s likely that the overwhelming majority of claims rejected for coverage by Medicare would similarly be rejected by most private insurers, experimental treatments for terminal conditions, expensive end of life care with marginal benefit to the patient, etc. It’s just that people covered by Medicare make more of these types of claims as a percentage of the total number of claims submitted.
Percentage of claims rejected doesn’t really tell you much without knowing the makeup of the risk pool and the types and numbers of claims rejected and accepted.
Chuchundra | Dec 19, 2009 | Reply
Keep in mind that denying a claim does not mean denying health care. Claims are made after the fact — providers give medical care to patients then submit a claim for reimbursement. The denial of claims harms the provider (physicians and hospitals) but not the patient — they have already gotten treatment.
CBDenver | Dec 20, 2009 | Reply
Any idea as to the proportion of administrative denials? CMS is very exacting in what it wants on a claim form. The initial denial rate is a red herring. What is the final denial rate when paid after resubmission is taken into account. This argument is getting a lot of play but it usually dies a quiet death after a some detailed analysis.
Greg | Dec 21, 2009 | Reply
Why is no one in politics talking about the waste and fraud in the system? If you do not remove that first then you still have a problem that should be removed first to get a true picture of the entire medical field.
camron | Dec 21, 2009 | Reply
My Dad is a heart patient. He has been taking an “infusion” treatment for the last couple of years. This is insanely expensive, on the order of $2000 per week.
His private insurance covered it. Then he turned 65. Medicare denied it. So, the drug maker agreed to provide it gratis due to the circumstances, which included a financial review.
Yet, Harry Reid and Co. expect me to believe that the private insurers and the drug companies are the bad guys?? And that the benevolent Federal Government will be better than the private sector?
However, from another point, I am personally torn. My dad chose to live a lifestyle that put him where he is. He chose to be obese and sedentary. He was warned by family, friends, and doctors about his lifestyle. Although I love him dearly, a part of me really questions if taxpayers should be forced to pay for all of his expensive treatments.
I guess as long as the private insurance was covering it, I could justify it. But why should healthy people be FORCED to pay for his health care, whether through the current Medicare system, or through what seems to be coming? Remember, only the Government can use force to take money (taxes) from one group and give it (entitlement) to another group.
Tim Kalafut | Dec 21, 2009 | Reply
Before making any judgment concerning this article talk to those that have experianced problems with private insurance coverage vs. Medicare. You will find that Medicare is excelent, they don’t drop you like those for profit guys do and they don’t make a judgment concerning pre existing conditions, etc. There is a lot of fraud and waste in Medicare like selling Medicare cards to illegal immigrants. More than half those those claims they deny are fraudulant. The article doesn’t tell you that does it.
Al P. | Dec 21, 2009 | Reply
Medicare consistantly denies Ambulance transports for MI patients. Medicares reasoning is that the transport was not medically needed, and the patient could have gotten to the hospital by other means.
Generally when people are having heart attacks they need the professional services that an Ambulance provides. They are not likely to drive to the hospital themselves, take a cab, or ride a bus.
Ambulances are not “experimental treatments for terminal conditions, expensive end of life care with marginal benefit to the patient, etc”
They are simple live saving measures that are consistantly denied. This is what we have to look forward to.
Kaiser | Dec 21, 2009 | Reply
Rejections are normally for poorly documented or duplicate procedures, and can be sent for review and reinstated. Why don’t you spend your time on less frivolous issues, like why the privates reimburse at 400% of cost, or deny procedures like mastectomies because a woman failed to report acne as a teenager, or deny transplants because they reduce profits? Is Medicare just too easy of a target?
Jack E Lohman | Dec 21, 2009 | Reply
Jack you watch too much Michael Moore.
Seriously you do.
Kaiser | Dec 22, 2009 | Reply
Wauw Mary!
You are deep! Well rooted, but only on the most shallow of the shallowest turfs. You must be one of those fortunate individuals who have their roots and get their salary from, well, the well-rooted insurance and drug-peddling crooks. Do they pay you for your service by the word or by how shallow you present the specific issue. I can imagine, to be on the saver side, they probably pay you for both.
Question: are you living about in the same vicinity that the zillions of war profeteers, the horde of slimy lobbyists and, of course, the entire bunch of the discusting mass of corrupt politicans call their home?
Future ahoy
Franz Grueter
Franz Grueter | Dec 30, 2009 | Reply
Franz,
If you had read any of our postings, you would have seen our consistent aim at the Warfare State—and the State in general. If you don’t like war profiteers, lobbyists, and corrupt politicians—who exist and thrive as a direct result of the largesse the government has at its disposal to dispense—why would you think you’d like the same system’s health care provision? Do you not think it likely that the exact sort of waste, fraud, abuse, corruption, and profiteering will occur under any “public option”? Isn’t it already with Medicare? (Hint: try Googling “Medicare fraud”.)
We agree that the health insurance industry is chronically in need for reform—mostly of the current government mandates that have broken it—and many more expert than I have put forth well-researched and presented proposals that effectively resolve the problems of insurance being too expensive and unavailable for some: allowing individuals to purchase insurance from any firm, anywhere (currently prohibited by law); and extending the tax-deductibility of health insurance premiums to individuals would be a great start.
Best wishes,
Mary
Mary Theroux | Dec 30, 2009 | Reply
I just found the website with your comment about Medicare denial of claims. I just wanted to tell you that Medicare is not free, as you said. A person has to pay monthly premiums and that only covers 80 per cent of the costs.
Jennifer | Mar 1, 2010 | Reply
Kaiser, I’m going to call your bluff here. Can you prove to me that MI residents who are having heart attacks regularly have to drive themselves to the hospital because an “ambulance won’t come pick them up?”
Somehow i doubt it...
mark | Mar 18, 2010 | Reply
Ms. Theroux,
You have misinterpreted the statistics provided in the AMA’s Health Insurance Report Card.
For one thing, you imply, in the last line of your piece, that the different claims denial rates for Medicare and private health insurers are an indication of customer satisfaction. The AMA study presented claims handling statistics from the perspective of medical care providers, not the customers of the various insurance carriers. Moreover, the statistics provide no indication as to whether or not Medicare’s denials were made in error or because the physicians charged for services beyond Medicare’s range of coverage.
With respect to coverage, in your 12/17 response to a reader’s comment you wrote that “Medicare provides inferior coverage to private insurance.” The AMA study did not provide any statistics regarding coverage. Coverage deals with the benefits the insurers have agreed to pay for and the amounts they will pay. This was not included in the AMA study.
Finally, rather than dealing all of the claims handling performance indicators included in the AMA study, you chose only one. If you had included, for example, compliance with contracted payments rate (Metic 5), you would have had to acknowledge that Medicare’s scores in the 2008 and 2009 studies were substantially above the average score of the private insurance carriers.
I conclude that in your zeal to make Medicare look bad, you misrepresented the AMA study.
Jim
Jim Taylor | Jun 21, 2010 | Reply
Hi, Jim, and thanks for your note:
As you will note, I chose the metric President Obama selected to support his claims.
They don’t hold up very well under even light scrutiny, do they?
Best wishes,
Mary
Mary Theroux | Jun 22, 2010 | Reply
Greetings, Mary:
Thanks for your response to my note.
You wrote “I chose the metric President Obama selected to support his claims. They don’t hold up very well under even light scrutiny, do they?”
I’m puzzled. The statement by Obama that is quoted at the top of your article deals with insurance companies (a) dropping people’s coverage when they get sick, and (b) paying less than the full cost of care. Neither of these has any relation to the metric on claims denials in the AMA study. BTW, I have never heard of Medicare dropping someone’s coverage because they got sick.
There is another quotation in your piece that deals with the denial of medically necessary care, though it isn’t clear who made this statement. Nonetheless, the AMA metric is about the denial of claims, not the denial of treatment. I have had Medicare coverage for over eight years, and have never been denied medical treatment by them, though Medicare occasionally denies payment to my providers after a specific treatment has been given, for various reasons. Furthermore, Medicare does not require prior authorization for physicians’ services, as is sometimes the case with private insurance companies, nor do they require a referral to see a specialist (this refers to the original Medicare Plan, not the so-called Medicare Advantage Plans).
Finally, it is relevant to point out that there are private options under Medicare. The Medicare Advantage Plans are offered by private companies that are approved by Medicare, and to which Medicare pays a monthly fee.
Regards,
Jim
Jim Taylor | Jun 23, 2010 | Reply
Medicare is ridden with rules and regulations. That might be why the denial rate is so high. We will have to see if the new health reform will affect this in any way.
Marc | Jul 27, 2010 | Reply
My husband has Blue Cross/Blue Shield as primary and Medicare A and B as secondary insurance. BC/BS won’t pay for aranesp injections at an outpatient clinic and Medicare B will only pay 20% because it is his secondary insurance. (I was told by a Medicare rep.) Unbelievable!! I almost think she made a mistake in her info. does anyone know if this is true about Medicare paying ONLY 20% because it is secondary???
rose | Jul 29, 2010 | Reply
I agree with the previous comment regarding the 65+ crowd are the sickest and often need insurance. My parents are almost to that age and my goal has always been to retire them and buy a solid PPO insurance plan. Their mortgage is paid-off with no dept, and they are health, but you never know and that always worries me, especially the high cost of healthcare. etc.
Kris
Kris | Jul 29, 2010 | Reply
The topic “Medicare’s Refusal of Medical Claims Continues to Outpace Private Rate” has been a hot topic for many years due to the claim that insurance companies have “loss prevention” protocols in place to attempt to deny as many claims as possible.
I believe that it is pretty well common knowledge that the private sector has to do a relatively good job due to constantly emerging competition and there is often a mini news based riot when a private company steps out of line.
That same practice of “accountability” through media seems to more difficult to leverage and maintain in the government arena.
I hope that if they do nationalize health care that they will treat it like a business and not an organization with unlimited funds.
Our government was created for the Health, Safety and Welfare of it’s citizens. I think that our for fathers would roll over in their graves if they could see how much the government has grown.
Chris the Medical Instrument Sales Guy | Jul 29, 2010 | Reply
This is America and the private sector works better than in any other country’s system in the world. That’s a fact. While no system is perfect I’ll take my chances with my private insurance company over a government mandated and regulated policy any day.
Beverly Hills Insurance | Jul 29, 2010 | Reply
It seems that both sides of the fence have very strong opinions and the facts to back it up. So who is right? What I am wondering is could we not start a bit slower on something with obvious huge ramifications? Maybe state by state or by age? Do we have to always do it all now? I think this is why people get so upset. The mistakes we make, if we make them, will be big.
Pat Deeter | Jul 31, 2010 | Reply
I totally agree with you. This is America and the private sector works better than in any other country’s system in the world. That’s a fact. While no system is perfect I’ll take my chances with my private insurance company over a government mandated and regulated policy any day.
typesofinsurance | Aug 2, 2010 | Reply
Medical insurance exist for the sole purpose to provide financial support for preventive medical care and in case of illness or injury. It is simply common sense to have your insurance pay those medical bills.
Medical Claim Denial | Aug 9, 2010 | Reply
Mary,
This point that you made in the article was very interesting and I’m sure a lot of people don’t know this fact.
When fact-checked by PolitiFact.com, it turned out the statistic had been derived by the California Nurses Association, which broadened its definition of “denial” to include such administrative non-events as a claim having been sent to the wrong insurer. Such snafus occur behind the scenes, and the patient never knows about them because his/her claim is, in fact, subsequently paid by the correct insurer.
Skipta.com
Skipta | Aug 16, 2010 | Reply
Makes perfect sense that some seniors in their final weeks, or months, may have some procedures denied.
Mike Barnes | Aug 16, 2010 | Reply
I am glad to see that this topic is maintaining some long term traction. This is an issue that everyone in the entire country should be focused in on as it will affect them dramatically in the future.
You can already see these playing out today like in:
The “Medicine Cabinet Tax”: Thanks to Obama’s current health care initiatives, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
This will cost the citizens of this country billions of dollars per year in taxes!
Chris the Medical Instrument Sales Guy | Aug 30, 2010 | Reply
I think that I am going to have to agree with many of the comments above. When adequate guidelines are laid out most services in the private sector are much more efficient than the government sector. Many times when you see things go terribly wrong it is because a government body mandated some sort of availability without considering the implications or costs associated with the decisions that were made.
Precision Surgical Instruments | Aug 31, 2010 | Reply
“More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won’t pay the full cost of care. It happens every day”
How many times have I had the same fight with my insurance company over what they will cover me for—and they never give a straight answer
Health Care denial | Oct 20, 2010 | Reply
I thought America is a land of opportunity, why is that there is a dispute on insurance claims?
http://howtogetridofacnes.us | Jan 10, 2011 | Reply
You cannot be kicked off Medicare, like you can private insurance. In addition, most Medicare denials are because the biller is not doing their homework and reviewing the published national and local coverage (and non-coverage) decisions Ironically, local coverage decisions are written by private contractors. Some people also try to bill for tests where the patient has no signs and symptoms. The Social Security Act, section 1861 and 1862 clearly prohibit most “preventative” screening tests. The biller also has a Medicare Benefits and Claims manual to reference. The rules are complex and sometimes seem contradictory, so it’s not easy to know what can and can not be billed to Medicare.
b | Feb 3, 2011 | Reply
In addition, Medicare is the primary driver for the billing rules the private insurance follows. Also, private insurance companies do offer “cadillac” plans that will pay for non-standard of care items and services and SOC items that are outside the normal frequency of visits normally allowed. This skews the numbers toward private insurance. If you want a fair comparison, remove the “cadillac” plans from your comparison.
b | Feb 3, 2011 | Reply
The fact that there are billions of dollars of Medicare fraud, every single year, astounds me. No wonder the United States government debt is climbing more quickly than ever.
Robert | Feb 4, 2011 | Reply
Epogen is not a cancer treatment. It treats a symptom that can come with cancer-severe anemia. Your statement isn’t entirely correct.
Also Drugs are Medicare Part D which is run by private insurers and can make their own drug lists and requirements.
Also medicare A is hospital coverage and doesn’t deny claims if your eligible and Medicare B is coverage for certain things for transplant patients, DME etc.
Medicare is not just one part, some statements made here are inaccurate.
Megs | Feb 6, 2011 | Reply
According to the American Medical Association’s National Health Insurer Report Card for 2010, denials from private insurers dropped to under 2.5%. I am certainly interested to see how that figure compares with Medicare.
Insurance License | Feb 15, 2011 | Reply
It’s pretty simple. Look at the average age of their subscribers... that’s where those stats are coming from. Let’s see an age group for age group comparison...
Frank | Mar 24, 2011 | Reply
I have an illness that has no cure, so I am terminal. I need chemo to just keep me alive along with continuous blood transfusions for the rest of my life.. My insurance has just denied any further care for my blood cancer, which means I die within 10 months. So a denial from an insurance company, in this case, Anthem Blue Cross and blue shield, certainly does affect a patient.. So denying a claim DOES affect me personally, they have made the decision to let me die. (Death panel) And Anthem’s explanation? Obama care! In those over 2000 pages of the health bill they have a section on care for the terminally ill patient, and that says, they have the right to deny that care. thus so, I have been denied. So in the last months I have to live watch for me on tv, newspapers, radio, to tell everyone that it can happen to them under Obama Care. Thanks for taking the time to read this.
Lori | Apr 6, 2011 | Reply
Lori,
I’m so very sorry for your present state of health. I don’t know how old you are, but Anthem telling you that Obamacare is the reason they denied your treatment is simply not true. Most of “Obamacare” has not yet been started, at least for adults. Insurance companies can’t deny children with pre-existing conditions, but they can continue to deny adults until 2014, when it goes fully into effect. When finance reform was in the makings, credit card companies were raising the interest on people who were stellar with their payments. I called Discover to ask why and do you know the person I talked to told me it was President Obama’s fault! Again, simply not true. They were doing it because they knew that when finance reform went into effect, they could no longer do it The high cost of premiums lately is not the fault of Obamacare. It is because they can now and won’t be able to after 2014. If Anthem denied your treatment it was because they can and because they don’t want to pay for it and for that reason only.
Liz | Nov 10, 2011 | Reply