Privatized Medicaid: An Incentivized System of Constant Denials

The Medicaid Program was created to fill the gap of what private insurance would not do—provide vulnerable populations with meaningful access to quality health care—but now it has been thrown into the pitfalls of private insurance. Over the last two decades, there has been a significant rise in states contracting with private Managed Care Organizations (“MCOs”) to provide services to a percentage of their Medicaid enrollees. MCOs now make decisions each year to approve or deny millions of requests for Medicaid coverage of health care services using prior authorization. Until now, the criticisms and fears surrounding privatized Medicaid have largely been theoretical. However, the Office of Inspector General’s recent report brought the issue of Medicaid managed care denials to a larger audience than it has ever seen before. This Note argues that Medicaid managed care plans are setting up a system of constant denials by using narrow coverage standards, like medical necessity, as rationing tools. First, this Note examines the ways that this cost-cutting system incentivizes MCOs to arbitrarily deny requests for coverage of medically necessary services. Second, this Note analyzes how the insufficiency of the current regulations and government oversight of MCOs facilitates leeway for arbitrary denials. This Note proposes potential policy solutions and legal remedies as approaches to protecting Medicaid enrollees from arbitrary denials. To ensure that the Medicaid Program remains true to its purpose of serving the public interest, it is imperative that we begin mandating comprehensive reporting of denial rates, records, and prior authorization standards by states and MCOs to the federal government. These reports should be publicly accessible as they concern the accountability for and administration of a publicly funded program. Further, when state Medicaid agencies exceed the bounds of their authority by adopting unreasonable review standards or failing to provide required services, aggrieved Medicaid enrollees may have recourse in court.