medical claims insurance

Since the inception of Tennessee’s managed Medicaid program in 1994, state officials have been attempting to balance cost with health care services for the state’s most vulnerable and sickest population.

Through waivers and health care reform, the state’s safety-net insurance program has evolved widely over the years, but the basics remain the same: Tennessee pays commercial insurers and other care management organizations on a per-capita basis to manage Medicaid beneficiaries’ health care while attempting to drive down spending and costs.

Representative of the evolution of those competing interests may be TennCare’s medical service appeals system, whose outcomes today almost always favor the state and its managed care organizations. The care prescribed by the doctor of a TennCare beneficiary is subject to review by the paying organization, which can deny a claim it believes is unnecessary or has a cheaper alternative.

The State of Tennessee does not publish data on the number of claims that are denied to beneficiaries by each managed care organization per year and officials declined to discuss details of TennCare’s policies and claims process. But an internal appeals process captures a tiny percentage of patients and doctors who petition TennCare to reconsider — often for services such as home health or major procedures the primary care physicians see as medically necessary for their patients.

In 2020, of the 8,338 enrollees who appealed the decision of their managed care organization to deny them medical services prescribed by their physicians, 3,006 were resolved by a fair hearing. Of those who got a hearing before the contractor hired by the state, only 145 — less than 5 percent — were able to overturn the original denial. According to the National Association of Insurance Commissioners, the average rate that internal appeals are overturned across all health insurers was 34.2 percent in 2019.

The 5,332 other appellants were filtered out prior to a fair hearing — the procedures of which are governed by federal law — either by a redetermination by the MCO or via two legal principles developed by state statute and years of court battles: medical necessity reviews and a finding of no valid factual dispute.

Tennessee made an unprecedented change to its definition of medical necessity in the early 2000s as the Medicaid program sought to rein in costs. The definition required that physicians sought the least expensive care alternative for which there was substantial scientific evidence backing its use. According to a report by Kaiser Health Foundation, the parameters were more restrictive than any other health insurer — private or public — in the nation and allowed the payer of last resort to categorically remove entire sections of health care services that had been covered. In short, the metaphorical safety net has shrunk in size.

Since passage of the Affordable Care Act and subsequent health care and insurance reforms, Tennessee has altered its definition of medical necessity slightly but the outcomes remain the same: For the past 10 years, between 8 percent and 12 percent of appeals were determined before a hearing not to be medically necessary.

“You create a very stringent definition of medical necessity. You create a financial incentive to cut services and you apply this utilization process in which the doctor who knows the patient and is prescribing the care has to justify this standard of medical necessity. And all of that makes for some very tough gatekeeping by the insurance companies as to who gets care or not,” says Tennessee Justice Center Co-Founder Gordon Bonnyman, a longtime health care attorney and patient advocate who for years has participated in court battles against TennCare on behalf of beneficiaries. “They have totally rigged the game in favor of the house.”

A three-decades-long court battle Bonnyman has litigated alongside other advocacy groups and health care organizations over TennCare’s handling of enrollment and the denial of medical services has also changed TennCare’s appeals process over time. According to plaintiffs in the case, the managed care organizations brought in by the state frequently sought to curtail providing necessary health care in favor of their bottom lines.

Through negotiations in that lawsuit, U.S. District Court Judge John Dixon of the Middle District of Tennessee in 2005 ordered an array of consumer protections within the TennCare appeals process, causing the state to overturn most denials after an appeal was filed. In 2007, TennCare officials asked to modify those protections, citing federal law and piggy-backing off another court ruling in the 6th Circuit. That opinion allowed the state to deny enrollment appeals where there was no “factual dispute” and use the same principle when determining whether medical service appeals should go to a hearing.

The factual-dispute clause prevents beneficiaries from challenging TennCare policies that exclude coverage of certain medical services, instead denying them outright as a matter of law without an appeals hearing. In a 2007 ruling on the matter, Judge Dixon wrote, “it will be a rare case indeed that is dismissed for failure to raise a valid factual dispute.”

Dixon’s assessment missed the mark: In 2020, more than 3,200 cases were dismissed prior to a hearing because they failed to raise a valid factual dispute, according to state data. That amounts to nearly 40 percent of total appellants whose doctors had ordered certain treatments or services.

Four years ago, all of the protections outlined by Judge Dixon in the case were eliminated as the state moved to dismiss the original lawsuit entirely. In the years since, appeals outcomes have fluctuated with overall TennCare enrollment, with about 25 percent of cases going to a fair hearing and only 5 to 10 percent of those getting ruled in favor of the patient.

“The nature of those appeals haven’t changed; they still involve factual disputes. But hey, the hall monitor isn’t around anymore,” Bonnyman says. “They are denying a lot of people these hearings in which these services are, in fact, medically necessary.”

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