Seniors enrolled in Medicare Advantage plans run by CVS Health and the two other largest insurers faced denial rates for long-term hospital and rehabilitation care far above those of smaller competitors, according to a federal watchdog review of prior-authorization decisions made in June 2024. The HHS Office of Inspector General examined the 19 biggest Medicare Advantage parent companies and found that the three largest by enrollment rejected requests for long-term acute-care hospital stays and inpatient rehabilitation facility admissions at some of the highest rates in the industry. When patients did appeal those rejections, insurers reversed a significant share of their own decisions, raising sharp questions about whether the initial denials were justified.
Why the denial gap between large and small insurers matters right now
More than half of all Medicare beneficiaries are now enrolled in Medicare Advantage plans rather than traditional fee-for-service Medicare. That concentration gives the biggest organizations enormous influence over who gets admitted to a long-term acute-care hospital or an inpatient rehabilitation facility after a serious illness or injury. The OIG’s finding that the three largest insurers denied these requests at higher rates than peers suggests that scale itself may shape how aggressively plans screen post-acute admissions.
One plausible explanation is economic: a very large plan can afford to lose a portion of appeals because the broader deterrent effect of high denial rates still reduces total utilization. Smaller plans, handling fewer requests, face greater reputational and regulatory risk from each individual denial and may set a lower bar for approval. The OIG data does not confirm or rule out this dynamic, but the pattern it documents is consistent with it. For patients, the practical result is the same: a denied request delays or blocks care that may have been medically appropriate all along.
The timing also matters. June 2024 was a period when hospitals and post-acute providers were still managing backlogs of medically complex patients, many of them older adults with multiple chronic conditions. For these patients, a long-term acute-care hospital can provide ventilator weaning, intensive wound care, or complicated infection management, while inpatient rehabilitation facilities deliver three hours of therapy a day to help people regain mobility and independence. When an insurer denies admission to those settings, patients may instead be discharged home without adequate support or diverted to a lower-intensity facility that cannot meet their needs.
OIG data on overturned denials across post-acute settings
The inspector general’s report found that 36% of long-term acute-care denials and 43% of inpatient rehabilitation denials were overturned when beneficiaries or providers appealed. Those reversal rates are significant because they indicate that roughly four in ten rejected patients had cases strong enough to survive the insurer’s own internal review. A companion OIG study of skilled-nursing facility admissions deepened the concern: insurers collectively denied 12% of SNF requests in June 2024, only 18% of those denials were appealed, and plans overturned 95% of appeals in favor of the enrollee.
The pattern is not new. An earlier OIG review covering 2014 through 2016 found that Medicare Advantage organizations overturned 75% of their own preauthorization and payment denials on appeal, yet beneficiaries and providers appealed only about 1% of denials to the first level. A separate 2019 sample of 250 prior-authorization denials from 15 large plans showed that 13% of those denials met Medicare coverage rules and likely would have been approved under traditional Medicare, leading investigators to conclude that some denials in Medicare Advantage inappropriately restricted access to medically necessary services.
High reversal rates, paired with low appeal rates, create a troubling picture. Many beneficiaries never challenge a denial because they are too sick, do not understand the process, or assume the insurer’s decision is final. When those few who do appeal win so often, it suggests that a substantial number of unappealed denials may also have been wrong. In other words, the appeals data likely understate the true extent of inappropriate barriers to care.
What the findings mean for patients and policymakers
For patients and families, the immediate consequence of an unjustified denial is disruption at a vulnerable moment. Hospitals may keep a patient longer while fighting with the plan, exposing them to higher risks of complications, or discharge them prematurely to home without the intensive services clinicians recommend. Post-acute providers, uncertain about payment, may hesitate to accept complex patients, further narrowing options.
Clinicians and hospitals also shoulder administrative burdens. Staff must gather documentation, file appeals, and track deadlines, diverting time from direct care. Smaller facilities without robust case-management teams may be at a particular disadvantage when dealing with large insurers that apply aggressive utilization review standards.
For policymakers, the OIG’s work underscores the tension at the heart of Medicare Advantage. The program relies on private plans to manage costs and coordinate care, but it also expects those plans to follow Medicare’s coverage rules and protect beneficiary access. When oversight reveals systematic patterns of denials that are later reversed, especially concentrated among the largest organizations, it raises questions about whether current enforcement tools and reporting requirements are sufficient.
Potential responses could include more targeted audits of high-denial plans, clearer federal standards for prior authorization in post-acute settings, and stronger requirements that insurers track and report reversal rates internally. Educating beneficiaries about their right to appeal and simplifying the process could also help ensure that medically necessary care is not lost simply because patients are overwhelmed.
Ultimately, the OIG findings highlight a basic expectation: when older adults need intensive hospital-level or rehabilitative care, coverage decisions should be driven by clinical need and Medicare rules, not by how much market power a particular insurer holds. As Medicare Advantage continues to grow, closing the gap between initial denials and eventual approvals will be central to maintaining trust in the program.
