Hospitals, Policy, Payers, Providers

As MA Denial Rates Rise, Hospitals Are Betting on Traditional Medicare Instead

As Medicare Advantage denial rates climb, health systems are dropping plans and steering patients back to traditional Medicare. Pearl Health CEO Michael Kopko thinks the original Medicare Advantage bargain has broken down — and that the model may never have been as efficient as policymakers assumed.

By Katie Adams on September 16, 2026 11:57 am

Hospitals struck a bargain with Medicare Advantage plans years ago to drive volume and receive a modest discount. But that partnership model has been deteriorating over the past few years, and the problem only seems to be getting worse, according to Michael Kopko, CEO of Pearl Health, a tech company that helps independent physician practices participate in value-based care models.

“What we hear from clients is that $1 is now 85 cents,” Kopko remarked.

He noted that initial denial rates have risen sharply over the past five years, moving from the 7-8% range to about 12%. 

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For health systems accustomed to faster reimbursement under traditional Medicare, this shift has been jarring. 

“Anybody who’s in the billing business, when you’re getting a lot more of your bills throttled, you start saying, ‘Hey, what’s the whole deal here? We think we’ve lost the plot.’ And I think that’s why you’re seeing a lot of folks reconsider,” Kopko stated.

This year, 30 health systems — including Mayo Clinic, Mount Sinai, UNC Health, Lehigh Valley Health Network and University of Miami Health System — have dropped a major Medicare Advantage plan or announced plans to do so.

Rather than just absorb the financial hit, these health systems are opting to give up a slice of Medicare Advantage volume in exchange for the reliability of traditional Medicare, Kopko said.

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He noted that he is seeing providers redirect patients toward original Medicare, where reimbursement is typically close to automatic. 

“You do give up a little bit of volume, but you still get paid 100% of Medicare — and so you can actually get a return of reimbursements if you play your cards right,” Kopko explained.

He doesn’t think there is an easy solution to stop providers from ending their Medicare Advantage contracts. Denial rates can’t be dialed back down to their old levels without payers giving up on profitability altogether, he pointed out.

“The MA plans can’t get you back to 5% denials from 12% easily and make money,” Kopko said. 

He believes this dynamic could force a broader reckoning — one that examines whether Medicare Advantage is actually the more efficient model policymakers once assumed it was, or whether traditional Medicare, with its lower administrative overhead, does the job better. 

Part of what’s propped up Medicare Advantage is what Kopko described as a “flywheel” of supplemental benefits. This includes offerings like free gym memberships, $0 copays and vision and dental perks — which attract healthy, newly eligible beneficiaries who don’t yet have significant healthcare needs.

But Kopko said that appeal fades once those enrollees end up needing more complex care, which is when denials and network restrictions tend to hit hardest.

Traditional Medicare benefits from a scale advantage that individual Medicare Advantage plans can’t replicate since the federal government runs the program directly rather than through hundreds of separate private payers, Kopko noted. 

In most other respects, Medicare Advantage doesn’t clearly outperform the traditional model either, he added.

“It doesn’t really beat them on cost. It doesn’t necessarily beat them on efficiency. It doesn’t beat them on provider satisfaction,” Kopko remarked.

That’s part of why he pushed back on the assumption that Medicare Advantage enrollment will keep climbing steadily. If the federal government were to cut Medicare Advantage reimbursement rates, Kopko thinks enrollment could tilt back toward traditional Medicare even faster than it already has.

As the number of Medicare beneficiaries grows toward 80 million by 2050, Kopko expects pressure on affordability — and on Medicare Advantage’s value proposition — to only intensify. 

To him, whether that leads to real reform or simply more hospitals walking away from Medicare Advantage contracts will depend on how much longer lawmakers and providers are willing to shoulder the cost of a model built for healthy 65-year-olds rather than the patients who need care most.

Photo: zimmytws, Getty Images