Insurance companies claim prior authorization lowers costs and improves care. But is that really the case?
Patients and physicians beg to differ with the claims that insurers bandy about when discussing payers’ time-wasting, care-delaying tactics that are designed to control costs. And physicians have the research to back up their position.
Knowing the truth is important because prior authorization, a utilization-management tactic that insurers once reserved for extremely expensive intervention, is now employed for even the simplest generic medication.
And denials only seem to be becoming an even greater problem for physicians and patients’ health. A recent AMA survey shows that 61% of physicians fear payers’ unregulated use of AI tools will increase prior authorization denials. The payers’ automated decision-making systems create systemic batch denials with little or no human review.
The AMA is fixing prior authorization by challenging insurance companies to eliminate care delays, patient harms and practice hassles. That includes setting the record straight on what the research shows about how prior authorization is used how it affects American health care.
Myth: Prior authorization lowers cost
Prior authorization, in fact, does not lower costs. Drug prior authorization costs $93.3 billion annually, according to a study published in Health Affairs. No one is immune. The study estimates that prior authorization costs payers $6 billion, manufacturers $24.8 billion, physicians $26.7 billion and patients $35.8 billion annually.
Meanwhile, 88% of physicians surveyed by the AMA reported that prior authorization leads to higher health care utilization because of avoidable emergency department visits and patients being forced by payer policies to initially use ineffective treatments.
Fact: It’s expensive for doctors—and payers
Here’s what some researchers have discovered about how prior authorization translates in economic terms for physicians and payers.
For primary care physicians, prior authorization costs an individual doctor between $2,161 and $3,430 annually, according to a study published in the Journal of the American Board of Family Medicine.
At 11 dermatology clinics that researchers examined, completing a prior authorization for biologic drugs cost an average $15.80 per request—or about $3,454.15 for the month studied, according to research published in JAMA Dermatology.
Emergency visits and hospitalizations rose 1.7 percentage points when access to antidepressants was restricted, according to research published in Forum for Health Economics and Policy.
Formulary restrictions on antipsychotics increased hospitalization risk, inpatient costs and total medical costs, according to a study of 24 state Medicaid programs published in the American Journal of Managed Care. Restrictions increased the number of incarcerated people by 9,920 and upped the costs associated with incarceration by $362 million nationwide.
Meanwhile, if a “gold carding” program—a system that allows approved physicians to forgo prior authorizations for certain medications or procedures—were implemented, it would save 5%–10% for payers and physicians, a McKinsey & Co. analysis found.
Fact: Prior authorization is wasteful
The AMA’s most recent annual survey of 1,000 physicians about prior authorization found that practices on average complete 39 prior authorization requests per physician, per week.
The AMA survey (PDF) also found that:
- Physicians and their staff spend an average of 13 hours completing those requests each week.
- 40% of physicians have staff who work exclusively on prior authorizations.
After jumping through all of those hoops, 98.5% of prior authorizations in pediatric oncology and hematology were eventually approved, according to a study in the Pediatric Blood & Cancer journal. Similarly, an AMA-funded cohort study published in Arthritis Care & Research found that 96% of all prior authorizations on rheumatoid disease treatments were ultimately approved.
Myth: Prior authorization improves care
The opposite is true. Prior authorization worsens patient outcomes.
Insurance companies’ overuse of prior authorization causes patients real harm – in some instances even resulting in death. Nearly 30% of the physicians who participated in the AMA prior authorization survey reported that the practice has led to a serious adverse event for a patient in their care, including 8% that said prior auth led to a patient’s disability or permanent bodily damage, congenital anomaly or birth defect or death.
Learn more about why the AMA is fighting to fix prior authorization.
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Get the latest news on the AMA’s fight to eliminate care delays, patient harm and practice hassles.
Fact: It delays necessary care
In addition to the agonizing anecdotes that every physician has, numerous peer-reviewed studies back up the fact that prior authorization results in patients not getting necessary care as quickly as they should be getting it. Here are a few examples.
Reduced access to novel anticoagulants because of prior authorization and step therapy led to higher risk for mortality, stroke and transient ischemic attack, according to research published in The American Journal of Managed Care.
In an American Society for Radiation Oncology survey, 31% of radiation oncologists said that prior authorization had delayed a patient’s treatment by one week, alarming because other research has shown an association of “each week delay in starting cancer treatment with a 1.2% to 3.2% increased risk of death.”
Dermatology patients with approved prior authorization requests had a 71.1% likelihood of disease improvement; those who had requests denied had a 58% likelihood of improvement, says a study published in the Journal of the American Academy of Dermatology.
Fact: It blocks evidence-based care
Physicians spend many years in medical school, residency and fellowship training and continuing medical education to gain the knowledge and skills needed to provide the best care for patients.
Yet prior authorization decisions are frequently made by those who do not share those qualifications. When physicians have “peer-to-peer consults,” the person on the other end of the line may be a nurse or a physician in a completely different specialty with little to no knowledge of the disease or treatment in question.
In addition, research has shown that prior authorization has led to:
- A nine times increased likelihood that irritable bowel disorder patients will need surgery when medication has been denied through prior authorization, says a study published in the journal Inflammatory Bowel Diseases.
- Over 40% of commercial patients and 53% of Medicare patients not beginning the oncology treatment their physician prescribed after a prior authorization denial or step therapy requirement, according to a white paper published by IQVIA Inc.
- Limited access to pre-exposure prophylaxis (PrEP) and increased rates of HIV diagnosis in regions with high rates of prior authorization for PrEP, which protects against contracting HIV, according to a JAMA Network Open study.
Patients, doctors and employers can learn more about reform efforts and share their personal experiences with prior authorization at FixPriorAuth.org.
