Health insurance companies claim prior authorization saves money, but this time-wasting, care delaying tactic may actually add significant costs to the nation’s health system.
In addition to resulting in worse patient care, prior authorization squeezes the pocketbooks of patients, employers, physicians, hospitals and health systems through higher overall use of health care resources, according to the latest results from the AMA’s annual nationwide survey (PDF) of 1,000 practicing physicians about prior authorization.
Nearly 90% of physicians surveyed reported that prior authorization leads to higher overall utilization of health care resources, with nearly half saying that happens “often” or “always.”
Here’s how. According to the physicians queried:
- 69% reported ineffective initial treatments; for example, due to step-therapy requirements.
- 68% said prior authorization leads to additional office visits.
- 42% reported immediate care or emergency department visits.
- 29% reported hospitalizations.
“Payers erect roadblocks and hurdles allegedly designed to save money for the health system and protect precious resources, but when patients and their doctors face care delays—or even give up and abandon necessary care—the result can actually be increased overall costs when worsening health conditions force patients to seek urgent or emergency treatment,” AMA President Bruce A. Scott, MD, wrote in a Leadership Viewpoints column that accompanied the AMA survey.
“Our patients are caught in the middle, twisting in the wind, while physicians fight for them—often with fax machines as our only available weapon,” wrote Dr. Scott, a private practice otolaryngologist in Louisville, Kentucky.
The AMA is fixing prior authorization by challenging insurance companies to eliminate care delays, patient harms and practice hassles.
Patients pay extra too
Patients are having to pay their portion of the bill for those ineffective initial treatments, additional office visits, hospital stays and emergency and urgent care visits. They also find themselves having to pay out of their own pockets for medication.
Among the physicians surveyed, 79% said that a prior authorization delay or denial at least sometimes leads to a patient paying out of pocket for a medication that the physician prescribed. For example, the health plan does not cover the prescription and the patient pays the full cost.
Employer impact
Employers aren’t immune from the extra costs, either. Slightly more than half of the physicians with patients in the workforce who were surveyed—53%—reported that prior authorization has affected patient job performance.
A patient story from New Jersey family physician Mary Campagnolo, MD, is illustrative. She had a patient with diabetes whose condition had been well controlled for many years with a long-acting formulation of metformin. Then the patient switched to a new insurance company.
The new carrier “required her to go through prior authorization for a medication she’d been on for years. Basically, they were asking her to go back on a generic metformin, which had contributed to significant gastrointestinal disruption. They were asking her to make herself sick in order for us to justify her needing that particular medication,” Dr. Campagnolo said in an AMA video.
Explore this video collection of AMA member physicians’ prior authorization horror stories.
What other research shows
Previous studies back up the cost findings in the AMA prior authorization survey, including ones that show patients use more health care resources when prior authorization is involved.
For example, when prior authorization and step-therapy for psychiatric drugs are involved, there are higher hospitalization rates, higher overall medical costs and higher incarceration rates because of uncontrolled mental illness, according to a summary of studies from University of Southern California researchers. One of the studies found that predicted expenses for patients with schizophrenia when there are not formulary restrictions for atypical antipsychotics was $16,171, but that number jumps to $18,897 when restrictions are involved.
Meanwhile, removing prior authorization for buprenorphine-naloxone was associated with an increase in medication use and lowered health care utilization and spending, according to a study published in JAMA Network Open.
And according to an AMA-funded study published in the American Journal of Managed Care, limiting access to novel anticoagulants reduced use of the drugs and increased the risk of stroke among newly diagnosed atrial fibrillation patients. Medications would have been less expensive than poststroke care costs.
The costs of prior authorization can add up for health plans too. A study published in the Journal of Managed Care & Specialty Pharmacy found that there were higher plan-paid health care costs among members who requested a type 2 diabetes medication requiring prior authorization but never received it when compared with patients who qualified for and got the requested medication.
Astonishingly, the health care industry spent $1.3 billion on administrative costs related to prior authorizations last year, according to a report from the Council for Affordable Quality Healthcare, a nonprofit organization that works with health plans and related associations to streamline health care business processes.
That represents a 30% increase over 2022 as a result of the rise in the volume of prior authorizations. It costs about $6 per transaction for physician practices, health systems and others to conduct prior authorization-related administrative functions that are HIPAA secure. That “is one of the highest” in the industry, the council’s report says.
Stay up to date on prior authorization improvements
Get the latest news on the AMA’s fight to eliminate care delays, patient harm and practice hassles.
AMA pushing for change
In 2018, the AMA, the insurer trade group AHIP, Blue Cross Blue Shield Association, American Hospital Association, American Pharmacists Association, and the Medical Group Management Association released a “Consensus Statement on Improving the Prior Authorization Process” (PDF). The groups agreed on changes to five core areas that could lead to fewer delays for patient care and fewer administrative burdens for physicians.
But six years later, not enough has changed, and the AMA continues to press for faster responses to prior authorization requests, fewer required prior authorizations and several other fixes.
After some progress on the state legislative and federal regulatory fronts last year, Congress is poised to take action to make more improvements to prior authorization this year.
In June, bipartisan groups in the House and Senate introduced legislation that would streamline and standardize how Medicare Advantage uses prior authorization. The AMA supports the legislation, the Improving Seniors’ Timely Access to Care Act of 2024. The bill is an updated version of legislation that did not pass the chambers last Congress.
Patients, doctors and employers can learn more about reform efforts and share their personal experiences with prior authorization at FixPriorAuth.org.
