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Whether you call it prior review, precertification, or prior authorization (PA), the practice is widespread and under attack. Almost every healthcare professional with experience with PA complains about the time required to respond to the request and the delay involved in getting treatment for a patient.

Prior authorization has been popular with the insurance industry because it works. By works, I mean it’s generally successful in its intended purpose of limiting unnecessary care by requiring the physician or prescriber to demonstrate the medical need for the prescribed treatment before it is approved for payment. The theory is that if the patient is truly in need of the proposed treatment, the physician will take the time to jump through administrative hoops to obtain it. If not, he/she will choose an alternative therapy. This is known as the sentinel effect, and in the initial stages, providers accommodated the process without much complaint.

Prior Authorization and Escalating Costs

There has nearly always been a low level of grumbling from healthcare practitioners about PA, but the complaints became louder as prices began to escalate and more drugs and procedures became subject to the process. The health insurance industry didn’t have many other tools to suppress demand, so it went with the sentinel effect by default. Remember, the total cost of healthcare is primarily dependent on two factors: unit price and utilization. To control total costs and make insurance more affordable, insurers discovered the tools available to them to control unit costs weren’t as effective as the tools they had to suppress utilization.

There are circumstances where PA is entirely appropriate, especially when it comes to the use of low-value healthcare services. When PA is used to raise the bar for access to low-value healthcare services, there should be a benefit to individual patients and savings to the system. The extent to which managed care does this remains open to debate.

Backlash Against Prior Authorization

A 2022 prior authorization survey by the American Medical Association (AMA) revealed the average physician practice processed 45 PA claims per week. This was up from 37 PA claims per week in 2017. Physicians have targeted PA as a process ripe for reform, joined by pharmacists and other healthcare professionals. Medical device and drug manufacturers have joined in as well and provided funding to encourage legislative and regulatory relief.

The politics of healthcare favor providers and suppliers over insurers in the battle over PA reform. After all, every congressional district has pharmacies and physicians, while very few are home to health insurance companies.

Is PA Reform on the Way?

There are both regulatory and legislative paths to reform of the prior authorization system. While states may take the lead in some cases, CMS has a role in two major healthcare coverage programs: Medicare and Medicaid.

CMS’s latest move to rationalize PA is in the final rule for MA and Part D programs for 2024. The rule limits prior authorization to confirm the presence of a diagnosis and validate medical necessity. The rule also requires transition requirements for patients moving to a new plan, requiring products and services currently available to the patient are available for 90 days upon transferring to the new plan. CMS has also mandated plans to move to electronic prior authorization beginning in 2026.

Congress has been active, too, with the Timely Access to Care Act in the House of Representatives last year. The bill must be passed again in the new Congress by both houses and signed into law by the president. The 118th Congress will likely engage on several bills dealing with both PBMs and health insurers on issues related to prior authorization.

States continue to be energized over PA, which is important, since they have primary authority over the operations of health insurers doing business there. For a look at state policy, look at the AMA’s state prior authorization chart.

X Factors for Prior Authorization

  • Familiarize yourself with both the PA policies of your frequent plans and your state’s prior authorization laws.
  • Begin tracking the resources you, or your prescribers, commit to carrying out PA requests.
  • Get active with your state pharmacy association and with ASCP® government affairs to learn how you can help get rational PA policies enacted.

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Written by: Paul Baldwin, Baldwin Health Policy Group
Paul’s pharmaceutical industry experience in public and government affairs led to becoming Executive Director of the Long Term Care Pharmacy Alliance, helping lead the industry through the Medicare Modernization Act and creation of the prescription drug benefit. Paul was VP of Public Affairs for Omnicare before founding Baldwin Health Policy Group.

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