By Dr. Brian C. Joondeph | Commentary, American Thinker
Preauthorization, also called prior authorization (PA), is a process where healthcare insurance companies must approve before paying for medications, procedures, surgeries, or other medical services.
These are usually standard and approved therapies. For medications, PA approval is required for many FDA-approved (though expensive) drugs, used according to label, meaning in accordance with the detailed package insert.
MAHA rainmaker, Health and Human Services Secretary Robert F. Kennedy Jr, is trying to fix this problem.
This process started in the 1960s as part of Medicare and Medicaid’s “utilization review” to reduce unnecessary hospital stays and manage costs. It comes from an intentional effort to establish a third-party payer system, separating the patient from the service providers, meaning physicians and hospitals.
Such disconnection exists in few other spheres. If you hire a plumber, lawyer, or tennis coach, they charge by the hour or job and you pay them directly.
Education is one area besides healthcare where this disconnect exists. Taxpayers fund education, either directly or through grants, subsidies, and loan guarantees; however, they are often disconnected from the consumers, namely students and their parents. Those providing the education, teachers, are disconnected from the payers and consumers.
As a result, both education and medical inflation grow faster than overall inflation, with education inflation leading the way. But quality metrics are going the other way resulting in a dumber and unhealthier population.
The main issue is that when someone else covers the cost, the consumer becomes insensitive to price and value. Meanwhile, the provider must serve the payer rather than the patient, which leads to inefficiency, overuse, and lower quality.
Or as I tell my patients, “He who pays the piper calls the tune” with the insurance company paying me as the piper and telling me and my patient that the tune is a Rolling Stones classic, “You can’t always get what you want.”
In defense of insurance companies, in our current healthcare delivery scheme, large systems are vulnerable to misuse. Think of military procurement and $10,000 toilet seats.
A Finnish study found that “The probability of unscheduled C-section increases substantially during the normal working hours (8am-4pm) on working days that precede a leisure day.”
Such behavior is the military equivalent of an endless war. However, in the medical field, such behavior is more the exception than the norm. But it happens and drives unnecessary costs.
PA might restrict the use of higher-risk, more expensive procedures for convenience. But the flipside is that PA also may deny the patient the treatment they need when they need it.
What happens when the pendulum swings too far in the other direction?
In my retina world, many payers require the initial use of an often inferior off-label cancer drug, packaged in a compounding pharmacy, to treat macular degeneration and diabetic retinopathy, rather than one of a few FDA-approved drugs in prefilled syringes used as indicated on-label and often with better results.
My staff then must contact the insurance company, begging them to approve the use of a more effective but more expensive drug to improve or preserve my patient’s eyesight. Yes, high-cost drugs are part of the issue, but that’s a separate discussion.
Medicare and most payers reimburse physicians 4.3% of the drug cost (6% reduced via budget sequestration) to cover the entire supply chain of office purchase, distribution, preparation, and of course making us get PA. That is our “profit”. The drug reimbursement goes directly back to the pharmaceutical company.
Additionally, there is a 2025 3% across-the-board cut in Medicare payments to physicians, something unlikely to be fixed in the Big Beautiful Bill still languishing in Congress. At some point, the business of medicine barely breaks even, or runs at a loss, for independent physicians and practices.
PA along with reimbursement not keeping pace with costs, increases the cost of doing business to a breaking point, pushing physicians into private equity or corporate employment, turning the practice and profession of medicine into another service, like getting your car repaired or signing up for a cell phone plan.
Enough of my problems. How does PA work for all physicians?
A 2022 AMA survey found some disturbing facts about PA that RFK Jr and Dr Oz cited in their recent announcement about PA reform. “86% of respondents reported that prior authorizations resulted in increased use of healthcare resources, leading to waste rather than the cost savings claimed by insurers.”
Furthermore, “Practices complete 45 prior authorizations per physician per week on average, with physicians and their staff spending an average of 14 hours weekly on prior authorizations.”
Who pays for this extra labor cost? Medicine operates under government price controls, leaving medical practices to eat these additional costs and unfunded mandates.
Besides costs, there are also treatment delays. In the same survey, “94% of physician respondents said the process led to delays in care for patients.”
For elective care, a delay might not always be problematic. If it takes a week or two for PA for a cataract surgery or hip replacement, that’s built into the surgeons who schedule a month or two out.
However, for urgent or timely treatments, it can be life threatening. “33% had seen a prior authorization requirement led to a serious adverse event for a patient, including 25% who reported prior authorization leading to a patient’s hospitalization.”
Delayed care risks patient harm and paradoxically increases costs for insurance companies, as the cheaper mandated treatment often leads to more costly care and prolonged hospitalization down the road. Insurance companies play the “penny-wise pound-foolish” game, frustrating physicians and patients, and in many cases, resulting in costlier care.
Health and Human Services Secretary Robert F. Kennedy Jr. announced last week that several large insurance companies, “pledged to make the changes, which will be implemented across private insurance, Medicare Advantage and Medicaid.”
AHIP, a health insurance trade group, said the changes “could benefit 257 million people in the United States.” These reforms include,
1. Standardized electronic submissions for real-time decisions by the end of 2026.
2. Reduce services requiring PA: From approximately 6,000 to 2-3,000 by next year.
3. Continuity across insurers: Existing authorizations remain valid for 90 days after the patient switches plans.
4. Public dashboard: Monitor denials and delays for transparency and peer review.
5. Real-time decisions and peer-to-peer reviews
These are welcome changes, but since they are voluntary, they might not happen. I am not a fan of extra government regulations, but without clear timelines and enforcement, compliance could be as unlikely as asking teenagers to do their homework and clean their rooms.
READ THE FULL COMMENTARY AT THE AMERICAN THINKER
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