What is a Prior Authorization?
Prior authorizations, or pre-authorizations, are a way for private healthcare insurance companies to make more money and reduce the number of covered procedures*. Private insurance companies require doctors to fill out lengthy forms to get approval for prescribed treatments and will often make to forms difficult to complete. Companies will often deny claims because of simple errors. If a company denies a claim, doctors and staff must spend time and money resubmitting forms, resulting in delays in patient care. Once the form has been submitted, the company reviews it to confirm that prescribed treatment matches what the insurance company decides is acceptable for the condition. Instead of trusting doctors, insurance companies will cross-check and only allow coverage if they believe the treatment is appropriate. This administrative step compromises the relationship between the patient and physician and introduces an unnecessary intermediary. Insurance companies do not provide doctors with sufficient information about what treatments will be covered which leads to physicians guessing what they think will be covered instead of simply considering what the best course of treatment would be. This system got its start in the 1970s in the form of Health Management Organizations (HMOs) to control doctors from ordering what was seen as too much health care. Although some overuse of some services exists, the theory that over-utilization explains high U.S. health care costs has never been supported by evidence. Compared to other advanced countries with universal healthcare systems that cover everyone, largely use fee-for-service payment, and cost half what we spend, U.S. per capita physician visits and hospital utilization rates are low**. In recent years, prior authorizations have been exploited as a way for insurance companies to improve their profit margin.
Why should I care about Prior Authorizations?
Insurance companies claim prior authorizations control costs. Still, it slows down and compromises a medical teams’ ability to practice medicine. On average, medical teams must fill out 41 prior authorizations per week per physician, costing the team valuable time, resources, and personnel. According to the American Medical Association, 91% of physicians said prior authorizations can lead to negative health outcomes. In this same survey, 82% of physicians reported prior authorizations can lead to a patient abandoning a course of treatment. No functioning healthcare system should have administrative barriers of this significance. When you see a doctor, your treatment should rest in the trained hands of someone interested in improving your health, not taking your money. Every time a private health insurance company approves a claim, it loses money. Our health care system responds to free market pressures, and prior authorizations are just one way health is neglected in private health insurance.
The Importance of a Single-Payer Universal Healthcare System.
Private health insurance is intentionally confusing for both the patient and the provider because health insurance companies are in the business of denying coverage and gaining profit. Traditional Medicare (TM) does not use prior authorizations. TM has clear published guidelines that define what services it will pay for. The billing and insurance related costs for traditional Medicare and Medicaid hover around 2 percent to 5 percent, while those for private insurance is about 17 percent***. We do not need an intermediary who scrapes money off the top of a system that is supposed to provide care to people who need it. Prior authorizations are a symptom of a broken system and demonstrate the importance of supporting a new public system.
By supporting Mid-Valley Health Care Advocates (mvhca.org) and Health Care for All Oregon (hcao.org), you can support initiatives like the Oregon Universal Health Care Plan, which will expand public health insurance options and allow physicians to care for patients in our community more easily and efficiently.
* What doctors wish patients knew about prior authorization | American Medical Association (ama-assn.org)
** OECD iLibrary, 2019. Healthcare Utilization. https://stats.oecd.org/Index.aspx?DataSetCode=HEALTH_PROC
*** Diane Archer, “Medicare Is More Efficient Than Private Insurance,” Health Affairs Blog, September 20, 2011, available at https://www.healthaffairs.org/do/10.1377/hblog20110920.013390/full/