A Closer Look at a Widely Despised Health Insurance Policy

Dan Gorenstein (DG): Picture this, you’ve got a medical problem. Your doctor proposes a fix.

But first, you’ve got to wait for your insurance company to sign off. 

It’s been days so you give them a call.

Montage: “Thank you for calling the billing department.” And yes, there is elevator music in the background when you’re on hold. “For English, press one.” Then the AI cue comes on and asks where you want to be directed. “Have I answered your question?” No. Sometimes I have to get sent to another cue. “I’m sorry, let me connect you with someone.”

DG: This extra step to get your cancer drug or brain scan approved, it’s known as prior authorization and it angers a lot of patients, doctors, too.

Tom Roberts (TR): It’s minimum 20 minutes of my time sitting on the phone trying to convince someone of something that everybody should know needs to be done.

DG: But insurance companies say these prior approvals help stop unnecessary tests, surgeries that could do more harm than good and rein in the health costs that we all pay.

Today, who this process helps, who it hurts and how it could work a whole lot better.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

*****

DG: Half of all Americans with health insurance say they’ve hit this bump in the road known as prior authorization. 

Most people’s care gets approved. It can be quick. It can take weeks.

Millions of times a year, it’s a flat out no. We’re not paying for that nursing home stay. For that inhaler.

One article I read described prior authorization as “one of the most enduring, infuriating, and effective tools in the United States for managing health care spending.”

Infuriating and effective. Pretty good titles for the two halves of our show today.

We’ll start with a story that captures just how enraging this process can be.

Then, a conversation about why insurers across the country continue to rely on this powerful but deeply flawed tool to keep America’s health costs in check.

Here we go.

DG: The way Kathleen tells it, her husband Paul’s cancer started as the kind of thing you roll your eyes at when you’ve been married to someone for 38 years.

Kathleen: He came down to the kitchen one day. I was sitting at the table and he’s like, my nose hurts here when I press it. So, I said, well, don’t press it. [laughs]

DG: A chuckle turned into a check-up which turned into a biopsy and then, a couple weeks later, the worst kind of phone call there is.

Kathleen: The doctor called him to tell him what it was, and she said, well, we’re going to send you to Boston.

DG: The diagnosis: a very rare, very aggressive cancer inside Paul’s nose and sinuses, right near his brain.

It’s news that the couple has kept close to their chest, which is why they’ve asked us to keep their last name out of this story.

Kathleen, a native of Massachusetts, brought a distinctly New England sensibility to the situation.

Kathleen: It was a task that had to be managed. It sounds distant, but it’s practical.

DG: That practicality helped the soon-to-be 60-year-old see the stakes for what they were.

Kathleen: The cancer moves quickly. So every week that you delay possible treatment is detrimental. 

DG: To prepare for Paul’s first blitz of chemo and radiation, Kathleen got to work. 

She arranged a sitter for their three dogs. Booked a hotel. But that was the easy part.

Kathleen quickly came to realize this was going to be daunting.

She remembers her husband getting fitted for this barbaric looking device, a kind of helmet that would hold him steady as doctors directed radiation beams at the tumor in his head.

Kathleen:  When you lay down, they bolt it into the table so that you don’t move. But then because he had nasal cancer and he had bleeding and postnasal drip, first time they put him in it, he felt like he was drowning. So he got really scared. And seeing him scared was frightening for me. 

DG: By Paul’s first day of treatment at the hospital in Boston, 12 weeks had passed since Kathleen had told her husband not to touch his nose if it hurt.

Biopsies. Referrals. Appointments with specialists. 

As Kathleen said, they were nervous AND ready to actually fight this thing.

Kathleen: They took his blood work, and we were sitting in the waiting room and someone called us and said, “Oh, you can’t start treatment today. You didn’t get a prior authorization yet. You haven’t been approved.” 

Kathleen:  I could feel the blood rushing to my face.

DG: Kathleen imagined the cancer creeping toward Paul’s brain. 

Kathleen: You’re not going to get treatment. That’s what we felt. It just looks like a dead end. But we just got a little adamant that no, we’re not leaving. We’re here.

DG: Kathleen and Paul still had so much they wanted to do. Big things, like travel, and small things. Hikes with their dogs, new recipes to test, Netflix shows to binge.

Kathleen: Just having each other together to plan the next day, the next year, next decade. He just is my soul mate, and I can’t imagine not having every day with him. 

DG: The pragmatic and now indignant New Englander dialed up her insurance company.

After 45 minutes on the phone, she learned that the treatment had been approved, just not everyone had gotten the memo.

Paul was cleared to start. 

DG: Paul wrapped up his grueling seven weeks of chemo and radiation last December.

But the health insurance grind continued for Kathleen. An hour here, 20 minutes there. 

Wading through prior authorization, says Kathleen, is just part of what it means for them to fight cancer.

Kathleen: It’s second nature now. It’s part of our life.

DG: Dealing with prior authorization has become second nature for Tom Roberts, too.

Tom, an oncologist at Massachusetts General Hospital in Boston, is Paul’s cancer doctor.

He treats some of the rarest cancers with some of the priciest drugs around. He gets that insurers have got to draw the line somewhere.

TR: There are conversations that you can have about the nuances about, you know, are we being good stewards of these very expensive resources in our health care system? I  think there are situations where it’s appropriate.

DG: But Tom takes issue with two big things about the way that insurers manage those precious health care dollars.

First, it often feels, to Tom, like the companies have no genuine interest in having a nuanced debate.

When he gets their staff on the phone, Tom says, sometimes they can’t even pronounce the names of the drugs that they refuse to cover.

Second, and this is what really ticks Tom off, insurers sometimes block care that’s both critical and, in his view, uncontroversial.

TR: Trying to sort of plead my case for something that is, you know, commonly accepted practice, is maddening.

DG: Maddening. That’s the way both Tom and Kathleen describe the latest insurance roadblock that they ran into this past summer.

Several quiet months after Paul’s first round of chemo and radiation, some bad news arrived.

DG: A routine procedure to help clear scar tissue out of Paul’s nose had turned up some worrying cells. 

An MRI confirmed it: cancer, again.

But was it contained to Paul’s sinuses? Or was it spreading to other parts of his body, his neck, his lungs?

To know for sure, Tom told the couple, we need another scan, a PET scan, and we need it now.

TR:  If you don’t know where the cancer is, you can’t treat it. If the cancer was back only in his nose or only one part of his nose, we treat that very differently than if it’s back in multiple parts of his body 

DG: Once Tom had this map of where the cancer was, his team could finalize a game plan.

And the sooner he could do that, the sooner he could try to stop this thing.

The insurance company disagreed, said they needed more proof that this step, which can cost a few thousand dollars, was clinically necessary.

TR: For an insurance company to say that these can’t be done or shouldn’t be done. Like, that’s crazy to me.

DG: Tom knew that a battle over this approval could delay the start of Paul’s treatment by days or even weeks and a lot could happen during that time.

TR: One of the challenges in managing these cancers is if things grow a millimeter or two you can lose your vision. You can lose the ability to move one of your eyes. 

DG: Desperate to speed up the approval, Tom fired off a strongly worded letter to the insurer. 

Kathleen once again called the company and the third party that manages their prior authorization requests.

Kathleen: The representative was very uncaring, short with words, almost rude.

DG: Kathleen tried to explain the urgency.

Kathleen: And they like clicking on their thing. Nope. Sorry. You’ll have to wait the typical 7 to 10 days. I was like, but we have an appointment at the end of this week. 

Kathleen: They don’t really care. They just are processing paperwork that comes in one end and goes out the other.

DG: Kathleen and Paul decided the PET scan was too important to wait.

They went ahead with it and hoped their insurer would come around to pick up the bill later. 

Kathleen knows she’s lucky that she could afford to take that risk and that they’re benefitting from so much of what modern medicine has to offer.

Kathleen:  Both of us feel he’s gotten very good care down in Boston. And Paul always says he feels very blessed to have the insurance. 

DG: But Kathleen also feels like they pay a lot of money for that coverage. They max out their $3300 deductible every year. And still, it’s a battle.

Kathleen: In order to use insurance, you just have to get through the hurdles and the obstacles. 

But I do wish working with insurance didn’t eat up so much of our free time.

DG: Because why? What could you do instead?

Kathleen: Be together. Enjoy life.

DG: The PET scan did end up returning crucial and devastating information.

Paul’s cancer had spread inside his head and all the way down to his liver.

Kathleen finally did hear back from the insurance company. They had agreed to pay the bill.

DG: When we come back, Kathleen’s saga in context.

And one expert explains why prior authorization is one of the best ways to cut costs, even with all of its flaws.

BREAK

DG: Welcome back for the second half of our show, we’re joined by Aaron Schwartz, a physician and health policy researcher at the University of Pennsylvania. Hey Aaron, thanks for being here.

Aaron Schwartz (AS):  Thank you for the invitation. It’s great to be here. 

DG: So, look, we heard before the break about one family’s pretty infuriating experience with prior authorization, but it is of course just one family story. What we’re hoping to do with you, Aaron, here in this interview, is really dig into the data.

And I’d like to start big picture. How widely is this tool used by America’s health insurers? 

AS:  So the data is pretty clear on this point that prior authorization is very widely used. The exceptions tend to be in emergency care and unplanned hospitalizations but when it comes to drugs, physician services, planned hospitalizations, planned admissions to nursing facilities, prior authorization is a big thing and a big thing that tends to be growing.

DG:  One of the biggest benefits in theory of prior authorization is that it reins this runaway spending on health care that keeps the cost that we all pay down. Aaron, do we know how much money the tool actually saves?

AS: [Deep breath]  Hmm. 

DG: Why the big sigh?

AS: It’s a tough, very tough question. This is what keeps me up at night in, in terms of trying to think of how to design these research studies. 

So we know that prior authorization reduces people’s use of care. And in some studies that’s by as much as 25%, but it’s not so simple. So let’s say you’re interested in how much money is saved by a restriction on a particular scan. You have to think, okay, what other services might a person have gotten with that scan? So that’s additional savings that you should try to count. And then on the other side of the ledger, you have to count the administrative costs that everyone goes through in this prior authorization system. So my view is that we just haven’t done a complete accounting of the savings and cost of prior authorization. I know it’s not satisfying, but I think that’s the truth of where the research stands right now.

DG: All those caveats aside, Aaron said one of the most rigorous attempts to answer this question looked at what Medicare spends on some prescription drugs.

The researchers found that prior authorization cut that spending by almost 100 dollars per person per year.

With tens of millions of people on Medicare, that’s a lot of cash.

DG: Aaron, here’s a simple question. It might be too simple. Are all these extra prior authorization hoops ultimately helping or hurting patients?

AS: So unfortunately, when it comes to prior authorization, the questions that we most want to know the answers to are the ones where we have the least clarity.

DG: Of course.

AS:   There are both signals of potential benefits and potential harms here. On the plus side, for example, we’ve got several studies that have shown that these kind of restrictions can push people away from very expensive medications towards cheaper alternatives that are similarly effective. So similar care, lower cost. So that would be good. But on the other hand researchers have found that adding prior approvals to people’s cancer care for example can cause them to delay care or even stop getting that care. But I think the truth is we don’t really know the balance of these harms and benefits. 

DG: And what about this, this phrase that sometimes people use when talking about prior authorization: “time toxicity”? We heard in Kathleen’s story that they are spending an inordinate amount of time going through this morass. Intuitively, that sounds like this is bad for Paul and Kathleen.

AS: I agree.  Administrative burden or ordeals are hard to defend in pretty much any well functioning system. Willingness to wait on the phone. Willingness to spend time writing letters, calling people should not be the determinative factor of who’s getting care. So this is a symptom of a system that could be better. Whether or not the coverage rules are ultimately good, they should be enforced in a way that is efficient. 

DG: I’m curious, Aaron, in recent months, some insurance companies may be acknowledging they’ve got a ‘time toxicity’ problem. They’re saying they’ll take steps to reduce the burden, but they’ve made similar promises before.

What’s a concrete example of something that if you saw insurers doing here, you’d know they really meant business — that they’re serious about reforming this policy?

AS: I think that an important first step is checking that the coverage rules are based on good science. So let me give you an example of this.

So the hemoglobin A1C test is a lab test that is very useful for diagnosing diabetes and tracking how well a diabetic patient’s blood sugar is controlled. This marker was discovered in 1968. It was only approved as a lab test to diagnose diabetes by Medicare in 2024. 

It was very surprising for me to learn in one of my studies that one of the most denied services was the hemoglobin A1C test, which is no one’s idea of a particularly wasteful use of health care resources. But I think what happens is these coverage rules can take hold when a service is new and there’s more skepticism about it being used and it’s more expensive, and then they just stick around for a while and eventually you have a system that contains a lot of restrictions that don’t make sense anymore.

DG: Thanks for that example, Aaron. So it sounds like you believe there’s a lot of tests and other things restricted for silly, outdated reasons.

But there’s also, I’m guessing, a lot of gray drugs or tests or procedures where there really isn’t great evidence about exactly who would benefit, whether they are worth the hundreds or thousands of dollars that they cost.

If you had to ballpark it, Aaron, how much of the stuff being done right now in medicine falls into that gray area?

AS:  I can’t give you a number, but I can say the longer I practice medicine, the larger I think the number is. Our health care system has great incentives in place for developing new therapies. If you make a new drug, you can become very rich. The incentives in place for figuring out how to use existing medications, hospitalizations, surgeries, you know, using existing tools of the health care system in a better way are not nearly as strong. So I think we, you know, we could be doing better as a system to, to support that kind of work.

DG: Aaron added that the health care system, and insurers in particular, could also do more to help researchers study prior authorization and how to improve it.

For starters, more transparency. What kinds of care do they restrict? For who? How often?

DG: I’m just, this is a personal question for a quick second. I’m really curious. Anytime I hear a story like Kathleen’s it’s pretty easy for my blood to start to boil and just kind of get pissed off. On a personal level, like what’s driving you, dude, to study this? 

AS: Well, I think you said it right in saying this is a really big deal, and it’s a big deal to know whether it’s working or not. This is a very emotional issue for people. There are no higher stakes in health care than the possibility that a patient who could benefit from medical treatment is not getting it. So it’s really important that we understand what’s going on.

AS: And it is also the case that every time I read a news story about an underfunded school, I think about our healthcare system. You know, I like to say that every problem in the United States is a health care spending problem, because we spend so much money on health care. Much of that spending is hidden in ways that don’t look like healthcare spending for people, because it comes out of their wages, it comes out of their taxes. But at the end of the day, these are all real dollars that could be spent to make Americans lives better. And getting our health care system as efficient as possible would be transformational.

DG: Do you feel like prior authorization is the best tool for reining in spending?

AS:  So if you were to imagine a system that nudge doctors to provide cost-effective care, what are the characteristics of that system you would imagine? One is that this process would happen before patients receive services. You’d wanna do it ahead of time, right? You would also want a system that is clinically nuanced, so the coverage rules are specific to what kind of service a patient needs. And you’d want a system that probably isn’t based just on a person’s willingness to pay. And prior authorization has all of those characteristics and yet it is widely disliked in the healthcare system.

DG: Reviled, right?

AS: Yeah, I think it is definitely the case that people who have felt burned by this system feel that very strongly. So this leaves me uncertain is where I’m at to be honest. I think it’s something we need to study intensely to understand better because I think the potential for upside exists and the potential for abuses clearly exist also. And so we need to understand what’s going on and how to optimize it.

DG: I gotta ask you here, Aaron, if not this, then what? If not prior authorization, what are the other options that insurers have to help keep the costs that we all pay down? 

AS: So let’s think about alternatives. We have patient cost sharing — higher co-pays, higher deductibles. You have narrow networks. So you might get to see a specialist but not as many are available. You might have to wait there. You have incentives targeted at providers helping them share in savings when medical spending goes down. None of these tools is perfect. So, I don’t see a silver bullet here exactly. But I do think it’s important to keep in mind that because prior authorization does reduce health care spending, if it’s removed, it’s either going to lead to pinching of our budgets in different ways, or they’re going to be other types of restrictions

DG: But what do you, at the end of the day, Aaron, tell patients like Kathleen and docs who are spending so much time and energy pushing, fighting, trying to wade through all of these hurdles just to stay healthy and to do their jobs. Is this really the best that we can do? 

AS: It can’t be. It’s a failure. We should view terrible administrative burdens as similar to avoidable complications from a medical procedure. They can hurt just as much. So I do believe that whatever policy approach we embrace when it comes to trying to discourage wasteful health care use we track these kinds of terrible events and do what we can to make sure they don’t happen.

DG:  Aaron, thanks so much for taking the time to talk to us on Tradeoffs.

AS: It was a pleasure to be here. 

DG: As for Kathleen and Paul, their next round of cancer treatment started this week.

But even in the midst of our interview, Kathleen was still waiting to hear if their insurance would cover all of Paul’s drugs.

Kathleen: I still have not gotten through to a nurse or someone who processes the prior authorizations and it is now after 2 p.m.

DG: She went out for a walk with Paul and the dogs after we spoke, but Kathleen found it hard to be in the moment.

Because she still had one eye on her phone.

I’m Dan Gorenstein. This is Tradeoffs.