Would a pedestrian jaywalk if they knew they were insured against injury? The choice to enroll in a medical insurance plan is a calculation of risk versus premium savings. However, escalating medical costs in the United States have rendered treatment without insurance unattainable, creating a disparity where the burden of healthcare costs disproportionately falls on those prone to illness. At the heart of this complex system lies prior authorization (PA), a pivotal tool shaping access to essential treatments. PA requires patients to seek approval from their health plans before receiving care, a process designed to manage costs and ensure patient safety. But behind the bureaucratic curtain lies a deeper narrative of risk, equity, and the delicate balance between profit and care.

PA serves as a mechanism to manage costs, ensure patient safety, and allocate resources toward critical care. It was introduced to address moral hazard issues, where insurance coverage might incentivize low-value care. PA predominantly affects access to certain treatments, particularly prescription drugs and expensive procedures, by requiring the submission of detailed information and evaluation by insurers and pharmacy benefit managers (PBMs), adding layers of complexity to the healthcare landscape and impacting both providers and patients.

Subsidized healthcare strives to ensure a healthy populace opts into insurance, balancing the need for cost containment with equitable access to care. The unpredictable nature of illness underscores the importance of medical insurance as a rational safeguard against financial jeopardy. Yet, the pursuit of profit may lead providers to withhold costly treatments, prompting a reevaluation of the principles of equity and access to optimal care. In his treatise on the moralities of healthcare access, Allan Gibbard, a pioneer of contemporary medical ethics, notes that equitable access to healthcare is not always synonymous with unlimited access or the most effective treatment for everyone (Gibbard, 1982). PA emerges as a crucial linchpin in this narrative, dictating who gets access to what treatment, and when.

Insurance giants Cigna and Aetna argue that PA is key in the context of moral hazard; without it, patients may seek more services than they actually need because the financial risk lies with the insurance company (Abramovich, n.d.). A working paper published by the University of Chicago titled "Rationing Medicine Through Bureaucracy" found that PA saved $95.88 per beneficiary in drug spending from 2007 to 2015 and reduced spending by about 3% (Brot-Goldberg, Burn, Layton, & Vabson, 2023). However, they were unable to evaluate how these policies affect health outcomes. The blurred line behind PA’s alleged cost savings is that insurance providers are likely to discourage treatments that are too costly. Physicians, afraid of incurring costs that might never be paid, may feel pressured to make insurance-driven decisions, potentially compromising their medical judgment.

In most situations, it would be reasonable to assume that the outcomes that matter most to patients and practitioners are fully aligned—avoiding death and serious adverse clinical events. However, life is seldom ideal, and human complexity rarely bows to equity. A physician’s deviation from the medical oath to act in service of the patient can be understood through the Hawthorne effect, which accounts for psychological phenomena where individuals change their behavior when aware of being observed. Doctors and hospitals might alter treatment decisions, knowing their actions are being scrutinized, potentially prioritizing insurance company interests over patient well-being. Healthcare facilities and providers may focus on "meeting metrics" for successful prior authorizations rather than optimizing patient care due to the high burden of cost and time associated with paperwork related to certification, approval, appeals, and rejections. The awareness of cost containment efforts through prior authorization can lead to a focus on reducing expenses, sometimes at the cost of quality care.

Prior authorization, like any rationing mechanism, is socially useful when the moral hazard for a treatment is high, or when its incremental value is low relative to its incremental cost. However, since its implementation, prior authorization has been extended from treatments meant for a specialized population to commonly prescribed drugs, including simple acne creams like retinol. Of the roughly 35 million PA requests in 2021, two million (6%) were denied. Only 11% of those denied claims were challenged. On average, 80% of those challenges were decided in favor of the beneficiary, allowing care (Sroczynski & Fuglesten Biniek, 2023). Simply rejecting a claim once can eliminate further requests. It can take less than a minute for a PBM or insurance company to deny a prior authorization request, while appealing a denial can take months, and few patients have the fortitude, time, or resources to navigate the labyrinthine process of denials. The process consumes more time for the provider than the insurer. Logistically, it's notable that the PA process has not changed since its inception. Most of the process, including claim submission, review, and follow-ups, still occurs through phones and faxes. Moreover, insurers rarely clearly communicate which treatments require PA and continually change these lists, even going so far as to stipulate conditions under which some medications may or may not be covered. Hence, although PA is excellent at preventing moral hazard, it is also effective at cutting off patient access to potentially life-saving treatments. The facts as reported by studies conducted by KFF and the American Medical Association (AMA) are as follows (Ochieng & Damico, 2023; AMA, 2024):

• 94% of patients report care delays while waiting for insurers to authorize necessary care, and 80% say prior authorization can lead to treatment abandonment.

• 33% of physicians report that prior authorization has led to a serious adverse event, including hospitalization (25%), disability, or even death (9%).

• 43% of physicians report that first-time PA requests are often reviewed by an insurer representative with no medical experience.

• 88% said costly administrative burdens pulled hospital resources from direct patient care. Nearly 35% employed staff members to work exclusively on PA paperwork.

Health insurers insist prior authorizations eliminate waste, save money, and are necessary to ensure patients get the care they need. Yet, an analysis by Crowe consultancy found that prior-authorization denials for hospital inpatients contributed to a 67% jump in the dollar value of insurer coverage denials between January 2021 and August 2022 (Hall, Ruiz, & Szaflarski, 2023). The United States ranks first in healthcare expenditure among developed nations, spending nearly 18% of its GDP on healthcare, yet it ranks 37th globally in healthcare provision. Interestingly, administrative efforts are largely aimed at reducing healthcare utilization and spending instead of providing optimal care. These include policies such as auditing claims for fraud, overbilling, or wasteful care, as well as enforcing compliance with managed care restrictions that limit access to costly providers, services, and drugs. These high administrative costs have become a significant point of political contention among legislators and policymakers and have triggered patient and physician protests over the prioritization of cost control over patient well-being. Earlier this year, a bipartisan group of 233 representatives and 61 senators called on the Centers for Medicare & Medicaid Services to streamline prior authorization processes in Medicare Advantage, Medicaid, and the federally facilitated Marketplace. They proposed requiring real-time electronic decision-making for routinely approved services, responses for emergency procedures within 24 hours, and additional transparency. The American Medical Association has taken a strong stance against prior authorization, with President Jack Resneck Jr. being a vocal proponent, criticizing the process as nightmarish, disorienting, and illogically complex.

In response, this April, UnitedHealthcare Group (UHC), the largest and most profitable insurer, announced that it would cut back on its use of PA, reducing the number of authorizations from 13 to 10 million annually by removing certain procedures and medical devices from its list of services (Wallace, 2023).

However, this decision, especially when announced unprompted, warrants further consideration. In 1896, Vilfredo Pareto, an Italian economist, introduced the Pareto Principle: the idea that 80% of consequences result from 20% of causes. Initially applied to wealth distribution, it is now increasingly relevant in healthcare: 80% of healthcare costs are shouldered by 20% of the populace (Inonde, 2023). In the nuanced landscape of insurance, 80% of payments by health insurance companies requiring prior authorizations are dictated by 20% of the total number of authorizations. Tracking patterns of healthcare spending, it's observed that the bottom 20% of insurers incur less than 1% of medical costs. Hence, UHC’s reduction proclamation may translate to only a nominal 1% impact on overall healthcare provider payments. The Affordable Care Act mandates that insurance companies must spend at least 80-85% of earned premiums (medical loss ratio) on claim management and handling. These ratios must be reported quarterly. Providers like UHC report extremely tight medical loss ratios, never ranging over 85%. It becomes apparent that denials act as financial stabilizers for plan providers, ensuring profitability. Viewed from an ethical standpoint, healthcare insurance markets are complex ecosystems where the well-being of individuals intersects with the economics of healthcare delivery.

Prior authorization is ultimately one of many symptoms that result from a healthcare system dominated by big players—insurance corporations and pharmaceutical companies—while patients suffer and contend with the realities of their worsening conditions. Its implementation raises questions about bureaucratic red tape, barriers to essential care, and the very essence of fairness in healthcare. A comprehensive overhaul of the system is imperative to address the myriad challenges and inequities ingrained in the current healthcare landscape.