Deborah Williams: Eliminating prior authorizations would be a mistake

A new study projects an 8% cost increase in 2025 for the health insurance you get at work. Voters are looking to leaders to do something, but, tragically, many proposals under consideration would make the problem worse. One policy in Indiana would eliminate prior authorization, which would devastate small employers and working families.

With prior authorization, insurance plans check the site, service and appropriate use of a service. Granted, if you’re a patient, it can seem unnecessary to have your insurance company review your doctor’s recommendation, but prior authorization is a proven way to ensure patients get the best, evidence-based care while keeping premiums low for everyone.

As an economist who spent decades working on health care policy for both government and health care providers, I know that eliminating prior authorization would greatly increase out-of-pocket burden and medical debt for working families and premiums paid by employers by billions of dollars.

This would damage our local economy. New research shows that rising health care prices can lead to job losses and increases in health care prices, lower income per capita, raise the share of individuals who receive unemployment insurance payments and reduce income tax revenue collected by the federal government.

This might happen here in Indiana. Indiana is already the 10th-worst state when it comes to delivering low health care costs and outcomes for its residents. Yet, Indiana legislators strongly considered a bill this year that would eliminate prior authorizations. And although Senate Bill 3 did not move due to fiscal concerns, it could make a comeback next session.

The most common use of prior authorization is called site of service, which evaluates whether a patient needs to have a routine service done at an expensive hospital or at a more convenient, far less costly location. SB 3 would have prohibited site-of-service contracts with the least costly providers, where a flat rate for an MRI might be $700 versus an average $3,000 at another site. Treating a simple Achilles rupture costs $4,000 less in a free-standing surgery center than it does in a hospital.

This bill and similar legislation considered elsewhere would prohibit commonly used prior authorizations on prescriptions as well. Many brand-name drugs have therapeutically equivalent, more affordable generic versions, and prior authorization can promote the prescribing of generic equivalents where available and help protect patients from significantly higher costs.

But it is not just about cost. Low-value care—services that have little to no clinical benefit or where the risk of harm outweighs the potential benefit—is potentially detrimental to patients’ well-being. Nobody wants this. Yet, studies show that in the United States, the number of fatal medical adverse events is estimated to be in the hundreds ofthousands annually.

This is not to criticize physicians. Doctors have significant pressures from poorly designed electronic health records and Medicare billing requirements that reduce the time spent determining the best possible care for patients. And there are options to improve prior authorizations through technology and encourage better partnerships with health insurers.

But let’s not get rid of them altogether. For most illnesses, a wide range of treatments with varying costs and similar effectiveness is available. Prior authorization substantiates the necessity of a service by requiring data from the medical record. This is a good thing, for both the cost of health care and your health. What any real solution requires is for all parties to collaborate on reducing costs and waste to achieve better outcomes.•

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Williams is an economist and health policy consultant who served on the U.S. House Ways and Means Committee staff. She has worked at the American Hospital Association and as an industry policy expert.