Prior Authorization NCPA Position Statement & Information

There are Better Options than Prior Authorization for Cutting Costs in Medicaid

What is Prior Authorization?

Prior Authorization is a requirement that your physician obtain approval from your health plan to prescribe a specific medication for you.  Without this prior approval, your health plan may not provide coverage, or pay, for your medication.

Prior authorization is an extra step that some insurance companies require before they decide if they want to pay for your medicine.  Frequently high-cost medications are put under prior authorization as a way to save money.

Why is it proposed to save money in NC Medicaid?

The Governor’s budget proposes to require prior authorization only for psychiatric medications in the Medicaid program as a way to reduce costs. 

How does Prior Authorization Work?

Frequently generic drugs are cheaper than brand name drugs so some insurance plans require a doctor to seek permission for the more expensive medications, even if he/she feels it’s needed for a patient’s care. 

Some plans require a “fail first” approach, where a patient must try a cheaper drug before a more expensive medication is prescribed. 

After a physician makes an assessment about a patient’s health situation, determines a diagnosis and treatment plan, and studies a patient’s medical history, family history, and current medication regimen, she or he then works to determine the psychiatric medication that might be most helpful for the patient.  Ideally, after the medical work up, the physician writes a prescription meant for immediate use.  These may be atypical antipsychotics, designed for severely mentally ill patients or other medications to treat depression, anxiety and other psychiatric diagnoses.   Prior authorization requires the physician to call and get permission first to prescribe a medication.

Does prior authorization work in reducing costs?

Forcing MDs to choose the cheapest medication for a patient, regardless of its efficacy for the individual will reduce drug costs.  However, the potential for multiple prescriptions (if cheaper drugs don’t work) and appointments could negate any savings – prior authorization for psychiatric prescriptions has great potential as a penny-wise and pound-foolish solution.

While general research has suggested that such managed care techniques can result in significant cost savings with little evidence of unintended financial or clinical consequences, such research does NOT exist for psychiatric care.

In fact, some research is showing that managed care practices such as prior authorization were associated with increased adverse outcomes among patients with mental illness. What kind of adverse outcomes?  Increases in ER visits, psychiatric hospitalizations, homelessness, suicidal ideation or incarceration.  Some argue that the cost for even the more expensive drugs is far lower than a day in a state hospital.

Another problem is that in the state Medicaid program, prescribers have no idea which drugs cost the state more or less money.  There are state and federal “rebate” programs in place, where manufacturers offer money back to the state for certain high-cost drugs.  In some instances in NC, generic medications may actually cost the state more money than the expensive brand name drugs.

How Will Prior Authorization Impact Patient Care?

It increases the burden for the prescribing physician.   Prior authorization requires the MD to call and ask permission first; this often requires long waits on the phone to receive approval.  The time a psychiatrist spends doing this is not compensated by Medicaid or reimbursed to the physician.  It reduces the time available to see patients.  It is also very frustrating for a physician working with a complex patient who has been stabilized on a certain medication to have to jump through hoops to keep that patient on a medication that has successfully managed the illness.  Many physicians will find the effort cost prohibitive and will stop seeing Medicaid patients.

It is frustrating for patients as well.   There is real concern about having to try and fail on a cheaper medication before being prescribed the drug that may work better. It means a patient may be prescribed a drug that may not help the medical condition and/or that may have side effects which keep the patient from taking his medication regularly.

What are better options for curbing costs?

1. Our current public mental health system may have contributed to the increase in medication costs.  For a number of years the use of outpatient therapy, one of the cheapest types of mental health care, was not valued and outpatient care was not as readily available.  The system is losing some of its most experienced therapists and psychiatrists—these are the professionals whose experience and expertise, whose ability to appropriately diagnosis and treat save the system money for the system in the in the long term.  Supporting the use of outpatient care by psychiatrists, psychologists, social workers and other mental health professionals may be a good step to avoiding higher costs down the road.
2. A+KIDS.  Innovative programs have been developed here in NC that are showing savings, yet still focus on patient care.  A+KIDS (Keeping it documented for safety) allows provider choice in the selection of an antipsychotic medication while encouraging appropriate monitoring of potential side effects.  With an initial phased in start date of April 2011, the program has already shown savings in the Medicaid drug claims of more than $5 million.  Now fully implemented, projected savings could equal $9.5 million annually.  This project was designed to provide access to the appropriate medications, not just create administrative barriers to save costs.
3. Consider allowing the specialists to prescribe their specialty’s medications without prior authorization.  Psychiatrists are the most highly trained prescribers in our mental health system, and are a scarce resource.  Yet they prescribe only 20-30% of all psychiatric medications.  Don’t create another disincentive for psychiatrists who want to treat Medicaid patients.