Health insurers require prior authorization (PA) for certain healthcare services, treatment plans, prescription drugs, and/or durable medical equipment before a patient can receive them. The determination focuses on whether the service, drug, or product is medically necessary. It does not guarantee that the insurer will cover the cost.
The PA process—and research into its effectiveness—dates back more than 25 years, when states began analyzing how to curtail drug costs within the Medicaid program. The Omnibus Budget Reconciliation Act of 1990 included PA among explicit provisions for limiting drug coverage and cutting costs. The legislation also required the Health and Human Services Secretary to study the impact of PA programs on beneficiary and provider access to prescription drugs as well as on program costs, and to make recommendations for PA reforms if needed.