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You have probably seen a commercial for a new prescription drug and thought, “Maybe I should ask my doctor about that.” Or maybe your doctor has already prescribed something new, and you were shocked by the price of it when you got to the pharmacy counter. Prescription drugs are a critical part of healthcare, but the way they are paid for can feel confusing.

And the out-of-pocket costs seem to get higher every year.

If you have ever felt frustrated by the cost of a prescription or confused by the steps required to fill one, you are not alone. Here is how the process works, and what your health insurance provider is doing behind the scenes to make your medications more affordable.

The Prescription Drug Cost Problem

Americans pay more for prescription drugs than anywhere else in the world. In 2024 alone, the United States spent a staggering $805 billion on prescription drugs, according to a report from the American Society of Health-System Pharmacists. That was more than 24 cents of every premium dollar according to America’s Health Insurance Plans, and those costs are only expected to accelerate in 2026— driven by rising prices, including costly new gene and cell therapies, and growing demand for other expensive drugs like GLP-1 weight-loss medications.

Part of what drives these high prices is direct-to-consumer advertising. Drugmakers spend billions on TV and online ads to boost demand for their most expensive products — and those campaigns are even tax deductible in the US, meaning taxpayers subsidize the marketing that arguably drives up prices for patients and families. The price of a drug should reflect how well it works, not how much was spent advertising it.

A fun fact – just the United States and apparently, New Zealand, allow this type of advertising.  It’s supposed to be regulated.  Maybe easier to regulate in New Zealand, where they have a centralized public body that negotiates and controls the price of drugs using evidence-based standards. and a population of slightly more than 5 million. Everywhere else, including in the EU where people live longer than they do in the US, direct-to-consumer TV advertising is not allowed.

The cost of development of a drug is not cheap.  Direct-to-consumer advertising can also speed the return on investment for the drug manufacturer.  This has been especially important with GLP-1’s.

How Your Prescription Benefit Works

Whether you get insurance through your employer, the marketplace, Medicare Advantage, or Medicaid, your health plan includes a pharmacy benefit that determines which drugs are covered, how much you pay, and what steps may be required before a prescription is filled.

Most plans organize drugs into a formulary grouped by tiers. Tier 1 typically includes the lowest-cost options, like generics. Higher tiers include brand-name and specialty medications. The tier your drug falls on directly affects your co-pay at the pharmacy.

Generics are not lesser versions of brand-name drugs. They contain the same active ingredients and go through the same FDA approval process. The only difference is the price. Choosing a generic when one is available is one of the easiest ways to save money on your prescriptions.

How Your Health Care Coverage Protects You

Your health insurance provider uses several common-sense tools to make sure you get the right medication at an affordable price. One is prior authorization — a review step before certain prescriptions are approved. It serves two purposes.

First, it is a safety check. Not every medication is right for every patient. A drug that works well for one person may interact dangerously with another person’s existing medications or conditions. This review confirms a drug is safe and appropriate for your situation.

Second, it identifies more affordable alternatives that work just as well. Older, well-established medications often have years of real-world evidence and deliver the same results at a significantly lower price. Your plan may ask that you try a proven option first — a common practice called step therapy. This is not about limiting your care. It is about connecting you with medications that deliver the best health outcomes at a price that works for your family.

These steps matter more than ever. Drugmakers are setting higher launch prices and sometimes raising those prices multiple times a year, often outpacing inflation. Without formulary management, tiered pricing, and review processes like prior authorization, prescription drugs would be even less affordable for families across the country.

What You Can Do to Save Money

There are simple steps you can take right now to make your prescriptions more affordable.

Ask about generics or biosimilars. A quick conversation with your doctor can move you to a lower tier and save real money.

Use your plan’s preferred pharmacy. Many plans offer preferred networks, including mail-order options, with lower co-pays — especially for 90-day supplies of medications you take regularly.

Review your formulary before open enrollment. Check whether your medications are covered, and on which tier, before choosing or renewing a plan.

Check for savings programs. Many drugmakers offer copay cards or patient assistance programs. Your pharmacist or plan’s customer service line can help.

Talk to your pharmacist. Pharmacists can flag more affordable alternatives, check for interactions, and coordinate with your doctor if a switch makes sense.

The Bottom Line

With drug costs climbing and pharmaceutical companies spending billions to drive demand for their most expensive products, the steps your doctor and your health insurance provider take to support your pharmacy benefit by using evidence-based prescribing guidelines are more important than ever. From formulary design to safety reviews, these common-sense protections exist to support your health and your household budget. That is something worth understanding.

Dr. Andrea Gelzer

Dr. Andrea Gelzer is a physician and recognized industry leader in managed care and clinical innovation. She has served in senior roles at AmeriHealth Caritas, Cigna, and Boston Medical Center HealthNet Plan, and practiced internal medicine for over 12 years.

Healthcare is on everyone’s mind right now. Costs are rising. Prescriptions are expensive. Emergency room bills keep climbing. And if you’re like most Americans, you’ve probably looked at your health insurance company and thought: “these people are the problem.”

I get it. I used to think the same thing.

I spent the early years of my career as a physician, working directly with patients. From that vantage point, health plans looked like obstacles: faceless organizations that existed to deny claims and make my job harder. Every prior authorization felt like a wall between me and my patient.

Then I got my MBA, stepped into the managed care world, and everything I thought I knew changed.

That was more than 30 years ago. I’ve since spent my career at organizations like Horizon and Cambia/Regence, working in every corner of managed care. And I want to let you in on something most people never hear: health plans are one of the most powerful tools we have to make healthcare better and more affordable for ordinary people. The system isn’t perfect, but the mission is real, and it works more often than you’d think.

The Part Nobody Talks About

When people hear “managed care,” they think of red tape, but here’s what’s actually happening behind the scenes.

Health plans negotiate rates with doctors and hospitals so you pay less. When you see an in-network provider, you’re getting care at a discounted rate — and that directly lowers your premiums. It’s not glamorous, but it saves families real money every month.

They coordinate your care. If you see a specialist, your primary care doctor, and a pharmacist, managed care is the connective tissue that helps those providers talk to each other. Your records move between in-network providers quickly and securely, with your consent. Prescriptions get sent directly to your pharmacy. You just show up and pick them up.

They check credentials. Every provider in your network has been vetted: credentialed and accredited, to make sure they can actually do what they say they can do. That’s a layer of protection most patients don’t even realize exists.

And they measure quality. Programs like HEDIS and Star Ratings hold plans accountable for outcomes, not just paperwork. If your plan isn’t delivering, those scores show it.

The Prior Authorization Question

Prior authorization is the process where a health plan reviews a proposed treatment or procedure before it’s performed to confirm it’s medically appropriate. I know. It’s the part that frustrates everyone, doctors included. But let me give you a number: $600 million. That’s how much prior authorization saved in costs during one period I oversaw. And it wasn’t by denying people care they needed. It was by catching care that wasn’t appropriate.

In 2017, studies showed that 11 to 25 percent of medical procedures were deemed clinically inappropriate. That means patients were getting tests, surgeries, and treatments that weren’t helping them, and in some cases, were putting them at risk. Prior authorization is the checkpoint that asks a simple question: Is this the right thing for this patient?

When the answer is yes, it goes through. When it’s not, we find a better path. That process keeps premiums lower for everyone.

What Changed My Mind

When I crossed over from the provider side, I expected to find a bureaucracy. What I found instead was a portfolio of services I never knew existed: care coordination, case management, medication management, grievance and appeals processes that give members a real voice.

Managed care organizations take on financial risk for their members. They receive a fixed fee per person and must make it work. That means they’re incentivized to keep people healthy, not just treat them when they’re sick.

I went from resenting health plans to believing in them, not because someone convinced me with a pitch. It was because I saw the results with my own eyes.

The Real Story

Healthcare is complicated. The debates are loud. And it’s easy to point fingers at insurers when the bills pile up. But if you take one thing from this, let it be this: the people working inside health plans are not the enemy. Most of them are clinicians, care managers, and administrators who wake up every day trying to make the system work better for you.

I’ve been on both sides. And I can tell you, managed care isn’t the problem. It’s one of the best-kept secrets in solving it.

Dr. Richard Popiel

Dr. Richard Popiel is a physician and healthcare executive with more than 30 years of leadership experience in managed care. He has served as Chief Medical Officer at Horizon Blue Cross Blue Shield of New Jersey and Cambia Health Solutions and is co-founder of Xploration Health.

Have you ever had your doctor tell you they need to get prior authorization before you get a test or a special medicine? It can feel annoying, like an extra step.

But here is the good news: this care confirmation process is one of the smartest ways your health plan saves you money and keeps the whole cost of healthcare from getting too high.

Think of prior authorization as a smart shopping tool. It makes sure that every expensive procedure or product is truly needed and is the safest, most cost-effective choice. When health plans stop paying for unnecessary care, that helps keep your monthly premiums and deductibles lower.

Here are 5 specific examples how prior authorization saves money.

1. Stopping the Bill for the Wrong Scan (MRI vs. X-ray)

A doctor might order an expensive scan, like an MRI or CT scan, for a simple problem like back pain. The cost for these tests can be thousands of dollars.

• Prior Authorization: Prior authorization makes sure the doctor has first tried a clinically appropriate and affordable approach, like physical therapy or a basic X-ray, which is often enough.
• The Saving: By catching unnecessary or overused diagnostic imaging, prior authorization programs help reduce massive waste and avoid potential harm, like excessive radiation exposure. Fewer unnecessary scans means lower costs for everyone.

2. Choosing the Right Drug for Cancer or Arthritis

Many new specialty drugs for conditions like cancer or rheumatoid arthritis can cost hundreds of thousands of dollars for just one course of treatment.

• Prior Authorization: Prior authorization ensures the expensive drug is being used for the specific disease it is proven to treat. It also makes sure you are not using an older, more toxic drug if a newer, safer, and maybe even cheaper one is available that works just as well.
• The Saving: This check keeps patients safe and makes sure these huge drug costs are justified. A 2019 study showed that when pharmacists reviewed prior authorization requests for certain high-cost drugs and suggested lower-cost alternatives, this process resulted in an average direct cost saving of over $3,000 per request.

3. Making Sure You Try the Generic First

Why pay full price for a name-brand product when a store-brand or generic version is just as effective and cheaper? The same is true for many medicines.

• Prior Authorization: Prior Authorization is often used as a step-therapy tool. It means the health plan requires the doctor to prescribe the cheaper generic drug first, unless there is a strong, medical reason (like an allergy) to use the more expensive brand-name drug.
• The Saving: This simple step directs money toward generics that are just as effective. Generics on average are 80% to 85% less expensive than their brand-name drug equivalents. Prior authorization helps generate massive savings on prescription costs.

4. Preventing Abuse of Costly Drugs

Some very powerful and expensive medications can be used for both a serious medical condition and a non-covered, cosmetic one.

• Prior Authorization: A drug like Botox (which can cost a lot) might be used to treat severe muscular disorders, or it might be requested to smooth out wrinkles (a cosmetic use that most plans do not cover). Prior authorization ensures the doctor is using the drug for the medical condition.
• The Saving: By preventing your plan from paying for cosmetic or unnecessary uses, prior authorization keeps money focused on serious illness, which helps stabilize your plan’s overall finances.

5. Stopping Unnecessary Surgeries

Certain procedures, especially those done in a hospital setting, may not always be truly necessary to improve health. The government’s Medicare program uses prior authorization for some outpatient procedures.

• Prior Authorization: For certain services like rhinoplasty (nose job) or certain vein ablations (a vein procedure), a prior authorization ensures the procedure is medically necessary and not just for appearance.
• The Saving: By having a medical expert review the request before the hospital books the procedure, prior authorization stops the plan from paying for procedures that will not improve your health, which keeps your health plan focused on value.

Prior authorization is not about bureaucracy; it is about making sure your healthcare dollars are spent on safe, valuable, and affordable care. When costs are controlled for expensive treatments and procedures, it benefits your wallet and the entire healthcare system.

Dr. Andrea Gelzer

Dr. Andrea Gelzer is a physician and recognized industry leader in managed care and clinical innovation. She has served in senior roles at AmeriHealth Caritas, Cigna, and Boston Medical Center HealthNet Plan, and practiced internal medicine for over 12 years.

Prior authorization is the process a health plan uses to confirm that certain treatments, services, or medications are safe, necessary, evidence-based, and appropriate before the plan approves them. The prior auth process can be confusing, especially when a patient doesn’t expect it, and it’s required by the plan for a medication or service that’s been ordered. There are lots of misconceptions about it. Here are some of the most common ones:

Misconception 1: Prior authorization always causes long delays

Many people believe requests drag on for weeks—delaying essential care. However, when prior authorization is required, federal regulations require decisions within 72 hours for urgent cases and seven days for routine requests under Medicare. Private insurers often turn around requests even faster. And many people think prior authorization applies to everything, or the majority of services. However, in reality, it only applies to a single-digit number of claims.

Misconception 2: Prior authorization only benefits insurers

People often think the process is just a cost-saving measure for health plans. In truth, prior authorization benefits the whole health care system. As a byproduct of these benefits, costs are reduced. Additionally, since health plans administer health care benefits for employers, states, and the federal government, it helps keep premiums costs down. Prior authorization also helps patients access equally effective, lower-cost alternatives—like generics—saving money and avoiding unnecessary treatments.

Misconception 3: Non-clinical staff make prior authorization decisions

You may have heard that office or administrative staff oversee prior authorization decisions. That’s certainly not the case. Licensed clinicians—including physicians, nurses, and pharmacists—review prior authorization requests using evidence-based criteria before a denial is made.

Misconception 4: Prior authorization is just red tape

Though it may feel bureaucratic, prior authorization plays a key role in patient safety—preventing duplicative tests, medication errors, and unnecessary procedures.

Misconception 5: AI is making prior authorization denials

Not true. AI is only used to approve – not to deny prior authorization requests. Health plans are increasingly using AI to streamline prior authorization and make approvals faster. AI makes the process quicker and helps health plan staff by flagging requests that may need extra attention and ensuring submissions are complete. A qualified clinician must always make the final decision to deny a prior authorization request.

Prior authorization is a safeguard designed to ensure that when patients need care, they can be sure that the care they receive is safe, evidence-based, high-quality, and affordable. By understanding what it is—and what it isn’t—patients and providers can better navigate the system and make it quicker.

Dr. Andrea Gelzer

Dr. Andrea Gelzer is a physician and recognized industry leader in managed care and clinical innovation. She has served in senior roles at AmeriHealth Caritas, Cigna, and Boston Medical Center HealthNet Plan, and practiced internal medicine for over 12 years.

Have you ever been told your doctor needs to get approval from your insurance before you can get a test, surgery, or prescription filled? That’s called prior authorization. While it can sometimes feel like a big hassle, it’s a vitally important piece of the American healthcare system and it’s actually designed to protect both your health and your wallet.

What is prior authorization?

Prior authorization is a process where your health insurance plan reviews a request from your doctor before agreeing to cover a treatment, service, or medication. It’s only required for a relatively small number of tests and procedures, most often for new, cutting-edge therapies or overprescribed tests, many of which are significantly more expensive than conservative care. It’s required for things like MRIs, surgeries, or high-cost prescriptions. It’s never required for emergencies. Other names for it include prior approval, precertification, or preauthorization.
(Source: Medicare.gov – What’s prior authorization?)

Why is it used?

Health plans use prior authorization to:

• Make sure treatments are medically necessary
• Encourage use of safer or more cost-effective options
• Prevent unnecessary or risky procedures
• Help manage the overall cost of care (which keeps premiums more stable)

(Source: Kaiser Family Foundation – Examining Prior Authorization in Health Insurance 2022)

For example, before covering an expensive drug, your insurer may want to know if you’ve tried a lower-cost option that generally works just as well. If the medication has significant, potentially dangerous side effects, that medication may also require further review.

Does it help patients?

Yes. Here’s how:

• Keeps care safe and appropriate: Your doctor explains why a certain test or treatment is needed, helping catch errors or risks early. This helps avoid unnecessary or potentially harmful procedures.
  (Source: Altarum – Prior Authorization Evidence Review)
• Reduces out-of-pocket costs: Health plans may suggest lower-cost alternatives, such as generics, that are equally effective and help patients save money.

  (Source: Kaiser Family Foundation – Prior Authorization and Consumer Experiences 2023)
• Supports smarter healthcare spending: By avoiding overuse of expensive or unnecessary care, it helps reduce overall healthcare costs which benefits everyone.

  (Source: KFF – Medicare Advantage Prior Authorization Trends 2024)

How Does Prior Authorization Work?

When your doctor recommends a treatment or prescription that requires prior authorization, here’s what typically happens:

1. Your doctor submits the request

   Your doctor’s office sends medical details to your insurance company explaining why the service or medication is needed. This might include documentation of past treatments that didn’t work or potential health risks to you without the request.

   Source: AMA 2024 Prior Authorization Survey (PDF)
2. Review by medical professionals

   The insurance company’s clinical team, usually made up of licensed doctors, nurses, and pharmacists, reviews the request to make sure it meets medical guidelines and plan rules. There are strict turnaround timelines that plans must meet.

   Source: Verywell Health – What Is Prior Authorization?
3. A decision is made and shared

   The health plan sends a decision in writing to both you and your provider. Once again, there are strict rules in place and turnaround times.

   Source: Centers for Medicare & Medicaid Services (CMS)
4. If denied, you can appeal

   If the request is denied, your doctor can submit an appeal with more details or request a peer-to-peer discussion with the insurance reviewer. There are multiple levels of appeal, and even at the appeal level, strict turnaround times must be met. Many denials are later overturned.

   Source: HHS OIG Report on Medicare Advantage Denials (2023)

It is important that we cooperate with the system and use it to your best advantage.

What should I ask my doctor?

Before starting a new treatment or filling a prescription, especially for something costly or specialized, ask your doctor:

• Does this need prior authorization?
• How long will it take to get approved?
• Are there alternative options that might be approved faster?
• Will my insurance likely cover this?

These questions and the answers to them can help you avoid surprises and understand the steps involved in getting care approved.

How soon the office submits the request and what clinical details they submit along with the request are important. Plan medical directors make decisions based on the clinical information in front of them. If your request is not approved and you and your doctor think it should have been, ask your doctor to request a “peer-to-peer” conversation with a plan medical director or help you place a timely appeal.

Dr. Andrea Gelzer

Dr. Andrea Gelzer is a physician and recognized industry leader in managed care and clinical innovation. She has served in senior roles at AmeriHealth Caritas, Cigna, and Boston Medical Center HealthNet Plan, and practiced internal medicine for over 12 years.