The Paper Labyrinth: How Prior Authorization Broke American Healthcare and the Fight to Fix It

Introduction: A Kafkaesque Ordeal

The experience was, in the words of the American Medical Association’s president, “Kafkaesque”.¹

Dr. Jack Resneck Jr., a San Francisco dermatologist, was treating a patient with severe, head-to-toe eczema so debilitating it prevented him from sleeping or working.

Dr. Resneck prescribed a targeted biologic medication that proved “truly transformational and life changing,” allowing the man to reclaim his life.¹

But several months into this successful treatment, the patient was abruptly unable to get his prescription refilled.

The pharmacy informed him that his health insurance plan now required prior authorization.

Dr. Resneck diligently completed the paperwork, detailing the patient’s remarkable improvement, and faxed it to the insurer.

The request was rejected.

The reason provided was both horrifying and absurd: the patient no longer met the severity criteria for the medication.

His skin was not covered with enough eczema, he was not missing enough sleep, and he was not itching enough to qualify for the very drug that had alleviated those symptoms.¹

The insurer’s implicit demand was that the patient stop the effective treatment, allow his condition to flare up to its previous agonizing state, and only then reapply for the medication.

It was a logic so disorientingly and illogically complex, it felt like a nightmare.¹

After more than 20 additional phone calls, Dr. Resneck finally prevailed, but the ordeal exposed a fundamental rot in the system.

This is not an isolated incident or a rare administrative hiccup.

It is a defining feature of modern American healthcare.

Dr. Resneck’s patient is one of millions trapped in the paper labyrinth of prior authorization, a process that has evolved from a niche cost-control tool into a systemic crisis.

The scale of this crisis is staggering.

Roughly half of all insured adults in the United States (51%) report that they or their provider have been required to get prior authorization in the past two years.²

The consensus among those on the front lines is overwhelming: more than nine in ten physicians (93%) report that prior authorization delays access to necessary care, and 94% state that it has a negative impact on patient clinical outcomes.³

This sentiment has breached the walls of the clinic and entered the public consciousness; a significant majority of Americans (73%), cutting across all political parties and income levels, now view insurance-related care delays and denials as a “major problem”.²

The logic that ensnared Dr. Resneck’s patient reveals a foundational design flaw in many prior authorization systems.

They are often built on a set of static, backward-looking criteria that are incapable of accounting for the dynamic nature of successful medical treatment.

The insurer’s algorithm or checklist evaluated the patient’s condition as it was after the medication had worked, ignoring the causal relationship between the treatment and the improvement.

This creates a perverse and dangerous incentive structure, a clinical catch-22 where, to prove the ongoing need for a therapy, a patient must first endure the harm of its absence.

This is not a bug in the system; it is a feature of a bureaucratic apparatus that prioritizes rigid, easily automated rules over clinical context and common sense.

Prior authorization, once a tool of managed care, has morphed into a labyrinth that actively harms patients, burns out physicians, and generates staggering economic waste.

This report will deconstruct this broken system, critically examine the fraught battle for reform, and chart a course toward a more rational and humane future.

Chapter 1: The Architecture of the Labyrinth: A History of Good Intentions

The sprawling, bureaucratic maze of modern prior authorization was not built overnight.

Its foundations were laid over decades, with each new layer constructed on a platform of seemingly good intentions: controlling spiraling costs and ensuring medical necessity.

Yet, this history is also a story of a gradual, inexorable shift in power, moving clinical authority from the physician’s office to the insurer’s back office.

The Conceptual Forerunner (1950s-1970s)

The conceptual seed of prior authorization was planted in the fertile ground of post-World War II America, where the expansion of employer-sponsored health insurance led to rising healthcare costs.

In response, commercial insurers, led by regional Blue Cross plans, began to implement “utilization review” programs.⁹

These early initiatives were primarily focused on scrutinizing hospital admissions and lengths of stay.

By the early 1960s, more than 60 Blue Cross plans were reviewing claims for “medical necessity” and often required physicians to certify the need for a patient’s continued hospitalization after a set number of days.⁹

While limited in scope, this was a revolutionary step.

For the first time, the idea that a third-party payer could insist on granting approval

before or during the delivery of care was introduced into the American healthcare system, establishing the conceptual forerunner of modern prior authorization.⁹

The Catalyst for Managed Care (1973)

The movement toward payer-driven oversight was cemented into federal policy with the passage of the Health Maintenance Organization (HMO) Act of 1973.⁹

The act offered federal grants and, crucially, required large employers that provided insurance to offer their workers an HMO plan as an option.

The statute’s explicit emphasis on cost containment and “gatekeeping”—where a primary care physician controls access to specialists and other services—normalized a host of utilization management techniques.

Practices like pre-admission certification for hospital stays and mandates for second opinions became commonplace, evolving directly into the formal prior authorization requirements that define the system today.⁹

The Mainstream Explosion (1980s-1990s)

If the HMO Act built the engine for managed care, the 1980s and 1990s provided the fuel.

As HMO enrollment surged, topping 50 million members by the mid-1990s, payers aggressively expanded the scope of prior authorization far beyond hospital stays.⁹

Suddenly, a vast array of common medical services fell under scrutiny.

Ordering an advanced imaging scan like an MRI, scheduling an elective surgery, or prescribing the newest brand-name drugs now required a physician to first secure a payer’s green light.⁹

This era also saw the birth of an entirely new cottage industry: third-party “utilization-management” vendors sprang up to process the deluge of authorization requests on behalf of insurers.⁹

By the end of the 1990s, the transformation was nearly complete.

The practice of medicine had been fundamentally altered; few physicians could provide what they deemed to be the best care for their patients without first navigating a complex approval process dictated by the insurance plan.

The Digital-Fax Paradox (2000s-2020s)

The final stage in the construction of the labyrinth is perhaps the most telling.

The 21st century brought a digital revolution to healthcare, spurred by the HITECH Act of 2009, which led to the near-universal adoption of Electronic Health Records (EHRs).⁹

Clinical medicine became faster, more connected, and more data-rich.

Yet, the administrative process of prior authorization remained stubbornly, almost defiantly, analog.

This created the “Digital-Fax Paradox.” While physicians documented patient encounters in sophisticated EHRs, they were forced to exit this digital ecosystem to handle PAs through a patchwork of antiquated methods.

As recently as 2022, data from the Council for Affordable Quality Healthcare (CAQH) showed that only about 28% of medical prior authorizations moved through the industry-standard electronic transaction.⁹

The vast majority still relied on a frustrating mix of phone calls, paper forms sent via fax machine—a relic of a bygone era—and a dizzying array of proprietary, non-standardized payer web portals.⁹

This technological disconnect was not accidental; it created immense friction, turning the administrative process itself into a formidable barrier to care and a significant source of the burnout and frustration that plague the system today.

The historical arc of prior authorization is not simply the story of a flawed policy.

It is the story of a fundamental transfer of power.

What began as a collaborative “review” of a physician’s plan to manage hospital costs evolved into a unilateral “authorization” process where the payer holds ultimate veto power over clinical decisions.

The deliberate inefficiency of the Digital-Fax Paradox was the capstone on this structure, ensuring that even in a digital age, the gatekeepers retained a powerful, non-clinical tool for controlling utilization: administrative friction.

Table 1: The Evolution of Prior Authorization

Era	Key Development	Dominant Practice	Systemic Impact
1950s–1970s	Utilization Review Takes Root	Review of hospital admissions and lengths of stay for “medical necessity.”	The concept of payer approval before or during care delivery is introduced.
1973	The HMO Act Accelerates Managed Care	Pre-admission certification and second-opinion mandates become widespread.	The “gatekeeper” model is normalized, formalizing the payer’s role in directing care pathways.
1980s–1990s	Prior Authorization Goes Mainstream	Scrutiny expands to advanced imaging, elective surgeries, and new brand-name drugs.	Prior authorization becomes a ubiquitous requirement, and a third-party utilization management industry emerges.
2000s–2020s	The Digital-Fax Era	The majority of requests are handled via manual faxes, phone calls, and non-standard web portals, despite EHR adoption.	The “Digital-Fax Paradox” creates a technological bottleneck, and administrative burden explodes.

Source: ⁹

Chapter 2: Casualties of the System: The Dual Crises of Patient Harm and Physician Burnout

The labyrinth of prior authorization is not a benign bureaucratic structure; it is an active agent of harm, inflicting a heavy toll on the two most critical actors in the healthcare system: patients and physicians.

For patients, the process creates a perilous journey marked by delays, abandonment of care, and, too often, devastating health consequences.

For physicians, it is a relentless engine of administrative burden and professional burnout.

These are not two separate crises but two sides of the same coin, locked in a destructive feedback loop that degrades the quality of care and threatens the stability of the healthcare workforce.

The Patient’s Perilous Journey

For patients navigating the healthcare system, delay is now the default experience.

An overwhelming 93% of physicians report that the prior authorization process causes delays in patient care.⁴

These are not minor inconveniences.

A survey by DrFirst found that more than a quarter of patients (27%) waited anywhere from two weeks to over a month for a PA decision.¹²

This waiting period is fraught with anxiety and tangible harm.

In that same survey, 36% of patients reported that their health condition actively worsened while they were stuck in PA limbo.¹²

This state of prolonged uncertainty and administrative friction often leads to a critical system failure: treatment abandonment.

Faced with confusing paperwork, endless phone calls, and unclear timelines, many patients simply give up.

According to physicians, 82% report that the PA process can lead to patients abandoning their recommended course of treatment altogether.¹

A prescription that is never filled or a procedure that is never scheduled represents a complete breakdown of the care continuum, where a system designed to manage care instead prevents it entirely.

For a significant number of patients, the consequences are far more severe.

The American Medical Association’s (AMA) extensive annual surveys have consistently documented a pattern of serious adverse events directly attributable to PA delays and denials.

Nearly one-third of physicians report that prior authorization has led to a serious adverse event for a patient in their care.¹

These events span a horrifying spectrum:

• Hospitalization: 23% to 25% of physicians report that a PA issue has resulted in a patient’s hospitalization.¹⁴
• Life-Threatening Events: 18% to 19% of physicians have seen a PA delay lead to a life-threatening event or one that required intervention to prevent permanent impairment.¹⁴
• Disability and Death: In the most tragic cases, 8% of physicians report that prior authorization has led to a patient’s disability, permanent bodily damage, a congenital anomaly, or death.¹

These are not abstract statistics.

They represent delayed cancer treatments where each week of waiting is associated with an increased risk of death ¹⁸, or patients with heart conditions who suffer strokes because they could not get timely access to novel anticoagulants.¹⁸

The patient experience is one of frustration and stress, with 58% finding the process challenging and 17% describing it as “extremely stressful”.¹²

They are often forced to become their own case managers, making countless calls to their doctor’s office (52%), scheduling additional appointments (29%), or being forced to first try and fail on a less effective medication—a process known as “step therapy”—before their doctor’s original recommendation is even considered.¹²

The Provider’s Breaking Point

While patients bear the physical and emotional costs of the labyrinth, physicians and their staff are crushed by its administrative weight.

The time and resources diverted from patient care to PA paperwork are staggering.

On average, a physician’s practice completes 39 to 43 prior authorization requests per physician, per week.⁵

This workload consumes an average of 12 to 13 hours of physician and staff time weekly—the equivalent of nearly two full business days stolen from clinical care every single week.⁵

This “time tax” translates into a significant financial drain.

To manage the workload, 40% of physician practices have been forced to hire staff who work exclusively on completing prior authorizations.⁴

This represents a massive, unfunded mandate placed on providers.

One study by Health Affairs estimated that the cost of these interactions with health plans amounts to an average of $68,274 per physician per year, contributing to a nationwide total between $23 billion and $31 billion annually.²⁰

This relentless combination of administrative burden and financial strain has become a primary driver of the national crisis of physician burnout.

An overwhelming majority of physicians—between 89% and 95%—report that prior authorization somewhat or significantly contributes to their burnout.⁵

This is more than just frustration; it is a key factor pushing experienced clinicians out of the profession, threatening the long-term stability of the healthcare workforce.

Beyond the practical burdens, the PA process represents a profound professional and ethical insult.

It forces highly trained specialists to spend hours on the phone justifying their evidence-based clinical decisions to insurance company representatives who may be nurses or physicians from entirely different specialties, lacking the relevant expertise to make an informed judgment.²²

This dynamic erodes the physician’s clinical authority, undermines the trust inherent in the patient-physician relationship, and reduces medical professionals to the role of administrative clerks and supplicants.

The parallel crises of patient harm and physician burnout are inextricably linked in a reinforcing negative feedback loop.

A PA delay causes a patient’s health to worsen, which in turn increases their anxiety.

This generates more urgent phone calls and administrative tasks for the physician’s office, adding to their workload and fueling burnout.

A burned-out, over-burdened practice is more susceptible to making an error or being unable to pursue an appeal with the necessary vigor, increasing the likelihood of further delays.

This, in turn, elevates the risk that the patient will abandon treatment or suffer a serious adverse event.

That adverse event then requires even more intensive and costly medical intervention, restarting the entire cycle with even higher stakes.

Breaking this destructive loop is not just a patient safety issue or a provider wellness issue; it is a single, critical imperative for the health of the entire system.

Table 2: The Quantified Burden of Prior Authorization

Impact on Patients	Impact on Physicians & Practices
Care Delays: 93% of physicians report PA delays access to care. 4	Administrative Time: Practices spend an average of 12-13 hours per physician per week on PA. 5
Worsening Condition: 36% of patients report their health condition worsened while waiting for approval. 12	Financial Cost: The process costs practices up to $68,274 per physician annually. 20
Treatment Abandonment: 82% of physicians report PA can lead patients to abandon treatment. 1	Dedicated Staff: 40% of physician practices employ staff who work exclusively on PA. 4
Serious Adverse Events: 33% of physicians report PA has led to a serious adverse event for a patient. 14	Physician Burnout: 89-95% of physicians report PA significantly contributes to burnout. 5
Hospitalization: 23-25% of physicians report PA has led to a patient’s hospitalization. 14	Negative Patient Outcomes: 94% of physicians state PA has a negative impact on clinical outcomes. 3
Public Perception: 73% of the public considers insurance delays and denials a “major problem.” 2	Increased Denials: 75% of physicians report that PA denials have increased over the past five years. 11

Sources: ¹

Chapter 3: Searching for an Exit: The Promise and Peril of Reform

As the prior authorization crisis has intensified, a consensus has emerged that the status quo is unsustainable.

In response, stakeholders have championed several major reform strategies, each promising a pathway out of the labyrinth.

The two most prominent are the technological solution of electronic prior authorization (ePA) and the behavioral incentive of “gold carding.” Yet, a critical examination of their real-world implementation reveals a recurring theme: promising concepts that have been largely neutralized by the unyielding realities of a system built on misaligned financial incentives.

The Digital Pathway: Electronic Prior Authorization (ePA)

The promise of electronic prior authorization is undeniably compelling.

The vision is to replace the antiquated world of faxes and phone calls with a streamlined, digital workflow fully integrated into a provider’s EHR.²³

In this ideal state, the system would notify a prescriber of a PA requirement in real time, at the point of care, while the patient is still in the office.

The necessary clinical data would be pulled automatically, the request submitted electronically, and an approval returned in seconds, not days.²⁴

This would, in theory, dramatically improve workflow efficiency, reduce administrative burden, enhance accuracy, and, most importantly, get patients their treatments faster.²⁴

However, the reality of ePA has fallen far short of this vision.

A large, nationwide survey of providers published in the Journal of Managed Care & Specialty Pharmacy delivered a sobering verdict: providers who used ePA software did not report spending less time on the submission process or experiencing fewer challenges than their non-ePA-using counterparts.²⁹

In a counterintuitive twist, ePA users actually reported spending

more time on PA submissions and having more difficulty identifying complex requirements like step therapy.²⁹

The reasons for this disconnect lie in a fundamental failure of integration.

For many practices, the ePA process is not a seamless part of the clinical workflow.

The alert that a PA is needed often comes not at the point of prescribing, but only after the patient has gone to the pharmacy and had their claim rejected.²⁵

This shatters the “real-time” promise and throws the process back into a reactive, time-consuming scramble.

Furthermore, the dream of a fully electronic system remains elusive.

A majority of providers (58.5%) report that manual PA processing—via phone, fax, or portal—is

still often required, even when they have ePA systems.²⁹

Technology applied to a fundamentally flawed process has, in many cases, simply automated the frustration without fixing the underlying problems of opaque criteria and excessive documentation demands.

There is, however, one glimmer of hope in the data: while ePA does not reduce the provider’s workload, it is associated with a shorter time to receive a final

decision from the payer.²⁹

This suggests the technology is creating some efficiency on the health plan’s side of the transaction, even if those benefits are not yet being felt in the clinic.

The Golden Ticket: The Rise and Fall of “Gold Carding”

Another widely touted reform is “gold carding,” a behavioral approach designed to reward high-performing clinicians.

The concept is straightforward: providers who consistently demonstrate adherence to evidence-based guidelines and achieve a high approval rate on their PA requests are granted a “gold card”—an exemption from future PA requirements for specific services for a set period.³¹

The state of Texas became the national test case for this idea when it passed a groundbreaking gold card law in 2021.³³

The legislation was celebrated by physician advocates as a “momentous achievement” that would slash administrative burdens and reduce care delays.³⁵

The results, however, have been deeply underwhelming.

According to testimony from the Texas Department of Insurance, a staggering

97% of the state’s physicians and health professionals failed to qualify for a single exemption.

Only 3% received a gold Card.³³

The law’s failure was engineered in its implementation.

The legislation allowed health insurers to set the eligibility criteria, and they created a bar that was exceedingly difficult for most physicians to clear.

For example, under one major insurer’s rules, a physician had to have at least a 90% approval rate on a minimum of five requests for a single, specific healthcare service within a six-month evaluation period to qualify for an exemption for that service alone.³⁴

For a physician who performs many different procedures but fewer than five of any single type in six months, qualifying is nearly impossible.

Payers also undermined the law’s intent by introducing new, equally burdensome programs like “advance notification” pilots, effectively replacing one form of red tape with another.³⁵

The Texas experience has revealed deeper, systemic critiques of the gold carding concept.

Health policy experts like Dr. Ravi Gupta of Johns Hopkins University have raised significant equity concerns, noting that physicians in large, well-resourced hospital systems with dedicated administrative staff are far more likely to successfully navigate the process and earn exemptions than their counterparts in smaller, independent practices.³⁷

This creates a two-tiered system that could exacerbate health disparities.

Ultimately, critics argue, gold carding is merely a “workaround, not a fix”.³⁷

It rewards clinicians for being good at jumping through the hoops of a broken system, rather than fundamentally repairing the system itself.

The struggles of both ePA and gold carding point to a crucial conclusion.

Technological and behavioral fixes, however promising in theory, are largely insufficient to solve a problem that is rooted in a fundamental conflict of financial incentives.

As long as payers benefit from the friction that PA creates, they will have little motivation to adopt technologies that eliminate it or to set behavioral rules that allow for widespread exemptions.

This realization has shifted the focus of the reform movement toward a more powerful tool: the force of law.

Table 3: A Comparative Analysis of Major Reform Strategies

Reform Strategy	Core Concept	Promised Benefits	Documented Challenges & Critiques
Electronic Prior Authorization (ePA)	Digital submission and processing of PA requests, often integrated with EHRs.	Faster decisions, reduced provider burden, improved accuracy, fewer errors.	Does not reduce provider time spent on PA; workflow disconnects (not real-time); manual processes still often required; more difficulty with complex requirements.
“Gold Carding”	Exemption from PA requirements for providers with a high historical approval rate.	Reduced PA volume for high-performing clinicians, less administrative burden, faster care for their patients.	Extremely low qualification rates (e.g., 3% in Texas); payer-defined rules create unattainable thresholds; potential to worsen health inequities; a “workaround” that doesn’t fix the core problem.

Sources: ²⁴

Chapter 4: The Gatekeepers’ Defense: The Payer Perspective and the Economics of Delay

To understand the intractability of the prior authorization problem, one must engage with the perspective of its architects and defenders: the health insurance companies.

From their vantage point, PA is not a bureaucratic weapon but an essential tool for fiscal prudence and quality control.

However, this defense rests on a narrow, siloed view of cost that ignores the vast economic and clinical burdens the system externalizes onto everyone else.

This disconnect, coupled with a history of broken promises, has created a deep well of skepticism that voluntary reforms can ever succeed.

The Stated Rationale

Health plans and pharmacy benefit managers (PBMs) publicly defend prior authorization as a vital process for achieving two primary goals: ensuring quality of care and controlling costs.

They position it as a necessary “check and balance” to confirm that a proposed service, drug, or piece of equipment is medically necessary, safe, and clinically appropriate before it is delivered.³⁸

In their view, PA helps guide physicians toward the most effective, evidence-based treatments and protects patients from undergoing procedures that are unnecessary or potentially harmful.⁴¹

The second pillar of their defense is cost containment.

Payers argue that PA is a crucial guardrail against fraud, waste, and abuse in a system where fee-for-service payment models can incentivize overutilization.⁴²

They contend that without this review process, spending on expensive new technologies, specialty drugs, and high-volume procedures would be unchecked, leading to higher premiums for everyone.³³

Some research supports this narrow claim, showing that PA can successfully reduce the utilization of the specific services it targets, such as in the fields of advanced diagnostic imaging and opioid prescribing.⁴²

When faced with criticism about delays and denials, insurers often shift the onus back to providers, asserting that many denials are the result of incomplete or incorrectly submitted paperwork, rather than a rejection of the treatment’s clinical merit.⁴⁵

The Cycle of Pledges and Skepticism

Faced with mounting pressure from physician groups, patient advocates, and regulators, the health insurance industry has repeatedly engaged in a cycle of acknowledging the problem and pledging voluntary reforms.

In 2018, a coalition of payers and providers issued a “Consensus Statement” promising to improve the PA process.⁴⁷

More recently, in June 2025, major health insurers coordinated with the Department of Health and Human Services (HHS) to announce a new, high-profile initiative.⁴⁸

This latest pledge includes ambitious commitments to reduce the overall volume of services subject to PA by 2026, standardize and automate electronic requests by 2027, and honor existing authorizations for 90 days when a patient switches health plans.⁴⁸

For the medical community, however, this is a case of déjà vu.

Physician advocates, particularly the AMA, are quick to point out that the components of the 2025 pledge are nearly identical to the commitments made in 2018.¹¹

Those earlier promises were followed not by relief, but by a documented

increase in the prior authorization burden, with 80% of physicians reporting that the number of PA requests has grown over the past five years.¹¹

This history has bred deep and justifiable skepticism.

As AMA President Dr. Bobby Mukkamala stated, “patients and physicians will need specifics demonstrating that the latest insurer pledge will yield substantive actions”.⁴⁷

This distrust is not confined to the medical profession.

A KFF poll found that public awareness of the new insurer initiative is extremely low, with only 20% of adults having heard of it.

More importantly, a clear majority (60%) are skeptical that it will lead to any meaningful change for patients.²

This widespread sentiment reflects a profound breakdown of public trust in the industry’s capacity for effective self-regulation.

The Economic Paradox

The central pillar of the payer defense—that PA saves money for the healthcare system—collapses under comprehensive economic scrutiny.

While the process may reduce a health plan’s direct spending on a specific service, a growing body of evidence shows that it often increases overall system costs through a cascade of negative downstream effects.

Nearly 90% of physicians report that PA leads to higher overall healthcare utilization.⁵¹

This occurs because care delays lead to worsening conditions that require more intensive and expensive interventions.

The data shows that PA-related delays and denials result in additional office visits (68%), avoidable emergency department visits (42%), and preventable hospitalizations (29%).⁵¹

The myth of cost savings is most starkly debunked by a 2022 study in

Health Affairs, which calculated the total system-wide cost of prior authorization for prescription drugs alone.

When factoring in the administrative costs borne by payers, manufacturers, physicians, and patients (including out-of-pocket spending and lost productivity), the process generates an astonishing $93.3 billion in annual costs.¹⁸

This figure dwarfs the direct savings claimed by payers.

The economic modeling of reform further highlights this paradox.

The Centers for Medicare & Medicaid Services (CMS) projects its new PA reform rule will yield approximately $15 billion in savings over ten years, driven primarily by reducing the administrative costs for providers.⁵²

Conversely, the Congressional Budget Office (CBO), using a different model, scored a similar legislative proposal as

increasing federal spending by $16 billion over ten years.⁵³

The CBO reasoned that making the process easier and more efficient would lead to an increase in the utilization of approved services, thus increasing total payouts.

This contradiction gets to the heart of the debate: is the goal to reduce administrative waste or to suppress utilization?

The payer’s defense of prior authorization is only coherent if one accepts its narrow, siloed definition of cost.

It is a perspective that systematically ignores the immense financial, administrative, and clinical costs that the process externalizes onto every other participant in the healthcare system.

A denied $500 medication may register as a “save” on a payer’s balance sheet, but if that denial leads to a $10,000 emergency hospitalization, it represents a massive net loss for the system as a whole.

The debate over PA, therefore, is not truly about controlling costs in a global sense.

It is about who is forced to bear them.

In its current form, prior authorization is a powerful and effective mechanism for cost-shifting, protecting insurer profits by transferring the burden to patients and the providers who care for them.

Chapter 5: Rewriting the Rules: Regulation, AI, and the Future of the Labyrinth

The persistent failures of voluntary reforms and the escalating harm caused by the prior authorization labyrinth have forced the hand of government regulators and spurred a technological arms race.

The future of PA is now being forged at the volatile intersection of two powerful forces: the push for federal and state regulation aimed at enforcing transparency and efficiency, and the rapid, often unregulated, deployment of artificial intelligence by payers to automate and scale their review processes.

The outcome of this collision will determine whether the labyrinth is dismantled or simply rebuilt with digital walls.

The Force of Law: A New Regulatory Era

After years of advocacy from physician and patient groups, the regulatory landscape for prior authorization is undergoing its most significant transformation in decades.

The centerpiece of this new era is the CMS Interoperability and Prior Authorization Final Rule, a landmark regulation that establishes a new federal floor for how certain health plans must operate.⁵²

Set to take effect primarily in 2026 and 2027, the rule applies to Medicare Advantage, Medicaid managed care, and plans on the Affordable Care Act marketplaces.

Its key provisions are designed to directly address the most egregious aspects of the current system:

• Mandated Timelines: The rule imposes strict, enforceable deadlines for PA decisions. Payers will be required to respond to urgent requests within 72 hours and to standard, non-urgent requests within seven calendar days. For many plans, this cuts the current allowable timeframe in half.¹⁰
• Required Transparency: In a crucial move to combat opaque denials, the rule mandates that payers must provide a specific, clinical reason for any denied request. This is intended to end the practice of vague rejections and give providers the clear information needed to appeal or resubmit a request effectively.¹⁰
• An Electronic Mandate: To finally solve the “Digital-Fax Paradox,” the rule requires impacted payers to implement and maintain a standardized electronic prior authorization system using a Health Level 7 (HL7®) Fast Healthcare Interoperability Resources (FHIR®) Application Programming Interface (API).⁵⁰ This is designed to enable seamless, automated communication between provider EHRs and payer systems, moving the process toward the real-time ideal.

These federal regulations are being complemented by actions at the state and congressional levels.

The bipartisan Improving Seniors’ Timely Access to Care Act, which enjoys broad support, aims to codify many of these reforms specifically for the Medicare Advantage program, providing a legislative backbone to the regulatory changes.⁹

Concurrently, states like Texas have pursued gold carding laws, and others, like the District of Columbia, have introduced legislation to set minimum qualifications for PA reviewers and prohibit utilization reviews based solely on cost rather than medical need.²²

The Ghost in the Machine: The Double-Edged Sword of AI

Even as regulators work to impose order on the current system, a new and disruptive force is reshaping it from within: artificial intelligence.

The deployment of AI in prior authorization presents both a utopian vision of efficiency and a dystopian fear of automated obstruction.

On one hand, technology companies and some forward-thinking payers envision a future of “zero-touch” automation.

In this model, AI and predictive analytics would proactively identify the need for a PA as a physician enters an order, intelligently assemble all necessary clinical documentation from the EHR, and automate the submission.⁵⁷

These systems promise to learn from historical data to predict payer requirements, leading to first-pass approval rates as high as 98% and decision times of under 10 minutes.⁵⁹

The ultimate goal is a truly frictionless process that removes the administrative burden from providers and accelerates patient access to care.⁵⁸

On the other hand, the physician community harbors a deep and growing fear of how these powerful tools are actually being used.

A recent AMA survey found that 61% of physicians believe that payers’ use of unregulated AI is actively increasing PA denials and exacerbating patient harm.⁹

This fear was given stark form by a 2023 ProPublica investigation which revealed that an algorithm used by the insurer Cigna had been programmed to automatically reject claims based on certain “mismatches,” enabling a single company doctor to deny over 300,000 requests in a two-month period without ever opening the patient files.¹⁴

This practice embodies the nightmare scenario of “systematic batch denials,” where care is rejected at an industrial scale with little to no human review.⁵

This has led to an emerging consensus that the use of AI in PA cannot be left unchecked.

Advocacy groups and policy experts are calling for strict guardrails, including full transparency into how AI algorithms make decisions, regular audits to detect and eliminate biases, and, most critically, a firm requirement for meaningful human oversight of all non-approved requests.⁶⁰

The core principle is that AI must be a tool to

assist and inform clinical expertise, not a black box used to replace it.⁴⁶

The healthcare system is now on a collision course.

The CMS rule and other regulations are pushing for a more transparent, responsive, and standardized PA process.

Simultaneously, the unregulated adoption of AI by payers threatens to create a new system that is faster and more opaque than ever before.

A potential outcome is that payers could use AI to comply with the letter of the law—for instance, by issuing a denial with a machine-generated “specific reason” within the 7-day window—while completely violating its spirit, forcing the provider into the same burdensome appeals process.

The next few years will reveal which force will win out: the regulatory push for genuine reform or the technological push for more efficient obstruction.

The future of prior authorization hinges on this battle, and whether the coming digital systems will be tools for facilitating care or more powerful engines for denying it.

Conclusion: A More Humane Blueprint

Prior authorization has devolved from a tool of rational oversight into a dysfunctional, bureaucratic system defined by a fundamental conflict of interest.

The evidence is overwhelming and the verdict is clear: in its current form, prior authorization is a failure.

It fails patients by delaying necessary care and causing demonstrable, sometimes catastrophic, harm.

It fails physicians by burying them under an avalanche of uncompensated administrative work that fuels burnout and erodes the patient-physician relationship.

And it fails the nation’s economy by generating billions of dollars in system-wide waste that eclipses its narrow, siloed cost savings.

The recent momentum for reform, particularly the CMS Interoperability and Prior Authorization Final Rule, represents a significant and necessary step forward.

Mandating electronic standards, enforceable decision timelines, and transparency in denials are essential foundational repairs to a crumbling structure.

These actions offer the first real hope of dismantling the “Digital-Fax Paradox” and holding payers accountable for the consequences of their decisions.

However, optimism must be tempered with a heavy dose of realism.

The history of this issue is littered with the wreckage of failed voluntary pledges and promising reforms, like gold carding, that were neutralized during implementation by the powerful financial incentives that drive the status quo.

The past has taught the healthcare community a harsh lesson: for a system built on cost-shifting and administrative friction, the path of least resistance will always lead back toward obstruction.

Implementation and enforcement will be everything.

The most critical and unresolved challenge on the horizon is the rise of artificial intelligence.

AI holds the potential to either finally solve the PA puzzle through intelligent automation or to create a new, digital labyrinth that is more efficient, more opaque, and more frustrating than the paper-based one it replaces.

Without robust, enforceable guardrails that mandate transparency and preserve human clinical oversight for any care that is not approved, AI threatens to automate and amplify the worst aspects of the current system, creating an industrial-scale engine for denial.

Ultimately, the fight to reform prior authorization is not a technical debate about APIs, timelines, or reimbursement codes.

It is a fight to restore the primacy of clinical judgment and the sanctity of the patient-physician relationship.

It is a battle to replace a labyrinth built on suspicion and delay with a more humane blueprint built on trust, evidence, and a shared commitment to patient well-being.

The goal is not merely to create a more efficient process, but to foster a more compassionate and effective healthcare system, one that recognizes the simple, urgent truth: care delayed is care denied.⁶¹

Works cited

1. Once just a burden, prior authorization has become a nightmare …, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/once-just-burden-prior-authorization-has-become-nightmare
2. KFF Health Tracking Poll: Public Finds Prior Authorization Process …, accessed August 14, 2025, https://www.kff.org/patient-consumer-protections/poll-finding/kff-health-tracking-poll-public-finds-prior-authorization-process-difficult-to-manage/
3. 2024 AMA Prior Authorization Physician Survey, accessed August 14, 2025, https://fixpriorauth.org/2024-ama-prior-authorization-physician-survey?utm_source=x&utm_medium=traffic&utm_campaign=priorauthphysiciansurvey
4. AMA prior authorization (PA) physician survey | AMA – American …, accessed August 14, 2025, https://www.ama-assn.org/system/files/prior-authorization-survey.pdf
5. AMA Survey Highlights Growing Burden of Prior Authorization on Physicians, Patients, accessed August 14, 2025, https://www.ajmc.com/view/ama-survey-highlights-growing-burden-of-prior-authorization-on-physicians-patients
6. Exhausted by Prior Auth, Many Patients Abandon Care, accessed August 14, 2025, https://strengthenhealthcare.org/exhausted-by-prior-auth-many-patients-abandon-care/
7. AMA survey shows physicians, patients heavily burdened by prior authorization | AHA News, accessed August 14, 2025, https://www.aha.org/news/headline/2024-06-20-ama-survey-shows-physicians-patients-heavily-burdened-prior-authorization
8. KFF Survey: Most Consumers Find Prior Authorization Is a Major Problem, accessed August 14, 2025, https://www.ajmc.com/view/kff-survey-most-consumers-find-prior-authorization-is-a-major-problem
9. Prior authorization: How it evolved, why it burdens physicians and …, accessed August 14, 2025, https://www.medicaleconomics.com/view/prior-authorization-history-burden-ai-future
10. How Medicare Advantage Insurers Use Prior Authorization – Penn LDI, accessed August 14, 2025, https://ldi.upenn.edu/our-work/research-updates/the-billing-bottleneck-how-medicare-advantage-insurers-use-prior-authorization/
11. Action must follow pledges on prior authorization reform | American Medical Association, accessed August 14, 2025, https://www.ama-assn.org/about/leadership/action-must-follow-pledges-prior-authorization-reform
12. Stuck in the System: How Prior Authorization Delays Frustrate and …, accessed August 14, 2025, https://drfirst.com/press-releases/stuck-in-the-system-how-prior-authorization-delays-frustrate-and-harm-patients
13. 7 prior authorization terms that drive every doctor to distraction, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/7-prior-authorization-terms-drive-every-doctor-distraction
14. Standing Up to Prior Authorization | ASH Clinical News – American Society of Hematology, accessed August 14, 2025, https://ashpublications.org/ashclinicalnews/news/7981/Standing-Up-to-Prior-Authorization
15. How Slow Prior Authorizations Harm Patients: A Hidden Crisis in Healthcare, accessed August 14, 2025, https://www.productiveedge.com/blog/how-slow-prior-authorizations-harm-patients-a-hidden-crisis-in-healthcare
16. AMA Advocacy Insights webinar series: How prior authorization disrupts patient care, accessed August 14, 2025, https://www.ama-assn.org/member-benefits/events/ama-advocacy-insights-webinar-series-how-prior-authorization-disrupts
17. How AI is leading to more prior authorization denials | American Medical Association, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/how-ai-leading-more-prior-authorization-denials
18. Don’t fall for these myths on prior authorization | American Medical Association, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/don-t-fall-these-myths-prior-authorization
19. Physician | Fix Prior Auth, accessed August 14, 2025, https://fixpriorauth.org/physician
20. Top 5 Prior Authorization Challenges – ReferralMD, accessed August 14, 2025, https://getreferralmd.com/5-reasons-why-prior-authorizations-are-challenging/
21. How the Prior Authorization Process Can Hurt Patients – Carrum Health, accessed August 14, 2025, https://carrumhealth.com/blog/how-prior-authorization-hurts-patients/
22. Reform Prior Auth | MSDC – Medical Society of the District of Columbia, accessed August 14, 2025, https://www.msdc.org/advocacy/reform-prior-auth
23. Prior authorization practice resources – American Medical Association, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/prior-authorization-practice-resources
24. Benefits of Electronic Prior Authorization (ePA) in Healthcare – RevenueXL, accessed August 14, 2025, https://www.revenuexl.com/resources/electronic-prior-authorization-healthcare
25. Impact of implementing electronic prior authorization on medication filling in an electronic health record system in a large healthcare system, accessed August 14, 2025, https://pmc.ncbi.nlm.nih.gov/articles/PMC8449617/
26. Implementing ePrior authorization in your EHR workflow – Practice Fusion, accessed August 14, 2025, https://www.practicefusion.com/blog/eprior-authorization-ehr-workflow/
27. How Electronic Prior Authorizations Cut Through Complexities of Specialty Medication Access – DrFirst, accessed August 14, 2025, https://drfirst.com/blog/how-electronic-prior-authorizations-cut-through-complexities-of-specialty-medication-access
28. Electronic Prior Authorization – Why Your Practice Needs this Technology Now – DrChrono, accessed August 14, 2025, https://drchrono.com/blog/2023/10/electronic-prior-authorization-why-your-practice-needs-this-technology-now/
29. Perceptions of prior authorization by use of electronic prior …, accessed August 14, 2025, https://pmc.ncbi.nlm.nih.gov/articles/PMC10332446/
30. Electronic Prior Authorization (ePA) Fact Sheet – NCPDP, accessed August 14, 2025, https://www.ncpdp.org/NCPDP/media/pdf/NCPDP_ePA_Fact_sheet.doc
31. Gold Carding Program – Highmark Provider Resource Center, accessed August 14, 2025, https://providers.highmark.com/claims-and-authorization/authorization-guidance/gold-carding-program.html
32. providers.highmark.com, accessed August 14, 2025, https://providers.highmark.com/claims-and-authorization/authorization-guidance/gold-carding-program.html#:~:text=The%20Gold%20Carding%20program%20provides,adherence%20to%20appropriate%20clinical%20criteria.
33. State-Mandated ‘Gold Card’ Programs to Ease Prior Authorization Burdens Offer Little Relief, Experts Say | MDedge, accessed August 14, 2025, https://www.mdedge.com/fedprac/article/272646/mixed-topics/state-mandated-gold-card-programs-ease-prior-authorization-burdens-offer-little-relief-experts-say
34. Texas Preauthorization Gold Card Rules – Harris County Medical Society, accessed August 14, 2025, https://www.hcms.org/tmaimis/HARRIS/Practice_Resources/Billing_and_Payers/Texas_Preauthorization_Gold_Card_Rules.aspx
35. Shielding the Gold Card Law: Texans Still Fight to Guarantee Gold …, accessed August 14, 2025, https://www.texmed.org/Template.aspx?id=63122
36. Texas gold card exemptions frequently asked questions – UnitedHealthcare commercial plans – UHCprovider.com, accessed August 14, 2025, https://www.uhcprovider.com/content/dam/provider/docs/public/health-plans/tx-commercial-gold-card-faq.pdf
37. State-Mandated ‘Gold Card’ Programs to Ease Prior Authorization Burdens Offer Little Relief, Experts Say | MDedge, accessed August 14, 2025, https://www.mdedge.com/fedprac/avaho/article/272646/mixed-topics/state-mandated-gold-card-programs-ease-prior-authorization-burdens-offer-little-relief-experts-say
38. Prior Authorization | AMCP.org, accessed August 14, 2025, https://www.amcp.org/concepts-managed-care-pharmacy/prior-authorization
39. What is prior authorization? – Healthinsurance.org, accessed August 14, 2025, https://www.healthinsurance.org/glossary/prior-authorization/
40. Perceptions of prior authorization burden and solutions – PMC, accessed August 14, 2025, https://pmc.ncbi.nlm.nih.gov/articles/PMC11425057/
41. The Future of Prior Authorization | Evernorth, accessed August 14, 2025, https://www.evernorth.com/articles/the-future-prior-authorization
42. IMPACTS OF PRIOR AUTHORIZATION ON HEALTH CARE COSTS AND QUALITY, accessed August 14, 2025, https://www.nihcr.org/wp-content/uploads/Altarum-Prior-Authorization-Review-November-2019.pdf
43. Analysis: Prior Authorization in California, accessed August 14, 2025, https://www.chbrp.org/sites/default/files/bill-documents/Prior%20Authorization_final.pdf
44. CMS Launches WISeR Model to Target Waste by Leveraging (Broken) Prior Authorization System | Health Industry Washington Watch, accessed August 14, 2025, https://www.healthindustrywashingtonwatch.com/2025/08/articles/fraud-and-abuse-developments/cms-launches-wiser-model-to-target-waste-by-leveraging-broken-prior-authorization-system/
45. 7 Common Prior Authorization Hurdles and How to Overcome Them | CoverMyMeds, accessed August 14, 2025, https://insights.covermymeds.com/healthcare-technology/prior-authorization/common-prior-authorization-hurdles-and-how-to-overcome-them
46. ‘Most Harmful’: Health Insurer Prior Authorization Reforms Fall Short of Nursing Home Industry Expectations, accessed August 14, 2025, https://skillednursingnews.com/2025/06/most-harmful-health-insurer-prior-authorization-reforms-fall-short-of-nursing-home-industry-expectations/
47. AMA responds as health insurers try again at prior authorization reform, accessed August 14, 2025, https://www.ama-assn.org/press-center/ama-press-releases/ama-responds-health-insurers-try-again-prior-authorization-reform
48. HHS announces initiative with insurers to streamline prior …, accessed August 14, 2025, https://www.aha.org/news/headline/2025-06-23-hhs-announces-initiative-insurers-streamline-prior-authorizations
49. Insurers Vow to Take Steps to Reform Prior Authorization – AARP, accessed August 14, 2025, https://www.aarp.org/health/healthcare/insurers-vow-to-simpify-prior-authorization.html
50. Inside payers’ latest plans to streamline prior authorization – American Medical Association, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/inside-payers-latest-plans-streamline-prior-authorization
51. Prior authorization delays care—and increases health care costs | American Medical Association, accessed August 14, 2025, https://www.ama-assn.org/practice-management/prior-authorization/prior-authorization-delays-care-and-increases-health-care
52. CMS Finalizes Rule to Expand Access to Health Information and Improve the Prior Authorization Process, accessed August 14, 2025, https://www.cms.gov/newsroom/press-releases/cms-finalizes-rule-expand-access-health-information-and-improve-prior-authorization-process
53. The Consequences and Future of Prior-Authorization Reform – PMC, accessed August 14, 2025, https://pmc.ncbi.nlm.nih.gov/articles/PMC10676707/
54. Toolkit: Addressing the Administrative Burden of Prior Authorization | ACP Online, accessed August 14, 2025, https://www.acponline.org/advocacy/state-health-policy/toolkit-addressing-the-administrative-burden-of-prior-authorization
55. Prior Authorization Process Policies in Medicaid Managed Care: Findings from a Survey of State Medicaid Programs | KFF, accessed August 14, 2025, https://www.kff.org/medicaid/issue-brief/prior-authorization-process-policies-in-medicaid-managed-care-findings-from-a-survey-of-state-medicaid-programs/
56. Prior Authorization Reform – AAPM&R, accessed August 14, 2025, https://www.aapmr.org/advocacy/current-priorities/reducing-physician-burden/priorauthorization-reform
57. 7 Prior Authorization Challenges and How To Overcome Them – AKASA, accessed August 14, 2025, https://akasa.com/blog/prior-authorization-mistakes/
58. The Future of Prior Auth is Zero-Touch and It’s Already Here – Innovaccer, accessed August 14, 2025, https://innovaccer.com/resources/blogs/the-future-of-prior-auth-is-zero-touch-and-its-already-here
59. Predictive AI: The Future of Streamlined Prior Authorizations | Thoughtful, accessed August 14, 2025, https://www.thoughtful.ai/blog/predictive-ai-the-future-of-streamlined-prior-authorizations
60. Start 2025 with these five emerging trends in prior auth | Cohere Health, accessed August 14, 2025, https://coherehealth.com/blog/five-emerging-trends-in-prior-auth/
61. Fix Prior Auth, accessed August 14, 2025, https://fixpriorauth.org/