California physicians push to end Medicaid prior approval

California's budget crisis is leading Gov. Arnold Schwarzenegger to consider massive health care cuts, but the California Medical Assn. has another suggestion -- end treatment authorization review for Medicaid services and save hundreds of millions of dollars.

The state's Medicaid treatment authorization program requires physicians to obtain prior approval for certain prescriptions and treatments. The mandate applies to a minority of procedures -- perhaps 15% overall, said Doug Robins, chief of the California Dept. of Health Care Services' Utilization Management Division. The state in 2001 reviewed 9% of Medicaid claims, including 10% of Medicaid prescriptions, 1.4% of inpatient care and 0.4% of physician services, according to a 2003 report by the California HealthCare Foundation, an independent philanthropy committed to improving the way health care is delivered and financed in California. Robins did not provide more current estimates.

CMA Trustee Ted Mazer, MD, said the program has questionable value because the state approves the vast majority of Medicaid treatment requests. "It is cumbersome, wasteful of financial and personnel resources, inefficient and off-putting to physician participation," Dr. Mazer said. Robins reported that 78% of the requests were approved on first submission in 2001.

Dr. Mazer's argument resonated with the California Assembly's Joint Legislative Audit Committee. The panel voted unanimously on May 27 to audit the program. CMA spokesman Andrew LaMar said the audit should be completed in about four months.

Conversations between the CMA and state officials indicate the treatment request program may cost more than $1 billion to administer, LaMar said. "We have a pretty good sense that there could be significant savings."

Robins did not have an estimate for the cost of Medicaid treatment review. But he noted that the program also saves money by filtering out inappropriate care and prescriptions. For example, adding oxycodone prescription review to the program in 2008 led the state to deny $10 million in inappropriate drug orders, he said. The 2003 California HealthCare Foundation report also found that the 9% of Medicaid treatment requests the state reviewed in 2001 accounted for 46% of all Medicaid spending.