A cost-benefit analysis of prior approvals for Medicaid services in New York state

This study investigates the costs and benefits of a prior approval mechanism instituted by the New York State Health Department to review the need for the provision of selected types of costly health care and services. The review is made prior to the provision of the service and Medicaid payment for the service is contingent upon the result of the review. Costs include program administration and form processing. Benefits include the value of services which are either denied or modified as a result of the prior approval process. The analysis indicates that three of the seven prior approval categories are cost-beneficial without regard to deterrence benefits. For the other four categories, the results of this study have been used to propose new policies.