Map Shows States Where Medicare Coverage Is Changing Next...

By Suzanne Blake

Reporter, Consumer & Social Trends

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Several states will start incorporating artificial intelligence into their Medicare coverage decisions starting January 1, but some experts are unimpressed, with one telling Newsweek, "If you show me the incentive, I can show you the outcome. When the incentive is built around Medicare denials, that’s exactly what you’ll get, more denials." Supporters say the program will reduce fraud and waste.

The change hits in the new year as traditional Medicare recipients undergo a federal AI pilot program in Washington, Arizona, Ohio, Oklahoma, New Jersey, and Texas.

Why It Matters

The new program has sparked backlash amongst some Medicare beneficiaries and thought leaders who argue the AI tools could be used to deny coverage for more patients, causing financial strain and worsened health outcomes in the long run.

Prior authorization requirements have long put a strain on Medicare recipients, who have to wait and see if their treatment or procedures get approved for full coverage.

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What To Know

Washington, Arizona, Ohio, Oklahoma, New Jersey, and Texas are the six states implementing the AI pilot program called Wasteful and Inappropriate Service Reduction.

The program aims to reduce fraud and waste by adding AI prior authorization for outpatient procedures seen as “low-value services.”

“For the first time, seniors will need prior approval from private contractors (paid based on how many claims they deny) before accessing certain treatments,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “Traditional Medicare has operated without prior authorization for 60 years. This pilot introduces it.”

Around half of all Medicare beneficiaries are on traditional Medicare, but in the past, prior authorization requirements have mainly been limited to the privatized version of Medicare, Medicare Advantage.

The new procedures that will have AI determine their prior authorization decisions include nerve stimulation, steroid injections for pain management, cervical fusion, knee surgery, impotence treatment and some skin substitutes.

"The difference here is the extent that AI will be used to determine the results of the prior authorization request. It is not unknown that private insurance companies are currently or will be using AI for their prior authorization process but there is an appeal process that is still very human which includes a peer-to-peer review," Chris Fong, CEO of Smile Insurance and a Medicare specialist, told Newsweek.

"We are unsure whether Medicare will have a similar appeal process. We are actively notifying our clients who are on traditional Medicare to be on the lookout for this new process and ensuring them that we will help them get through the prior authorization process."

Because AI companies are paid based on the savings from claims they deny, there are concerns that Medicare beneficiaries will suffer from the AI program in the long run.

“If you show me the incentive, I can show you the outcome. When the incentive is built around Medicare denials, that’s exactly what you’ll get, more denials,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.

“These new AI systems will be programmed to reject claims at a higher rate because that’s how their algorithms are designed. The intent may be to curb overbilling and fraud through expanded prior authorizations, but the result will likely be longer wait times and more rejected procedures.”

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What People Are Saying

CMS Administrator Dr. Mehmet Oz said previously in a statement: "CMS is committed to crushing fraud, waste, and abuse, and the WISeR Model will help root out waste in Original Medicare. Combining the speed of technology and the experienced clinicians, this new model helps bring Medicare into the 21st century by testing a streamlined prior authorization process, while protecting Medicare beneficiaries from being given unnecessary and often costly procedures."

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “The pilot program Medicare is launching in six states that will integrate AI into existing operations has been met with a number of concerns, all centering around how these new systems will process claims. If AI accelerates the process of denying claims, it could become more difficult for future approvals for Medicare recipients to receive healthcare goods and services.”

Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “What’s being marketed as a way to 'root out waste, fraud, and abuse' will instead create more Type II errors, denying legitimate claims. And that’s not a good outcome for beneficiaries who depend on timely access to care.”

Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “This normalizes profit-driven gatekeeping in Medicare. If the 6 year pilot (through 2031) succeeds, expect expansion nationwide. A program that serves 60+ million seniors without these barriers suddenly operates like commercial insurance, with corporate interests between patients and care.”

What Happens Next

While the new model could bring about a reduction in fraud and waste, valid claims could also be denied in the process.

“Supporters say the new system will help to curb fraud and abuse within the program, but if those attempts also end up denying coverage to many valid claims, this revision could quickly become a nightmare,” Beene said. “A system of pilot states will hopefully assist in working through some of these potential difficulties before a possible expansion.”

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