Medicare Launches Controversial AI-Driven Prior Authorization Pilot

AI will soon have a say in approving or denying Medicare treatments

KFF Health NewsSep 25 2025 Taking a page from the private insurance industry's playbook, the Trump administration will launch a program next year to find out how much money an artificial intelligence algorithm could save the federal government by denying care to Medicare patients. The pilot program, designed to weed out wasteful, "low-value" services, amounts to a federal expansion of an unpopular process called prior authorization, which requires patients or someone on their medical team to seek insurance approval before proceeding with certain procedures, tests, and prescriptions. It will affect Medicare patients, and the doctors and hospitals who care for them, in Arizona, Ohio, Oklahoma, New Jersey, Texas, and Washington, starting Jan. 1 and running through 2031. The move has raised eyebrows among politicians and policy experts. The traditional version of Medicare, which covers adults 65 and older and some people with disabilities, has mostly eschewed prior authorization. Still, it is widely used by private insurers, especially in the Medicare Advantage market. And the timing was surprising: The pilot was announced in late June, just days after the Trump administration unveiled a voluntary effort by private health insurers to revamp and reduce their own use of prior authorization, which causes care to be "significantly delayed," said Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services. "It erodes public trust in the health care system," Oz told the media. "It's something that we can't tolerate in this administration." But some critics, like Vinay Rathi, an Ohio State University doctor and policy researcher, have accused the Trump administration of sending mixed messages. On one hand, the federal government wants to borrow cost-cutting measures used by private insurance, he said. "On the other, it slaps them on the wrist." Administration officials are "talking out of both sides of their mouth," said Rep. Suzan DelBene, a Washington Democrat. "It's hugely concerning." Patients, doctors, and other lawmakers have also been critical of what they see as delay-or-deny tactics, which can slow down or block access to care, causing irreparable harm and even death. "Insurance companies have put it in their mantra that they will take patients' money and then do their damnedest to deny giving it to the people who deliver care," said Rep. Greg Murphy, a North Carolina Republican and a urologist. "That goes on in every insurance company boardroom." Insurers have long argued that prior authorization reduces fraud and wasteful spending, as well as prevents potential harm. Public displeasure with insurance denials dominated the news in December, when the shooting death of UnitedHealthcare's CEO led many to anoint his alleged killer as a folk hero. And the public broadly dislikes the practice: Nearly three-quarters of respondents thought prior authorization was a "major" problem in a July poll published by KFF, a health information nonprofit that includes KFF Health News. Indeed, Oz said during his June press conference that "violence in the streets" prompted the Trump administration to take on the issue of prior authorization reform in the private insurance industry. Still, the administration is expanding the use of prior authorization in Medicare. CMS spokesperson Alexx Pons said both initiatives "serve the same goal of protecting patients and Medicare dollars." Unanswered questions The pilot program, WISeR -- short for "Wasteful and Inappropriate Service Reduction" -- will test the use of an AI algorithm in making prior authorization decisions for some Medicare services, including skin and tissue substitutes, electrical nerve stimulator implants, and knee arthroscopy. The federal government says such procedures are particularly vulnerable to "fraud, waste, and abuse" and could be held in check by prior authorization. Other procedures may be added to the list. But services that are inpatient-only, emergency, or "would pose a substantial risk to patients if significantly delayed" would not be subject to the AI model's assessment, according to the federal announcement. While the use of AI in health insurance isn't new, Medicare has been slow to adopt the private-sector tools. Medicare has historically used prior authorization in a limited way, with contractors who aren't incentivized to deny services. But experts who have studied the plan believe the federal pilot could change that. Pons told KFF Health News that no Medicare request will be denied before being reviewed by a "qualified human clinician," and that vendors "are prohibited from compensation arrangements tied to denial rates." While the government says vendors will be rewarded for savings, Pons said multiple safeguards will "remove any incentive to deny medically appropriate care." "Shared savings arrangements mean that vendors financially benefit when less care is delivered," a structure that can create a powerful incentive for companies to deny medically necessary care, said Jennifer Brackeen, senior director of government affairs for the Washington State Hospital Association. And doctors and policy experts say that's only one concern. Rathi said the plan "is not fully fleshed out" and relies on "messy and subjective" measures. The model, he said, ultimately depends on contractors to assess their own results, a choice that makes the results potentially suspect. "I'm not sure they know, even, how they're going to figure out whether this is helping or hurting patients," he said. Pons said the use of AI in the Medicare pilot will be "subject to strict oversight to ensure transparency, accountability, and alignment with Medicare rules and patient protection." "CMS remains committed to ensuring that automated tools support, not replace, clinically sound decision-making," he said. Experts agree that AI is theoretically capable of expediting what has been a cumbersome process marked by delays and denials that can harm patients' health. Health insurers have argued that AI eliminates human error and bias and will save the health care system money. These companies have also insisted that humans, not computers, are ultimately reviewing coverage decisions. But some scholars are doubtful that's routinely happening. "I think that there's also probably a little bit of ambiguity over what constitutes 'meaningful human review,'" said Amy Killelea, an assistant research professor at the Center on Health Insurance Reforms at Georgetown University. A 2023 report published by ProPublica found that, over a two-month period, doctors at Cigna who reviewed requests for payment spent an average of only 1.2 seconds on each case. Cigna spokesperson Justine Sessions told KFF Health News that the company does not use AI to deny care or claims. The ProPublica investigation referenced a "simple software-driven process that helped accelerate payments to clinicians for common, relatively low-cost tests and treatments, and it is not powered by AI," Sessions said. "It was not used for prior authorizations." And yet class-action lawsuits filed against major health insurers have alleged that flawed AI models undermine doctor recommendations and fail to take patients' unique needs into account, forcing some people to shoulder the financial burden of their care. Meanwhile, a survey of physicians published by the American Medical Association in February found that 61% think AI is "increasing prior authorization denials, exacerbating avoidable patient harms and escalating unnecessary waste now and into the future." Chris Bond, a spokesperson for the insurers' trade group AHIP, told KFF Health News that the organization is "zeroed in" on implementing the commitments made to the government. Those include reducing the scope of prior authorization and making sure that communications with patients about denials and appeals are easy to understand. 'This is a pilot' The Medicare pilot program underscores ongoing concerns about prior authorization and raises new ones. While private health insurers have been opaque about how they use AI and the extent to which they use prior authorization, policy researchers believe these algorithms are often programmed to automatically deny high-cost care. "The more expensive it is, the more likely it is to be denied," said Jennifer Oliva, a professor at the Maurer School of Law at Indiana University-Bloomington, whose work focuses on AI regulation and health coverage. Oliva explained in a recent paper for the Indiana Law Journal that when a patient is expected to die within a few years, health insurers are "motivated to rely on the algorithm." As time passes and the patient or their provider is forced to appeal a denial, the chance of the patient dying during that process increases. The longer an appeal, the less likely the health insurer is to pay the claim, Oliva said. "The No. 1 thing to do is make it very, very difficult for people to get high-cost services," she said. As the use of AI by health insurers is poised to grow, insurance company algorithms amount to a "regulatory blind spot" and demand more scrutiny, said Carmel Shachar, a faculty director at Harvard Law School's Center for Health Law and Policy Innovation. The WISeR pilot is "an interesting step" toward using AI to ensure that Medicare dollars are purchasing high-quality health care, she said. But the lack of details makes it difficult to determine whether it will work. Politicians are grappling with some of the same questions. "How is this being tested in the first place? How are you going to make sure that it is working and not denying care or producing higher rates of care denial?" asked DelBene, who signed an August letter to Oz with other Democrats demanding answers about the AI program. But Democrats aren't the only ones worried. Murphy, who co-chairs the House GOP Doctors Caucus, acknowledged that many physicians are concerned the WISeR pilot could overreach into their practice of medicine if the AI algorithm denies doctor-recommended care. Meanwhile, House members of both parties recently supported a measure proposed by Rep. Lois Frankel, a Florida Democrat, to block funding for the pilot in the fiscal 2026 budget of the Department of Health and Human Services. AI in health care is here to stay, Murphy said, but it remains to be seen whether the WISeR pilot will save Medicare money or contribute to the problems already posed by prior authorization. "This is a pilot, and I'm open to see what's going to happen with this," Murphy said, "but I will always, always err on the side that doctors know what's best for their patients." 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Medicare WISeR pilot uses AI for service approvals in 6 states

The Trump administration initiated a Medicare pilot program set to begin January 1, 2026, in six states. Titled the Wasteful and Inappropriate Service Reduction Model (WISeR), it will use artificial intelligence to help approve or deny certain services to reduce spending. Operating in Arizona, Ohio, Oklahoma, New Jersey, Texas, and Washington, the pilot program is scheduled to run through 2031 unless altered by subsequent congressional or administrative policy changes. The WISeR model specifically targets three procedures for AI-driven prior-authorization reviews: skin and tissue substitutes, electrical nerve stimulator implants, and knee arthroscopy for osteoarthritis. This initiative introduces AI-based reviews into the traditional Medicare system, a domain where such technology was previously confined mostly to private insurance plans. According to the program's design, the recommendations generated by the AI system will be subject to a final review by qualified human clinicians before a decision is rendered on a service. The stated objective of the program, according to the Centers for Medicare and Medicaid Services (CMS), is to curb fraud, waste, and potential patient harm by identifying and denying services considered unnecessary or of low clinical benefit. This approach has generated significant criticism from medical professionals and healthcare experts. A primary concern is that the algorithms could disproportionately flag and lead to the denial of high-cost treatments that are medically necessary for patients. Experts also warn about the possibility of the AI system rejecting treatments that a patient's own doctor has recommended, raising questions about the role of automated systems in clinical decision-making. Formal opposition has been voiced by several organizations, including the American Medical Association (AMA). The AMA opposes the pilot and has called for its modification, citing its own surveys that revealed an increase in care denials by private insurance companies already utilizing similar AI systems. Joining the opposition are various advocacy groups and some lawmakers. These groups argue that delegating coverage decisions to AI-driven platforms could ultimately harm patients and create new barriers that worsen access to essential healthcare services across the affected states.

Medicare to Put AI in Charge of Prior Authorization With 2026 Pilot Program | PYMNTS.com

Starting in 2026, a federal pilot will examine if AI can speed up prior authorization and cut waste, a move that could redefine how millions of Americans experience access to care. The initiative, known as the Wasteful and Inappropriate Service Reduction model, will launch in six states and apply to 17 outpatient procedures. Centers for Medicare and Medicaid Services (CMS) says AI will help flag requests, while clinicians retain the final say on denials. Supporters see the program as a way to cut unnecessary spending and reduce the 13 hours per week doctors devote to authorization paperwork. Critics, led by the American Medical Association, warn that AI is already linked to higher denial rates and harmful delays. The states in the pilot will be Arizona, Ohio, Oklahoma, New Jersey, Texas and Washington. Private health plans already use algorithmic tools to automate prior authorization; the approval doctors must secure before patients can receive certain treatments or procedures. By adopting similar tools, Medicare is signaling that AI will become a baseline mechanism for managing coverage. With more than 67 million beneficiaries expected by the end of the decade, Medicare's experiment could establish new norms for how care decisions are mediated across the U.S. healthcare system. The CMS says the pilot is aimed at eliminating waste. Billions of dollars are spent each year on services with limited medical benefit, from redundant imaging to procedures with little evidence of effectiveness. According to the AMA, physicians complete an average of 39 prior authorizations each week, consuming more than 13 hours of staff time. Nearly 9 in 10 doctors report the process contributes to burnout, and more than a third say they hire staff solely to manage approvals. If AI can screen out predictable cases quickly, human reviewers can devote time to more complex requests. PYMNTS reports that Oracle Health is deploying AI tools to reduce administrative complexity in the U.S. healthcare sector, including claims, prior authorization and eligibility workflows. Cyrus Nikou, founder and managing partner at Atar Capital, noted that beyond prior authorization, AI could transform care coordination, outcome prediction, personalized treatment planning, operational efficiencies such as scheduling, and patient engagement. Doctors still remain skeptical that efficiency will outweigh risks. The AMA survey found that 61% of physicians believe payers' use of AI has increased denial rates; 93% say prior authorization has delayed necessary care, and 29% report serious adverse events such as hospitalization or permanent harm. Insurers' algorithms are typically proprietary, leaving doctors and patients in the dark about why requests are denied. Meanwhile, major insurers say they'll modernize prior authorization. The Wall Street Journal reported that health plans have pledged to standardize electronic submissions by 2027 and deliver real-time responses for most requests. Alfred Olivares, global managing partner of Healthcare and Life Sciences at HTEC, cautioned that despite advances in AI, adoption remains inconsistent because stakeholders are still navigating trust, usability and long-term value. He warned that when tools are not embedded into workflows or aligned with clinical priorities, they generate "noise" instead of clarity, and the goal should be seamless systems and better outcomes.