Is Medicare Using AI Prior Authorization?
Key Takeaways
- The Centers for Medicare and Medicaid Services announced a model intended to reduce waste in Original Medicare, the public health insurance program for people who are over 65 or have certain disabilities.
- On a trial basis, CMS will require prior authorization for certain services that have a high risk for fraud or abuse in six states.
- As part of the trial Medicare will work with technology companies to use artificial intelligence as part of the prior authorization process.
- Using AI in prior authorization is already common for Medicare Advantage plans, which are offered by private insurance carriers.
Dramatic advances in artificial intelligence (AI) technology have affected almost every industry, including healthcare. Firms are investigating how to use AI in applications like discovering new drugs, diagnosing diseases, and helping to make decisions about the care for patients.
Specifically, AI might play an increasingly central role in determining whether an insurance carrier agrees to pay for a particular test, treatment, or procedure.
Health insurance commonly requires prior authorization (also called preauthorization or precertification) for some services to avoid unnecessary spending, prioritize lower-cost treatment options, and minimize risk to patients. To request authorization, healthcare providers must submit clinical details and other documents to the insurance carrier, showing why their patient needs a specific type of care rather than some simpler or less expensive alternative.
Some Medicare Advantage plans from private insurance carriers already use AI and predictive algorithms — mathematical models that use historical data to model what might happen in the future — to assist in prior authorization. Now, the Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Original Medicare, is exploring whether this approach could work for the public health insurance program as well.
Prior Authorization and Medicare
Original Medicare, also known Medicare Parts A and B, is federally administered health coverage for U.S. adults who are over 65 or have certain disabilities. The program currently only requires prior authorization in a few situations, like for certain hospital outpatient procedures or particular types of durable medical equipment. For most hospital and outpatient services covered by Medicare, you get the same coverage from participating healthcare providers across the country without any need for preauthorization.
Medicare Advantage plans, offered by private insurance carriers to substitute for Original Medicare, work differently. The coverage must at least include everything that Original Medicare does and may feature a variety of additional benefits. However, details vary by plan, with different plans available in every ZIP code.
People on Medicare Advantage generally need to visit the doctors and pharmacies in the plan’s provider network to make full use of their benefits. For more expensive or complex services, the healthcare provider might need to obtain prior authorization.
According to a KFF report, almost everyone on a Medicare Advantage plan is subject to preauthorization at times. The services that most commonly call for approval are:
- Stays in a skilled nursing facility
- Drugs administered in an outpatient setting
- Inpatient hospital stays
- Outpatient psychiatric services
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AI in Prior Authorization Decisions
For years, private insurance carriers have applied AI and predictive algorithms in coverage decisions. These tools have been harnessed to quickly review patient records and provide recommendations based on treatment guidelines and the plan’s coverage details.
Medicare Advantage plans frequently employ AI to inform their prior authorization determinations, accounting for the likely costs and healthcare outcomes from covering certain services. CMS has set some limits on using the technology, like a 2024 rule clarifying that plans can only use AI and algorithms in ways that account for every individual’s needs and medical history, not just a broad set of criteria.
But now, AI prior authorization could be coming to Original Medicare as well. In June 2025, CMS announced a trial of a new model for Original Medicare coverage called Wasteful and Inappropriate Service Reduction (WISeR), which is intended to cut unnecessary spending. As part of this model, CMS will work with private technology companies to test whether AI can help conduct prior authorization processes more efficiently.
A Trial for AI
The WISeR pilot will occur in six states: Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. Services that are provided only in an inpatient setting or that a patient needs urgently won’t be part of the trial. Instead, the agency said it would focus on using preauthorization for several services and devices that are especially subject to waste, fraud, abuse, or misuse like:
- Skin and tissue substitutes, which can replace wounded or burned skin.
- Electrical nerve stimulator implants, often used to manage chronic pain, sleep apnea, and epilepsy
- Knee arthroscopy, a surgical procedure on the joint, when treating osteoarthritis
- Devices for controlling incontinence
- Cervical fusion, a procedure that joins vertebrae in the neck together for greater stability
- Steroid injections to manage pain
- Diagnosis and treatment for impotence
According to CMS, the WISeR model will strive to eliminate “low-value” services that result in greater costs and create risks for patient safety. While the trial will investigate using AI to streamline the prior authorization process, officials told The New York Times that any coverage denials would be handled by “an appropriately licensed human clinician, not a machine.”
AI will likely have a growing impact on healthcare as researchers, private companies, and government agencies explore the technology’s possibilities. Original Medicare’s AI prior authorization trial could lead to major shifts in how this public health insurance program makes routine coverage decisions.
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