Medicare Turns to AI for Prior Authorization as Trust Fund Depletes
The Centers for Medicare and Medicaid Services launched a pilot program in January that uses artificial intelligence to review whether certain medical services are necessary before Medicare pays for them. The program, called WISeR (Wasteful and Inappropriate Service Reduction), marks the first time traditional Medicare - which covers nearly half of the nation's 69.7 million beneficiaries - faces this kind of automated scrutiny.
The move reflects growing pressure to address what CMS estimates as 25% waste in U.S. healthcare spending. The Medicare hospital insurance trust fund is projected to run out of money in 2033, down from 2036 just a year ago.
What the Pilot Targets
WISeR initially focuses on three specific services:
- Skin and tissue substitutes
- Electrical nerve stimulator implants
- Knee arthroscopy for knee osteoarthritis
Private companies will conduct the reviews using AI systems. CMS selected services that the agency says have "little to no clinical benefit for certain patients" and historically carry higher fraud and abuse risk.
A Shift for Traditional Medicare
Traditional Medicare has largely avoided the preauthorization requirements that plague Medicare Advantage plans. With nearly equal enrollment numbers, Medicare Advantage beneficiaries faced 53 million preauthorization requests in recent data, compared to 625,000 for traditional Medicare users.
U.S. Rep. Lois Frankel, D-West Palm Beach, has vowed to fight any expansion of the pilot. "Medicare was based on a promise that if your doctor says you need care, Medicare will be there for you, not AI," she said.
Insurance Industry Already Uses AI Extensively
The broader insurance sector has moved faster. Eighty-four percent of commercial health insurers now use AI for Insurance processes including prior authorization and fraud detection, according to the National Association of Insurance Commissioners' 2024-25 survey.
Insurance representatives argue AI accelerates decisions and applies coverage rules more precisely. Christopher Turner, a certified insurance agent in Hobe Sound, said the pilot is necessary. "If we keep on overspending, it's going to bankrupt the country," he said.
Doctors and Patients Express Concerns
Healthcare providers worry the system will delay necessary care. Dr. Andrew Rosenthal, a Boynton Beach plastic surgeon, said skin substitutes prevent expensive complications like infection and amputation. "This changes the DNA of what the Medicare system was originally meant to be, which is a contract between you and your doctor," he said.
Iris Smith, an 80-year-old retiree with arthritis, echoed the concern. "My doctors know me. I know my doctors. When I'm in pain - which is every morning - I need something to take care of the pain," she said.
The Waste Question
Gabriel Carrillo, program director for the Center for Risk Management and Insurance Education at the University of Central Florida College of Business, confirmed the 25% waste estimate is reasonable. But he cautioned that without proper resources and safeguards, AI could create approval delays that force patients into lengthy appeals.
"Both sides have a great point," Carrillo said.
In 2024, the federal government spent $1.1 trillion on Medicare, accounting for about 13% of total federal spending. Only Social Security costs more.
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