Original Medicare Tests Coverage Preapprovals With an AI Twist

Medicare does cover the procedures if they’re considered medically necessary based on supporting documentation from your providers. The services include electrical nerve stimulator implants to manage chronic pain, knee arthroscopy procedures to combat pain and improve function for knee osteoarthritis, and skin and tissue substitutes, CMS says.

Skin substitutes accounted for $10.3 billion, or 83.4 percent of 2024 spending for services targeted in the pilot program, a 2,000 percent jump from 2019 when skin substitutes were 21 percent of nearly $510 million for the procedures. In contrast, spending for all the other targeted services combined was just 6.6 percent higher in 2024 than in 2019, KFF reports.

The tech companies receive a portion of the savings Medicare may realize from the extra scrutiny.

The cost of questionable and low-value care with little clinical benefit has been a longstanding problem in original Medicare, which rarely requires prior authorization except for a few items, like some durable medical equipment and certain outpatient services. 

A combined 2.7 million beneficiaries in Oklahoma and Texas, 1.5 million in Arizona and Washington state, and 1.1 million each in Ohio and New Jersey are subject to the pilot program’s requirements, McDermott+ estimates. But only those referred for one of the procedures will be affected.

AARP is “especially troubled” by the model’s financial incentives for participating tech companies. Paying them based on the program savings they generate “creates a clear incentive to deny care,” the group says in a letter this month to Abe Sutton, the CMS deputy administrator who directs the agency’s innovation center.

AARP opposes original Medicare prior authorization

“AARP strongly supports efforts to root out waste, fraud and abuse in Medicare,” says Andrew Scholnick, a government affairs director at AARP. “We believe those efforts can be carefully designed to avoid unintentionally creating delays or barriers to medically necessary care. Adding prior authorization to original Medicare, especially if outside vendors are rewarded based on how much they cut, could make it harder for people to get the treatment their doctors recommend.”

CMS counters that the tech companies “must have clinicians with appropriate expertise to conduct medical reviews and validate coverage determinations.” And licensed clinicians, not machines, will make the decision on denials, the agency says.

All recommended coverage denials “will apply standardized, transparent and evidence-based procedures to their review,” CMS says. The pilot program doesn’t require preapproval for emergency services, services that would pose a substantial risk if significantly delayed or services provided only for hospital inpatients.

In its letter to CMS, AARP affirms that AI has a constructive use in Medicare. But its purpose should be “to identify and stop fraudulent or improper payments, not to substitute for medical judgment or punish patients for fraud committed by providers.”

Questionable procedures prompt coverage approvals

“Low-value services, such as those of focus in WISeR, offer patients minimal benefit and, in some cases, can result in physical harm and psychological stress,” Sutton said in a statement. “They also increase patient costs while inflating health care spending.”

In 2019, original Medicare spent $2.5 billion to $7.3 billion on low-value services. Between 23 percent and 37 percent of Medicare beneficiaries received at least one of those services, defined as offering little to no clinical value or causing more harm than good, according to the Medicare Payment Advisory Commission.

If Medicare providers and suppliers in the six pilot-program states don’t submit a prior authorization request for a targeted service, one of the tech companies will review their claim before any payment is made “to ensure the delivered service met Medicare coverage, coding and payment criteria,” McDermott says.

If providers or suppliers have a record of compliance, they may be exempt in the future from the claim reviews, CMS says. That would allow the tech companies in the study to focus on others more at risk of delivering unnecessary care.

Medicare Advantage mixed on prior authorization

While the pilot program scrutinizes only 13 procedures, it has drawn opposition from AARP and others because of its potential to expand prior authorization in original Medicare. Medicare Advantage plans already require prior authorization, and reports indicate many use artificial intelligence to help make coverage decisions.

But problems with Medicare Advantage prior authorization have been vexing for patients and providers alike. Unlike original fee-for-service Medicare, which pays for each medical service provided, private Medicare Advantage plans from commercial insurers receive monthly payments to cover each beneficiary’s cost of care.

The payments are meant to encourage plans to provide care more efficiently. Prior authorization, like other rules that insurers use to decide what they’ll cover, helps toward that goal.

Studies, including a 2022 report from the Health and Human Services (HHS) Inspector General’s Office, have found Medicare Advantage plans denied millions of requests for care that original Medicare typically covers. This can include requests for diagnostic imaging, pain-relief injections and transfer of patients from hospitals to nursing homes.

The report from four years ago urged CMS to clarify when and how Medicare Advantage plans can use their own criteria in coverage decisions and to penalize plans that continue to impose unnecessary documentation or apply more restrictive standards than original Medicare. Since then, CMS has moved to strengthen oversight of Medicare Advantage prior authorization practices though the HHS Inspector General and the federal Government Accountability Office say problems persist.

In 2024, Medicare Advantage plans denied 7.7 percent, or 4.1 million, of 53 million prior authorization requests, according to KFF. Nearly 81 percent of the denials were overturned on appeal, but beneficiaries or their providers challenged only 11.5 percent of the 4.1 million denials — a little more than 470,000.

Some favor more accountability in original Medicare

While lawmakers, government watchdogs, providers and consumers have raised concerns about prior authorization in Medicare Advantage, some believe that original Medicare needs to add more coverage and cost constraints.

“As painful as utilization management may sometimes be, it’s delusional to think that traditional Medicare can duck more of it for much longer,” says a recent article by President and CEO Susan Dentzer of America’s Physician Groups, a Los Angeles-based professional organization that represents 340 physician groups with nearly 260,000 doctors and other clinicians.

Medicare should push for greater program accountability, Dentzer writes. And this prior authorization pilot program could be a great option.

“By introducing technology-driven prior authorization into [original Medicare], CMS may be working toward a more uniform set of administrative rules across Medicare, so that providers are subject to the same accountability standards regardless of whether they treat a beneficiary enrolled” in Medicare Advantage or original Medicare, a McDermott+ analysis says.