Washington's Medicare Adopts AI-Driven Prior Authorization Pilot in 2026

Starting January 1, 2026, traditional Medicare recipients in Washington state will be required to obtain prior authorization for a select group of outpatient procedures under a new federal pilot program aimed at reducing fraud and waste. The program, known as Wasteful and Inappropriate Service Reduction, involves private companies utilizing AI tools to evaluate Medicare claims and determine eligibility for specific procedures considered low-value, such as nerve stimulation and arthroscopic knee surgery. These AI firms are compensated based on a share of cost savings from denied claims, a payment model that has sparked concerns among healthcare providers and lawmakers about potential care denials driven by financial incentives. Washington joins five other states in this six-year pilot, impacting over 750,000 traditional Medicare beneficiaries in the state who previously did not face prior authorization requirements for most services. The Centers for Medicare and Medicaid Services (CMS) emphasized that licensed clinicians will make final decisions on claim denials and that AI use will be monitored for transparency and alignment with Medicare rules. However, medical associations from the affected states warned that the program could delay care, restrict access, and increase administrative burdens for both patients and providers. They highlighted risks inherent in tying contractor compensation to denied services, warning it could lead to inappropriate denials of necessary care. Democratic lawmakers from Washington, including Reps. Suzan DelBene and Pramila Jayapal, introduced legislation to repeal the pilot, citing concerns about increased bureaucracy, treatment abandonment, and negative health outcomes linked to prior authorization processes. Prior studies have shown that most prior authorization denials are overturned on appeal but many patients do not pursue appeals, leading to treatment discontinuation. The private contractor for Washington, Virtix Health, maintains that AI will expedite and improve accuracy in claim processing, bridging technology with clinical expertise. Nevertheless, skepticism remains among providers due to the existing strain on the healthcare system and worries about AI-driven claim denials compromising patient care quality. This pilot marks a significant shift in Medicare administration for traditional beneficiaries, introducing AI-driven prior authorization in a program historically limited to Medicare Advantage plans.