CMS Launches AI-Driven Prior Authorization Pilot in Medicare, Raising Industry Concerns

The Centers for Medicare & Medicaid Services (CMS) is launching the Wasteful and Inappropriate Services Reduction (WISeR) Model in January 2026, a pilot program that integrates AI-driven prior authorization into traditional Medicare for certain vulnerable health services across six states: Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington. This program aims to reduce Medicare spending on medical services identified as prone to fraud, waste, abuse, or inappropriate use, including knee arthroscopy for osteoarthritis and certain nerve stimulation services. The private companies participating in WISeR will use AI technology to review prior authorization requests and receive financial incentives based on the money saved by denying unnecessary or non-covered services. Traditionally, prior authorization, common in Medicare Advantage plans but not in traditional Medicare, requires insurer approval before certain medical procedures or drugs are administered. AI-powered prior authorization has faced significant criticism across the healthcare sector for contributing to care delays, administrative burdens, and negative health outcomes, prompting legislative and regulatory responses at both state and federal levels. Despite this, CMS maintains that licensed clinicians will make final coverage decisions, and the program includes performance metrics to incentivize timely and accurate responses without disrupting care. Physicians and medical associations from the affected states have expressed concerns about the increased administrative workload and potential barriers to patient care, particularly emphasizing the difficulties encountered in Medicare Advantage prior authorization processes. They warn that increased denials and lengthy appeals can detract from patient care. Studies also highlight issues of improper denials in prior authorization reviews under Medicare Advantage, raising questions about the financial incentive model for denials within WISeR. Supporters of WISeR emphasize the necessity of cost control in Medicare, which is the largest healthcare purchaser nationally, with expenditures expected to double in the next decade. The program targets low-value services that inflate healthcare spending without benefiting patients. However, opposition includes a bipartisan group of congressional representatives seeking to repeal the program, citing concerns about added bureaucracy for seniors and healthcare providers. CMS has selected six private technology companies to operate the AI programs, including venture-backed firms with ties to major insurers, raising further concerns about potential conflicts of interest influencing denial rates. CMS officials have assured that patient and physician satisfaction, as well as turnaround times, will be key in evaluating vendor performance to prevent profit-driven denials. Overall, the WISeR Model represents a significant shift in Medicare’s approach to managing care utilization through AI-enabled prior authorization, stirring debate on administrative burden, patient access, and cost containment. The outcome of legislative efforts and stakeholder feedback may influence the program's future and inform broader policy on AI applications in healthcare insurance authorization processes.