CMS Launches AI-Driven Prior Authorization Pilot for Traditional Medicare in Washington
The Centers for Medicare and Medicaid Services (CMS) is launching a pilot program starting January 1, 2026, which will involve private artificial intelligence (AI) companies in determining prior authorization for specific low-value procedures for traditional Medicare patients in Washington state, along with Ohio, Oklahoma, Arizona, New Jersey, and Texas. This initiative aims to reduce wasteful and inappropriate Medicare procedures by requiring prior authorization for select treatments such as skin substitutes, certain steroid injections, cervical fusion, impotence treatments, knee arthroscopy for osteoarthritis, and certain nerve stimulators. Medicare clinicians will have the final authority to review and override AI decisions to ensure patient care standards are maintained. The program excludes inpatient-only and emergency services and does not affect Medicare Advantage plans, which already require prior authorizations.
Private AI companies participating in this model may receive financial incentives tied to cost savings from denied claims, raising concerns about potential claim denials. Washington state has a significant population of Medicare enrollees, with nearly 781,000 traditional Medicare beneficiaries potentially impacted. The program is part of a broader federal effort to combat Medicare waste, fraud, and abuse. At the same time, some lawmakers and healthcare professionals have voiced criticism, warning that AI-driven prior authorization may increase delays and wrongful denials of needed care. Washington legislators have introduced a bill to restrict the use of AI as the sole basis for denying or modifying healthcare services, emphasizing mandatory human oversight.
The timeline of this pilot coincides with ongoing legal scrutiny of insurance companies’ use of AI in prior authorizations amid allegations of wrongful denials. Industry stakeholders recently pledged improvements in prior authorization processes by 2026, highlighting the contentious nature of AI integration in insurance claims management. Washington's legislative caution reflects broader apprehensions about algorithmic decision-making in healthcare and underscores the importance of balancing efficiency with patient care quality.
This pilot program expands the regulatory landscape for Medicare oversight by integrating AI technology, offering a test case for future expansion or modification. The initiative aligns with CMS’s strategic objectives to modernize Medicare processes and improve cost management without compromising clinical decision-making. Effective implementation will require balancing technological capabilities with appropriate human review to mitigate risks associated with automated claim denials and ensure compliance with regulatory guidelines.