Older men play cards in a park in New York City's Chinatown in 2024. Medicare, the public health insurance for older Americans, is piloting a new prior authorization program powered by artificial intelligence that some physicians fear will result in more denials and delays in medical care for patients. (Photo by Spencer Platt/Getty Images)

A Medicare pilot program will allow private companies to use artificial intelligence to review older Americans’ requests for certain medical care — and will reward the companies when they deny it.

In January, the federal Centers for Medicare & Medicaid Services will launch the Wasteful and Inappropriate Services Reduction (WISeR) Model to test AI-powered prior authorizations on certain health services for Medicare patients in six states: Arizona, New Jersey, Ohio, Oklahoma, Texas and Washington. The program is scheduled to last through 2031.

The program effectively inserts one of private insurance’s most unpopular features — prior authorization — into traditional Medicare, the federal health insurance program for people 65 and older and those with certain disabilities. Prior authorization is the process by which patients and doctors must ask health insurers to approve medical procedures or drugs before proceeding.

Adults over 65 generally have two options for health insurance: traditional Medicare and Medicare Advantage. Both types of Medicare are funded with public dollars, but Medicare Advantage plans are contracted through private insurance companies. Medicare Advantage plans tend to cost less out of pocket, but patients enrolled in them often must seek prior authorization for care.

AI-powered prior authorization in Medicare Advantage and private insurance has attracted intense criticism, legislative action by state and federal lawmakers, federal investigations and class-action lawsuits. It’s been linked to bad health outcomes. Dozens of states have passed legislation in recent years to regulate the practice.

In June, the Trump administration even extracted a pledge from major health insurers to streamline and reduce prior authorization.

“Americans shouldn’t have to negotiate with their insurer to get the care they need,” U.S. Health and Human Services Secretary Robert F. Kennedy Jr. said in a June statement announcing the pledge. “Pitting patients and their doctors against massive companies was not good for anyone.”

Four days after the pledge was announced, the administration rolled out the new WISeR program, scheduled to take effect in January. It will require prior authorizations only for certain services and prescriptions that the Centers for Medicare & Medicaid Services has identified as “particularly vulnerable to fraud, waste, and abuse, or inappropriate use.” Those services include, among other things, knee arthroscopy for knee osteoarthritis, skin and tissue substitutes, certain nerve stimulation services and incontinence control devices.

The companies get paid based on how much money they save Medicare by denying approvals for “unnecessary or non-covered services,” CMS said in a statement unveiling the program.

The new program has alarmed many physicians and advocates in the affected states.

“In concept, it makes a lot of sense; you don’t want to pay for care that patients don’t need,” said Jeb Shepard, policy director for the Washington State Medical Association.

“But in practice, [prior authorization] has been hugely problematic because it essentially acts as a barrier. There are a lot of denials and lengthy appeals processes that pull physicians away from providing care to patients. They have to fight with insurance carriers to get their patients the care they believe is appropriate.”

CMS responded to Stateline’s questions by providing additional information about the program, but offered few details on what the agency would do to prevent delays or denials of care. It has said that final decisions on coverage denials will be made by “licensed clinicians, not machines.” In a bid to hold the companies accountable, CMS also incentivizes them for making determinations in a reasonable amount of time, and for making the right determinations according to Medicare rules, without needing appeals.

In the statement announcing the program, Abe Sutton, director of the CMS Innovation Center, said the “low-value services” targeted by WISeR “offer patients minimal benefit and, in some cases, can result in physical harm and psychological stress. They also increase patient costs while inflating health care spending.”

A vulnerable group

Dr. Bindu Nayak is an endocrinologist in Wenatchee, Washington, a city near the center of the state that bills itself as the “Apple Capital of the World.” She mainly treats patients with diabetes and estimates 30-40% of her patients have Medicare.

“Medicare recipients are a vulnerable group,” Nayak told Stateline. “The WISeR program puts more barriers up for them accessing care. And they may have to now deal with prior authorization when they never had to deal with it before.”

Nayak and other physicians worry the same problems with prior authorizations that they’ve seen with their Medicare Advantage patients will plague traditional Medicare patients. Nayak has employees on staff whose only role is to handle prior authorizations.

More than a quarter of physicians nationwide say prior authorization issues led to a serious problem for a patient in their care, including hospitalization or permanent damage, according to the most recent report from the American Medical Association.

And some patients are unfairly denied treatment. Private insurers have denied care for people with Medicare Advantage plans even though their prior authorization requests met Medicare’s requirements, according to an investigation from the U.S. Department of Health and Human Services published in 2022. Investigators found 13% of prior authorization denials were for requests that should have been granted.

But supporters of the new model say something must be done to reduce costs. Medicare is the largest single purchaser of health care in the nation, with spending expected to double in the next decade, according to the Medicare Payment Advisory Commission, an independent federal agency. Medicare spent as much as $5.8 billion in 2022 on services with little or no benefit to patients.

Congress pushes back

In November, congressional representatives from Ohio, Washington and other states introduced a bill to repeal the WISeR model. It’s currently in committee.

“The [Trump] administration has publicly admitted prior authorization is harmful, yet it is moving forward with this misguided effort that would make seniors navigate more red tape to get the care they’re entitled to,” U.S. Rep. Suzan DelBene, a Washington Democrat and a co-sponsor of the bill, said in a November statement.

Physician and hospital groups in many of the affected states have backed the bill, which would halt the program at least temporarily. Shepard, whose medical association supports the bill, said that would give CMS time to get more stakeholder input and give physicians more time to prepare for extra administrative requirements.

“Conventional wisdom would dictate a program of this magnitude that has elicited so much concern from so many corners would at least be delayed while we work through some things,” Shepard said, “but there’s no indication that they’re going to back off this.”

Adding more prior authorization requirements for a new subset of Medicare patients will tack on extra administrative burdens for physicians, especially those in orthopedics, urology and neurology, fields that have a higher share of services that fall under the new rules.

That increased administrative burden “will probably lead to a lot longer wait times for patients,” Nayak said. “It will be important for patients to realize that they may see more barriers in the form of denials, but they should continue to advocate for themselves.”

Dr. Jayesh Shah, president of the Texas Medical Association and a San Antonio-based wound care physician, said WISeR is a well-intentioned program, but that prior authorization hurts patients and physicians.

“Prior authorization delays care and sometimes also denies care to patients who need it, and it increases the hassle factor for all physicians,” he told Stateline.

Shah added that, on the flip side, he’s heard from a few physicians who welcome prior authorization. They’d rather get preapproval for a procedure than perform it and later have Medicare deny reimbursement if the procedure didn’t meet requirements, he said.

Prior authorization has been a bipartisan concern in Congress and statehouses around the country.

Last year, 10 states — Colorado, Illinois, Maine, Maryland, Minnesota, Mississippi, Oklahoma, Vermont, Virginia and Wyoming — passed laws regulating prior authorization, according to the American Medical Association. Legislatures in at least 18 states have addressed prior authorization so far this year, an analysis from health policy publication Health Affairs Forefront found. Bipartisan groups of lawmakers in more than a dozen states have passed laws regulating the use of AI in health care.

But the new effort in the U.S. House to repeal the WISeR program is sponsored by Democrats. Supporters worry it’s unlikely to gain much traction in the Republican-controlled Congress.

Shepard said his organization has talked with state and congressional representatives, met with the regional CMS office twice, and sent a letter to CMS Director Dr. Mehmet Oz.

“We’ve looked at all the levers and we’ve pulled most of them,” Shepard said. “We’re running out of levers to pull.”

Venture capital jumps in

CMS announced in November it has selected six private tech companies to pilot the AI programs.

Some of them are backed by venture capital funds that count larger insurance companies among their key investors.

For example, Oklahoma’s pilot will be run by Humata Health Inc., which is backed by investors that include Blue Venture Fund, the venture capital arm of Blue Cross Blue Shield companies, and Optum Ventures, a venture capital firm connected to UnitedHealth Group, the parent company of UnitedHealthcare. Innovaccer Inc., chosen to run Ohio’s program, counts health care giant Kaiser Permanente as an investor.

Nayak said she knows little about Virtix Health, the Arizona-based private company contracted by the feds to run Washington state’s pilot program.

“Virtix Health would have a financial incentive to deny claims,” Nayak said. “It begs the question, would there be any safeguards to prevent profit-driven denials of care?”

That financial incentive is a concern in Texas too.

“If, financially, the vendor is going to benefit by the denial, it could be a problem for our patients,” Shah said. He said that Oz, in a speech at a recent meeting of the American Medical Association, assured physicians that their satisfaction and turnaround times would be metrics that Medicare would factor into the tech companies’ payments.

Editor’s note: This story has been updated to correct a reference to Medicare Advantage and to CMS Director Dr. Mehmet Oz’s speech to the American Medical Association.

Stateline reporter Anna Claire Vollers can be reached at avollers@stateline.org.

Children are pictured at an Autism Speaks Light it Up Blue Autism Awareness Celebration at Chicago Children's Museum in April 2017. State Medicaid agencies are struggling to pay for applied behavior analysis, an intensive therapy for children with autism. (Photo by Daniel Boczarski/Getty Images for Autism Speaks)

State Medicaid agencies are struggling to pay for an intensive therapy for children with autism — and looming federal Medicaid cuts are likely to make the problem worse.

Parents of children and young adults who receive applied behavior analysis, or ABA, worry states’ cost-saving measures will make it harder for them to get vital services. About 5% of children ages 3 to 17 on public insurance have autism spectrum disorder, compared with 2% who have private insurance, according to a CDC survey.

Many families and autism therapists say ABA can help improve communication and social skills, sharpen memory and focus, and replace challenging behaviors with positive ones. ABA therapy can range from 10 to 40 hours per week in different settings, including home and school. That makes it expensive.

In 2014, the federal Centers for Medicare & Medicaid Services mandated that all state Medicaid programs cover comprehensive autism services for children. It did not explicitly require coverage of ABA, but by 2022, every state Medicaid program covered ABA.

In addition, more kids are getting diagnosed with autism as screenings increase. As a result, state spending on the service has skyrocketed. In Indiana, for example, Medicaid spending on ABA therapy grew from $21 million in 2017 to $611 million in 2023. The sharp increase has prompted Indiana, and other states, to take steps to control costs.

Meanwhile, federal auditors have begun examining states’ coverage of ABA services to ferret out fraud and abuse.

Mariel Fernandez, vice president of government affairs at the Council of Autism Service Providers, a nonprofit trade association, acknowledged that states are facing difficult choices.

“For such a costly and intensive service, the states need to explore how to best reimburse this benefit so that it’s sustainable and promotes quality,” said Fernandez, who is also a board-certified behavioral analyst. “Is [the rate] going to bankrupt Medicaid? Is it going to ensure that people are actually receiving the service?”

The Medicaid changes included in the One Big Beautiful Bill Act that President Donald Trump signed in July will increase the pressure: The law includes more than $900 billion in federal spending cuts over the next decade. Medicaid is funded jointly by the federal government and the states.

Meanwhile, Health and Human Services Secretary Robert F. Kennedy Jr. has described autism as a rapidly growing “epidemic” in the U.S. and has made it a major focus of his tenure. Kennedy has promoted the debunked theory that there’s a link between childhood vaccines and autism.

Curbing costs

Several states this year have considered curbing ABA costs by capping therapy hours, tightening provider enrollment rules, reducing reimbursement rates or changing patient eligibility rules. A bill in New York, for example, would establish a 680-hour annual cap on ABA services.

But nowhere has the issue been more prominent than in Indiana, where Medicaid has covered ABA therapy since 2016.

Governor’s group recommends ABA usage cap, rate changes as Medicaid costs rise

Historically, Indiana Medicaid has reimbursed ABA providers for most services at a rate of 40%, regardless of what they charged.

That “created some very strange incentives for a small portion of the provider network,” said Jason McManus, president of Indiana Providers of Effective Autism Treatment (InPEAT), which represents smaller ABA providers in Indiana and larger providers that operate in Indiana and elsewhere. “You had folks who were charging exorbitant amounts for the service.”

Beginning in 2024, Indiana lowered its reimbursement rate to about $68 per hour — and received plenty of pushback.

“That did have an impact on the provider community,” McManus said. “You had a lot of folks, smaller shops, who ended up closing their doors or consolidating with other organizations. So that was disruptive.”

And that year, the HHS inspector general issued a report which found that Indiana’s Medicaid program made at least $56 million in “improper” payments to ABA therapy providers in 2019 and 2020.

The state’s rapidly rising ABA costs and the federal audit prompted Republican Gov. Mike Braun to issue an executive order earlier this year creating a working group to examine ways to cut costs without compromising quality.

The group crafted recommendations to correct the problems identified in the federal audit and put ABA coverage on a financially sustainable path. Without changes in the state’s reimbursement policies, the group concluded, Indiana’s Medicaid spending on ABA therapy would reach a projected $825 million by 2029.

This month, Braun unveiled the group’s recommendations, which include the creation of a new ABA office to increase oversight and lower reimbursement rates, which the state has not yet detailed.

ABA allows people with autism “to obtain the highest level of independence that’s possible for them,” said McManus, who served on the working group.

“But from a state perspective, I can see how, if you’re purely just looking at the cost, you would say, ‘Wow, this is a cost that has grown over time, and if absent all other contexts, this is something we need to pay attention to, because it’s unsustainable.’”

Nebraska rate cut

In Nebraska, state officials also have been looking for ways to control spiraling ABA costs: Last year, Nebraska Medicaid paid out more than $85 million for ABA therapy, a surge from $4.6 million in 2020.

In July, the state announced that it would cut its Medicaid reimbursement rates for ABA, including a 48% cut to reimbursement for direct therapy provided by a behavior technician. That brought the rate to $74.80 per hour, down from about $144 per hour. Rates for therapy by physicians or other board-certified professionals also were reduced by about 37%.

Many providers saw the cuts coming, as the state has had the highest hourly reimbursement rate in the nation.

“It would be fiscally irresponsible of the state to maintain that,” said Leila Allen, vice president of external affairs at Lighthouse Autism Center, which has ABA therapy centers in Nebraska as well as in Illinois, Indiana, Iowa, Michigan and North Carolina.

Sam Wallach, president of Attain, an ABA therapy provider that operates in Nebraska and a dozen other states and Washington, D.C., said the service is “life-changing for children and families.” He views the ABA reduction as a “correction” that will make it feasible for Nebraska Medicaid to continue to cover it.

“The previous rates were well above what most Medicaid programs pay nationally, and while that created short-term benefits, it wasn’t realistic or sustainable,” Wallach said.

But some providers are taking issue with the way Nebraska went about those cuts.

For example, the state provided only 30 days’ notice before making the change. “There were providers that within 30 days had to tell their staff, ‘We’re so sorry. We have to cut your salary by ‘x’ percent in 30 days,’” Allen said.

Nebraska also didn’t examine how much it costs to provide ABA in the state, she said. The new rate is closer to what neighboring states, such as Iowa, pay. But therapists are few and far between in sparsely populated Nebraska, and families there often have to travel long distances to reach ABA providers.

“There was no cost survey to determine what the cost should be,” said Allen. “They didn’t take into account that you do have to pay people a little bit more to be able to work as behavior analysts in Nebraska.”

Finding ABA therapists in Nebraska is particularly difficult for families with older kids. Angela Gleason, executive secretary on the board of autism advocacy organization Arc of Nebraska, has a 13-year-old son with autism. She said many companies only serve very young children, up to age 6.

“So for families like mine, it’s then hard to even find a company that will serve his age and will provide that kind of support,” she said. To be able to afford therapy, her son Teddy has Medicaid coverage as his secondary insurance. ABA therapy helps him with socializing and speaking with his speech delay.

“He needs a lot more help throughout his day than a normal 13-year-old without autism might need,” Gleason said.

North Carolina court case

In North Carolina, the cost of covering autism services, including ABA, will total an estimated $639 million in fiscal 2026, up 425% from 2022, according to the state’s Medicaid agency. About five autism providers made up roughly 41% of the state’s increase in spending in fiscal year 2023-2024, according to the state.

Effective on Oct. 1, North Carolina Medicaid cut reimbursement rates for all kinds of health care services, arguing that state legislators had not budgeted enough money to keep up with rising costs. The reductions, which ranged from 3% to 10%, included a 10% cut to the reimbursement rate for autism services, including ABA therapy.

But the families of 21 children immediately sued the state Department of Health and Human Services to halt the move, arguing that it was discriminatory because it targeted children with disabilities.

Earlier this month, the families won a preliminary injunction temporarily halting the rate cut.

But families across the state are on edge as children with autism often see multiple providers — psychologists and speech language pathologists, for example — whose rate cuts were not paused, according to Allen, of Lighthouse Autism Center.

David Laxton, director of communications for the Autism Society of North Carolina, which is also a provider, said many providers won’t be able to absorb the rate reductions and continue operating.

“At some point, the math is not going to math,” Laxton said.

“It’s very stressful for families, because right now, there’s not an end in sight,” Laxton said. “There’s agreement that this [service] is very important, but there’s not been action to bring an end to the cuts.”

Stateline reporter Nada Hassanein can be reached at nhassanein@stateline.org.