Healthcare Finance: Democrats press CMS on AI-based claims denials in Medicare Advantage

By: Jeff Lagasse | November 6, 2023 

Democratic lawmakers in the U.S. House of Representatives have penned a letter to the Centers for Medicare and Medicaid Services, asking the federal agency to analyze artificial intelligence use in Medicare Advantage plans with an eye toward reducing claims denial rates.

In particular, representatives are concerned that CMS' 2024 final Part C and D rule, which establishes new prior authorization requirements, may not adequately address MA plans' increased reliance on artificial intelligence to guide coverage decisions. 

Most items and services in traditional Medicare are not subject to prior authorization and instead are submitted to Medicare Administrative Contractors (MACs) to process payment. The flip side is that the MA program sees widespread use of prior authorization, especially for more costly services. 

In a 2018 report, the Department of Health and Human Services' Office of Inspector General found what it called "widespread and persistent problems related to denials of care and payment in Medicare Advantage." A 2022 report found that among prior authorization requests denied by MA plans, 13% met Medicare coverage rules – meaning those services likely would have been approved for these beneficiaries under original Medicare.

Lawmakers claim in the letter that these prior authorization issues have been exacerbated by MA plans' increasing use of AI to assist on coverage determinations in certain care settings – specifically singling out software firms such as naviHealth, myNexus and CareCentrix.

This, they contend, leads to more restrictive coverage decisions than allowed under traditional Medicare rules, in addition to more frequent denials of care.


Democrats said it's unclear how CMS is evaluating and monitoring plans' use of AI tools and algorithms, but floated several suggestions to ensure proper oversight.

Specifically, they suggested that CMS require MA plans to report prior authorization data, including reason for denial, type of service, beneficiary characteristics, such as health conditions, and the timeliness of prior authorization decisions. They said the agency should compare the guidance generated by AI tools with actual MA coverage decisions, such as comparing projected lengths of stay in a skilled nursing facility with the actual approved lengths of stay approved by the MA plan.

Lawmakers also want the feds to assess the frequency of denials related to the same individual in the same episode of care by analyzing data from Quality Improvement Organizations and Independent Review Entities that process Medicare appeals to identify trends in MA appeals regarding hospital discharges, skilled nursing facility discharges and home health terminations.

In addition, they'd like to see CMS assess how, and to what extent, initial prior-authorized AI determinations for services are adjusted to account for unanticipated changes in a patients' condition and require attestation from MA plans and contractors (including care management firms such as naviHealth, myNexus) that their coverage guidelines are not more restrictive than traditional Medicare, with an enforcement mechanism in place in case that proves not to be true.

Given concerns about the homogeneity of patient testing populations when developing AI or algorithmic software in other settings, lawmakers said they'd like CMS to assess the data plans are relying on to make these determinations or assessments, and whether plans are inappropriately using race/other factors in these algorithms.

They applauded the Biden administration's recent executive order, released on October 30, to establish the first set of standards on the use of artificial intelligence in healthcare.


Medicare Advantage has steadily grown in popularity and now covers slightly more than half of all Medicare beneficiaries, and one of the drivers of this growth has been people switching from traditional Medicare, especially younger and healthier patients, according to a recent Health Affairs analysis.

Switching from fee-for-service Medicare to MA more than tripled between 2006 and 2022, whereas switching from MA to fee-for-service Medicare decreased, a trend that started to gain steam around 2019.

Prior authorization, meanwhile, has received increased attention as of late. In late July, industry groups including the American Hospital Association, American Medical Association and the Blue Cross Blue Shield Association sent a joint letter to the Centers for Medicare and Medicaid Services requesting that the government agency reconsider regulatory proposals requiring different electronic standards for data exchange during the prior authorization process.

The proposed rule, issued in December 2022, would require implementation of an HL7 FHIR standard API to support electronic prior authorization. Certain payers would need to include a specific reason when denying requests, publicly report certain prior authorization metrics and send decisions within 72 hours to seven days, depending on the level of urgency, which is twice as fast as the existing Medicare Advantage response time limit, CMS said.

The groups said that, while they appreciate the administration's efforts to reduce administrative burdens and costs within the healthcare system, including prior authorization reform, they described the regulatory proposals as "conflicting." They say they potentially set the stage for multiple prior authorization electronic standards and workflows – which would contribute to the "costly burdens that administrative simplification seeks to alleviate." (Healthcare Finance)