AI Pilot Program for Medicare Prior Authorization Faces Criticism Over Denials and Delays

Documents obtained by the Electronic Frontier Foundation (EFF) reveal that the program's implementation was rushed. For example, the vendor Innovaccer had requested a delay but proceeded with a rollout that required temporarily auto-approving all requests to avoid backlogs. Other vendors have faced significant issues, such as Zyter, which struggled with data discrepancies between Medicare Part A and Part B, and Virtix, which reported denying 53 percent of its 6,096 reviewed requests in late March.

While the program is intended to provide authorization decisions within 72 hours, many requests have taken weeks or even months. One healthcare provider reported that a surgery was delayed by nearly two months due to a complete lack of communication from the program. In response to these delays, the Centers for Medicare & Medicaid Services (CMS) placed Virtix on a Corrective Action Plan (CAP) for noncompliance with the 72-hour window, though the company stated the CAP ended in August.

A significant point of contention involves the financial structure of the program. Although HHS nominee Chris Klomp testified that contractors do not profit from denials, CMS planning documents describe a "novel payment approach" where participants are compensated based on a share of averted expenditures. Under this model, companies receive 25 percent of the estimated cost of a denied claim as compensation. While a performance-based "Aggregate Quality Score" exists to disincentivize inappropriate denials, critics note that even companies with low scores retain a large portion of the diverted funds.