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CMS Pumps the Brakes on AI for MA Plans

Analysis  |  By Marie DeFreitas  
   February 12, 2024

CMS is cracking down on AI use in Medicare Advantage.

Medicare Advantage (MA) insurers can use AI and algorithms to assist in making coverage decisions, but CMS is warning the insurers that they must follow the agency’s internal benefits requirements and nondiscrimination rules under the ACA and lawfully deny care.

This recent warning aimed at  MA insurers addressed concerns surrounding coverage criteria and utilization management requirements from CMS’ final rule policy that detailed policy and technical changes to MA; the rule was originally issued last April.

"We are concerned that algorithms and many new artificial intelligence technologies can exacerbate discrimination and bias," CMS wrote in the memo. "MA organizations should, prior to implementing an algorithm or software tool, ensure that the tool is not perpetuating or exacerbating existing bias, or introducing new biases." 

 What exactly is CMS saying?

In the memo CMS highlights a few important items, including their clarification between an algorithm and an AI model.

It defined AI as: “a machine-based system that can — for a given set of human-defined objectives — make predictions, recommendations or decisions influencing real or virtual environments,” and algorithms as technology that “can imply a decisional flow chart of a series of if-then statements."

CMS detailed that while algorithms can aid in predicting the length-of-stay for post-acute service, they cannot make the decision of terminating coverage. Regarding inpatient admissions, the agency stated that algorithms and AI alone cannot be used as a reason to deny admission or downgrade an observation stay.

CMS also stated that while payers may use algorithms to assist in coverage decisions, they must ensure the tech is compliant with the agency’s coverage decision requirements. MA payers cannot make decisions based on a larger data set, and decisions must be based on an individual patient’s medical history, provider recommendations, and clinician notes.

How did we get here?

In 2023 the federal government told MA insurers repeatedly that they cannot use AI to deny care. We saw three giants Cigna, Humana and UnitedHealthcare faced with lawsuits for allegedly using AI to wrongfully deny claims.

The issue has even garnered attention from senators.

At a recent hearing Senator Elizabeth Warren called out MA insurers for wrongfully using AI to profit off of deny claims. “Without significant guardrails in place, these (AI) algorithms will continue to harm patients while padding the private insurers’ profits,” said Warren.

Senator Warren questioned Michelle M. Mello, JD, PhD, professor of health policy and law at Stanford University, about what measures CMS should take to ensure that private insurers are not leveraging AI tools to unlawfully deny care.

“CMS plans to beef up its audits in 2024 and specifically look at these denials. That seems extremely important. But beyond that, I think additional clarification is needed to the plans about what it means to use algorithms properly or improperly,” Mello stated. “For example, for electronic health records, it didn’t just say ‘make meaningful use of those records,’ it laid out standards for what meaningful use was.”

Senator Warren commented: “Until CMS can verify that AI algorithms reliably adhere to Medicare coverage standards, by law, then my view on this is: CMS should prohibit insurance companies from using them in their MA plans for coverage decisions. They’ve got to prove they work before they put them in place.”

MA payers must ensure they stay on top of these guidelines to avoid future scrutiny over denials and AI use. CMS has also created a website as an AI resource for insurers.

AI is just one of the many items recently shaking up the MA space. In addition to evolving tech, check out three other items MA payers will need to stay on top of this year.

Marie DeFreitas is the finance editor for HealthLeaders.


CMS is warning Medicare Advantage insurers not to use AI to deny care.

The agency also provided lengthy guidance on topics such as length-of-stay and coverage determinations.

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