Reed Smith Client Alerts

Key takeaways

  • AI and other algorithms can be used as part of making Medicare Advantage coverage decisions.
  • CMS reminds Medicare Advantage organizations that coverage must be based on individualized determinations.
  • AI and other algorithms should not perpetuate or create discriminatory and biased results.

Medicare Advantage (MA) organizations that use modern technology (such as artificial intelligence (AI)) to aid in making efficient coverage determinations are in the crosshairs of both Congress, which has held hearings and requested documents from MA organizations about AI and other algorithm use, and members who have filed class action lawsuits alleging certain MA organizations are using the technology to wrongly deny coverage. We have previously written about these lawsuits and made recommendations to help reduce risk. Last November, members of the House of Representatives urged the Centers for Medicare & Medicaid Services (CMS) to assess how MA organizations use artificial intelligence and algorithms to guide coverage decisions.

On February 6, 2024, CMS released an FAQ memo clarifying how a new Medicare rule (Final Rule) and the Affordable Care Act impact the use of AI and algorithms by MA organizations in making Medicare Advantage coverage determinations. The final rule (CMS Final Rule, CMS-4201-F) became applicable to coverage beginning January 1, 2024. It updates Medicare Advantage coverage criteria, including for basic benefits, prior authorization protocols, and the routine review of utilization management tools.

The FAQ states that MA organizations may use AI and other algorithms “in making coverage determinations,” as long as coverage determinations are made in compliance with applicable laws and regulations. It also provides guidance for MA providers and Medicare-Medicaid Plans navigating the evolving landscape of AI regulations, discussed below. It elaborates on CMS’ previous comments that accompanied the final rule, which recognized that MA organizations could use AI or algorithms to make medical necessity determinations insofar as they are “based on the circumstances of the specific individual…as opposed to using an algorithm or software that doesn't account for an individual's circumstances.” We have previously discussed this final rule in more detail in our January 17, 2024 Managed Care Outlook article.