Medicare Spending On Artificial Intelligence: Payment Policy Is Only Part Of The Story

Abstract

The rapid growth of clinical artificial intelligence (AI) applications poses a unique challenge to Medicare's prospective payment systems, with two issues at the forefront. First, the productivity gains from AI may dwarf those of previous non-AI innovations, but they are uncertain and will take time to realize. Second, AI forces the Centers for Medicare and Medicaid Services (CMS) to think very differently about software. For many clinical applications of AI, the software itself is the service. It does not make sense to treat this expense as overhead, but direct reimbursement will likely exceed the true cost of using AI. Finally, although CMS currently pays for only a small fraction of all AI-enabled medical devices approved by the Food and Drug Administration, Medicare may already be spending more on AI as a result of additional AI-generated findings and follow-up care.

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