Prior authorization is a method third party payers use to avoid unnecessary care or unnecessarily expensive care. I have told this story many times about how prior authorization saved us $2,300. My wife’s doctor ordered a CT scan, and her office clerk scheduled it at a local hospital outpatient clinic. The hospital had to seek prior authorization from BlueCross BlueShield of Texas. When the hospital called to schedule the CT scan after it was approved, they informed Cheryl her cost would be about $2,700. It was due at time of service. Upon hearing this I quickly found a radiology clinic that charged $403.
While prior authorization saved us $2,300 and saved BlueCross as well, Doctors and most patients generally hate prior authorization. Congress and state governments have tried to limit the practice and reform the use of prior authorization. Recently, the U.S. Department of Health and Human Services cracked down on the over-use of prior authorization, but here is where it gets interesting. Medicare Advantage plans – the popular Medicare plans run by private insurers – are often accused of using prior authorization as a rationing tool to save money. Now Original Medicare is planning a pilot projects to do the same. The following is from Kiplinger:
The Centers for Medicare and Medicaid Services (CMS) will implement prior authorization requirements for certain traditional fee-for-service Medicare services in six states starting next year.
This change will go into effect on January 1, 2026, when the CMS starts to “test ways to provide an improved and expedited prior authorization process relative to Original Medicare’s existing processes, helping patients and providers avoid unnecessary or inappropriate care and safeguarding federal taxpayer dollars,” per a CMS press release. The model being implemented in 2026 builds on a change to prior authorizations rolled out by the Department of Health and Human Services (HHS) and CMS on June 23, 2025.
Six states — New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington — will begin using the Wasteful and Inappropriate Service Reduction (WISeR) Model to perform prior authorization evaluations, CMS announced in a Federal Register notice. This will apply to 17 services that CMS says “are vulnerable to fraud, waste and abuse.”
It is about time HHS took waste, fraud, and abuse in Medicare more seriously. Historically, Original Medicare required prior authorization for only a few procedures. The federal program has always pursued a policy of pay and chase. That is, pay charges quickly and try (in vain) to retrieve looted funds when fraudsters take advantage of the system. HHS also announced the agency has begun using AI tools to root out fraud.
As part of the goal of rooting out waste and fraud, the Justice Department conducted a 2025 National Health Care Fraud Takedown. Results were released on June 30, 2025, and included charges against more than 300 defendants who were accused of a range of health care fraud schemes.
There are currently 17 medical services that will be subject to prior authorization. Some of these are several types of nerve stimulation of dubious merit. Criticism quickly came from both the Democrats and Republicans. As an aside, when Medicare attempts to rein-in abusive spending Members of Congress from that state often intervein. In the hands of the federal government prior authorization is likely to be poorly managed. However, the initiative is positive if for no other reason than it signals a desire to do something… anything… to combat waste, fraud, and abuse. For example, a recent fraudulent scheme that took place in Arizona cost taxpayers $1 billion. It involved unnecessary skin grants.
To make matters worse, according to the indictment, the defendants are alleged to have targeted Medicare beneficiaries, many of whom were terminally ill in hospice care.
Patients on Medicare hospice care are not supposed to receive therapeutic care, only palliative care. Why didn’t a computer system catch and immediately reject expensive care for hospice patients? The answer is because Medicare does not require prior authorization, even for hospice patients not allowed to receive therapeutic care. Medicare has a long way to go, but perhaps the agency is moving in the right direction.
Kiplinger: Prior Authorization Coming to Traditional Medicare Starting in 2026
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