The Government Just Proposed 36 New Ways to Charge for Healthcare AI
Medicare's new plan to make efficiency more expensive.
In my book, The Lean Health Plan, I detail how the American healthcare system operates entirely outside of normal economic gravity. In any functioning free market, technology is a deflationary force. When you introduce a new efficiency, operational costs drop and competition passes those savings to the consumer, but in our multi-trillion-dollar healthcare system, a new efficiency rarely results in added value for patients or employers; it is immediately captured and extracted by the administrative machine.
We just got a perfect, terrifying preview of how this dynamic will play out in the era of Artificial Intelligence.
Right before the holiday, the Centers for Medicare and Medicaid Services (CMS) dropped its proposed 2027 Hospital Outpatient Prospective Payment System rule. Buried inside it is a brand-new payment category for algorithmically driven care called Software as a Medical Service (SaMS). The agency has designated 36 new billing codes specifically for software-based technologies that support clinical decision-making.
This is the exact opposite of what we need. We need to demand that the free market, not the government, figure out where the value in AI lies. Right now, it is beyond crazy. This technology is in its infancy. If ever there was a more clear example of how we keep enabling one folly after another, a tragic pattern I trace through the history of our system in PART I of The Lean Health Plan, this is it.
As I explain in Artificial Intelligence Will Revolutionize Medicine But May Bankrupt Us In the Process, instead of expecting AI to make care faster, leaner, and cheaper, the bureaucratic apparatus is already working overtime to figure out how to charge more for it. The industry loves to sell these tools under the seductive promise that they will reduce doctor burnout and streamline charting, but a more “efficient” doctor in a fee-for-service model does not mean your bills come down. The administrative machine does not tolerate idle time.
Hospital administrators will simply use that newfound efficiency to increase throughput—seeing more patients and logging more codes with each passing hour. The underlying clinical care doesn’t change, but the “allowed amount” billed to the health plan certainly will.
The cavalry isn’t coming to save us from this technological upcoding. As I emphasize throughout The Lean Health Plan, we must stop treating everyday medical maintenance like a catastrophic insurance event. To survive, employers must adopt a truly lean health plan. We must go further than simply unbundling; we have to take back control and literally get 85% or more of claims completely out of the plan by moving to a direct procurement system. Until we rip the legacy claims chassis out by its roots, the administrative machine will continue to turn every technological miracle into another tollbooth.