Driving Equitable Healthcare Innovations through AI for Medicaid

Artificial intelligence (AI) has transformative potential in the public health space – in an era when millions of Americans have limited access to high-quality healthcare services, AI-based tools and applications can enable remote diagnostics, drive efficiencies in implementation of public health interventions, and support clinical decision-making in low-resource settings. However, innovation driven primarily by the private sector today may be exacerbating existing disparities by training models on homogenous datasets and building tools that primarily benefit high socioeconomic status (SES) populations. 

To address this gap, the Center for Medicare and Medicaid Innovation (CMMI) should create an AI for Medicaid (AIM) Initiative to distribute competitive grants to state Medicaid programs (in partnership with the private sector) for pilot AI solutions that lower costs and improve care delivery for rural and low-income populations covered by Medicaid. 

Challenge & Opportunity

In 2022, the United States spent $4.5 trillion on healthcare, accounting for 17.3% of total GDP. Despite spending far more on healthcare per capita compared to other high-income countries, the United States has significantly worse outcomes, including lower life expectancy, higher death rates due to avoidable causes, and lesser access to healthcare services. Further, the 80 million low-income Americans reliant on state-administered Medicaid programs often have below-average health outcomes and the least access to healthcare services. 

AI has the potential to transform the healthcare system – but innovation solely driven by the private sector results in the exacerbation of the previously described inequities. Algorithms in general are often trained on datasets that do not represent the underlying population – in many cases, these training biases result in tools and models that perform poorly for racial minorities, people living with comorbidities, and people of low SES. For example, until January 2023, the model used to prioritize patients for kidney transplants systematically ranked Black patients lower than White patients – the race component was identified and removed due to advocacy efforts within the medical community. AI models, while significantly more powerful than traditional predictive algorithms, are also more difficult to understand and engineer, resulting in the likelihood of further perpetuating such biases. 

Additionally, startups innovating the digital health space today are not incentivized to develop solutions for marginalized populations. For example, in FY 2022, the top 10 startups focused on Medicaid received only $1.5B in private funding, while their Medicare Advantage (MA)-focused counterparts received over $20B. Medicaid’s lower margins are not attractive to investors, so digital health development targets populations that are already well-insured and have higher degrees of access to care.

The Federal Government is uniquely positioned to bridge the incentive gap between developers of AI-based tools in the private sector and American communities who would benefit most from said tools. Accordingly, the Center for Medicare and Medicaid Innovation (CMMI) should launch the AI for Medicaid (AIM) Initiative to incentivize and pilot novel AI healthcare tools and solutions targeting Medicaid recipients. Precedents in other countries demonstrate early success in state incentives unlocking health AI innovations – in 2023, the United Kingdom’s National Health Service (NHS) partnered with Deep Medical to pilot AI software that streamlines services by predicting and mitigating missed appointment risk. The successful pilot is now being adopted more broadly and is projected to save the NHS over $30M annually in the coming years. 

The AIM Initiative, guided by the structure of the former Medicaid Innovation Accelerator Program (IAP), President Biden’s executive order on integrating equity into AI development, and HHS’ Equity Plan (2022), will encourage the private sector to partner with State Medicaid programs on solutions that benefit rural and low-income Americans covered by Medicaid and drive efficiencies in the overall healthcare system. 

Plan of Action

CMMI will launch and operate the AIM Initiative within the Department of Health and Human Services (HHS). $20M of HHS’ annual budget request will be allocated towards the program. State Medicaid programs, in partnership with the private sector, will be invited to submit proposals for competitive grants. In addition to funding, CMMI will leverage the former structure of the Medicaid IAP program to provide state Medicaid agencies with technical assistance throughout their participation in the AIM Initiative. The programs ultimately selected for pilot funding will be monitored and evaluated for broader implementation in the future. 

Sample Detailed Timeline

• 0-6 months:
  • HHS Secretary to announce and launch the AI for Medicaid (AIM) Initiative within CMMI (e.g., delineating personnel responsibilities and engaging with stakeholders to shape the program)
  • HHS to include AIM funding in annual budget request to Congress ($20M allocation)

• 6-12 months:
  • CMMI to engage directly with state Medicaid agencies to support proposal development and facilitate connections with private sector partners
  • CMMI to complete solicitation period and select ~7-10 proposals for pilot funding of ~$2-5M each by end of Year 1
• Year 2-7: Launch and roll out selected AI projects, led by state Medicaid agencies with continued technical assistance from CMMI
• Year 8: CMMI to produce an evaluative report and provide recommendations for broader adoption of AI tools and solutions within Medicaid-covered and other populations

Risks and Limitations

• Participation: Success of the initiative relies on state Medicaid programs and private sector partners’ participation. To mitigate this risk, CMMI will engage early with the National Association of Medicaid Directors (NAMD) to generate interest and provide technical assistance in proposal development. These conversations will also include input and support from the HHS Office of the Chief AI Officer (OCAIO) and its AI Council/Community of Practice. Further, startups in the healthcare AI space will be invited to engage with CMMI on identifying potential partnerships with state Medicaid agencies. A secondary goal of the initiative will be to ensure a number of private sector partners are involved in AIM.
• Oversight: AI is at the frontier of technological development today, and it is critical to ensure guardrails are in place to protect patients using AI technologies from potential adverse outcomes. To mitigate this risk, state Medicaid agencies will be required to submit detailed evaluation plans with their proposals. Additionally, informed consent and the ability to opt-out of data sharing when engaging with personally identifiable information (PII) and diagnostic or therapeutic technologies will be required. Technology partners (whether private, academic, or public sector) will further be required to demonstrate (1) adequate testing to identify and reduce bias in their AI tools to reasonable standards, (2) engagement with beneficiaries in the development process, and (3) leveraging testing environments that reflect the particular context of the Medicaid population. Finally, all proposals must adhere to guidelines published by AI guidelines adopted by HHS and the federal government more broadly, such as the CMS AI Playbook, the HHS Trustworthy AI Playbook, and any imminent regulations.
• Longevity: As a pilot grant program, the initiative does not promise long-term results for the broader population and will only facilitate short-term projects at the state level. Consequently, HHS leadership must remain committed to program evaluation and a long-term outlook on how AI can be integrated to support Americans more broadly. AI technologies or tools considered for acquisition by state Medicaid agencies or federal agencies after pilot implementation should ensure compliance with OMB guidelines.

Conclusion

The AI for Medicaid Initiative is an important step in ensuring the promise of artificial intelligence in healthcare extends to all Americans. The initiative will enable the piloting of a range of solutions at a relatively low cost, engage with stakeholders across the public and private sectors, and position the United States as a leader in healthcare AI technologies. Leveraging state incentives to address a critical market failure in the digital health space can additionally unlock significant efficiencies within the Medicaid program and the broader healthcare system. The rural and low-income Americans reliant on Medicaid have too often been an afterthought in access to healthcare services and technologies – the AIM Initiative provides an opportunity to address this health equity gap.

This action-ready policy memo is part of Day One 2025 — our effort to bring forward bold policy ideas, grounded in science and evidence, that can tackle the country’s biggest challenges and bring us closer to the prosperous, equitable and safe future that we all hope for whoever takes office in 2025 and beyond.