Medicare locked into AI vendor pricing for 5 years, no cost review
S. 1399 — Health Tech Investment Act · Filed by Mike Rounds (R-SD) · 4 cosponsors · Introduced Apr 9, 2025 · Referred to committee
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What it does
This bill creates a special Medicare payment category for AI-powered healthcare services (like diagnostic algorithms cleared by the FDA). It guarantees these services receive payment based on manufacturer-submitted costs for at least 5 years, and prevents Medicare from reclassifying them to lower-paying categories during that period. It also codifies a policy allowing hospitals to bill Medicare separately for software-as-a-service tools.
Why we flagged it
The bill's core function is to guarantee favorable Medicare reimbursement for AI healthcare vendors by locking in manufacturer-determined pricing, preventing cost-based reassessment, and creating a protected payment category. This is a direct financial carve-out for the health-tech sector, not a public health measure.
- Section 3 codifies a 2022 CMS policy on software-as-a-service billing retroactively to 2023, unrelated to the algorithm-based service payment framework in Sections 1–2.
What the text implies
- Manufacturer cost submissions are not subject to independent audit or verification, allowing vendors to embed high markups into 'cost' claims that lock in for 5 years.
- The 5-year lock-in prevents Medicare from using real-world claims data to negotiate lower rates, even if the service becomes commoditized or cheaper to deliver.
The full analysis lists 5 implications of this text.
Who stands to gain
health-tech companies with FDA-cleared AI diagnostic/treatment tools; medical device manufacturers integrating AI; hospital systems adopting proprietary AI platforms