Introduction to the Health Tech Investment Act
The Health Tech Investment Act, introduced in April 2025, proposes a significant change in how Medicare reimburses for algorithm-based healthcare services (ABHS). As AI continues to transform the medical landscape, this legislation aims to address the challenges faced by innovative healthcare technologies under Medicare’s current reimbursement structures.
Current Reimbursement Challenges
Under existing Medicare policy, AI-driven services must fit into traditional benefit categories such as diagnostic tests, imaging, or physician services. This often results in ad hoc or bundled payment approaches, leaving many digital health companies without a clear pathway for reimbursement. The lack of clear billing codes and predictable reimbursement has meant that even FDA-authorized technologies often fail to reach patients.
Key Provisions of the Health Tech Investment Act
The proposed legislation seeks to change this by:
- Defining ABHS as a distinct service category under Medicare
- Requiring CMS to place qualifying AI services into a “New Technology” Ambulatory Payment Classification (APC)
- Establishing payments based on manufacturer-submitted cost data
- Guaranteeing at least five years of separate reimbursement before transitioning to standard classifications
- Allowing reimbursement for AI services even when performed concurrently with other medical procedures
Impact on Stakeholders
Medical Device Companies
The HTIA could provide clarity and predictability for medical device companies. AI-enabled devices that have received FDA authorization could obtain a more straightforward path to reimbursement. However, not all digital health technologies are FDA-regulated devices, particularly clinical decision support software, which may not be considered devices if they meet certain criteria.
Healthcare Providers and Patients
Clinicians and hospitals could benefit from dedicated reimbursement for AI-enabled medical devices, potentially accelerating their adoption. Patients stand to gain access to faster and more accurate diagnostics, as well as targeted treatment recommendations. This could lead to more equitable access to advanced technologies across different care settings.
FDA Regulation of AI-Enabled Devices
The FDA has already authorized over 1,000 AI-enabled devices, primarily in radiology. The agency has issued guidance on Predetermined Change Control Plans and lifecycle management for these devices. While regulatory challenges remain, the FDA continues to adapt its approach to AI-enabled medical devices.
Conclusion
If enacted, the Health Tech Investment Act could modernize Medicare’s reimbursement model, recognizing the value of AI and algorithm-based services in delivering timely and effective care. This legislation has the potential to accelerate the adoption of life-changing technologies while ensuring they remain accessible and clinically valuable.
