Recently, daisyNews unpacked the impact of a federal program introducing Artificial Intelligence (AI)-driven prior authorization models into Medicare, with newly erected barriers to treatment potentially harming patients’ health.

Before committing Medicare more fully to the Wasteful and Inappropriate Service Reduction (WISeR) model, currently being piloted in six states, the federal government should look to California workers’ comp, where the consequences of excessive obstacles to care have been on display for years.

California workers’ comp is a test case in how administrative holdups can hurt outcomes in a healthcare system. From under-regulated provider networks to onerous authorization requirements, California injured workers constantly face roadblocks that lengthen claim durations, raise costs, and reduce productivity.

The vendors and private equity investors fueling the friction in California comp generate profit regardless of the impacts on patient health. This also appears to be the case with WISeR, where AI contractors keep a share of the “savings” from denied care.

With WISeR, Medicare is inviting a crisis that has long plagued California workers’ comp: profitable administrative friction.

CA and the Costs of Impeding Care

For workers’ comp patients, California requires payer approval for every treatment through the Utilization Review (UR) process. Every UR decision is a chance to delay or deny necessary care.

Anecdotally, we’ve seen months- and years-long waits for treatment, as providers battle with distant UR organizations. The data tell an even more disturbing story: for the payers in our system, treatment approval rates hover around 70%, with approval rates varying across payers. When injured workers appeal UR denials, they are extremely unlikely to succeed; just 10.2% of UR appeals in 2025 resulted in the state overturning the denial.

The profit implications are undeniable, and the results of treatment delays and denials are as tragic and expensive as they are predictable.

Aside from the human cost in pain and suffering, a national study of 400,000 workers’ comp claims found that delayed treatment raised the odds of attorney involvement (a major cost driver) by nearly 20%. That same study found that attorney involvement rates in California were double the average of all states included in the study.

Meanwhile, California’s independent insurance rating bureau found that Allocated Loss Adjustment Expenses (which include legal costs and some Medical Cost Containment Programs), relative to overall losses, are twice the national median, driven largely by high rates of legal representation. Attorney expenses accounted for 37% of the system’s “frictional” costs in 2025.

Overall, California claims take twice as long as the national median to resolve, and cost twice as much in administrative expenses (including litigation and Medical-Legal battles), all while employer premiums continue to rise despite relatively low provider reimbursement rates.

Imagine that dysfunction supercharged by AI, and you’ll have a good idea of what Medicare is facing.

Friction Pays (in Comp and Medicare)

Just as in California workers’ comp, onerous prior authorization requirements financially benefit not only the vendors involved, but the private equity interests that back those vendors.

For example, according to More Perfect Union, WMP Virtix Health, a major contractor in Medicare’s WISeR pilot program, is backed by Patient Square Capital and The Carlyle Group. Regular readers will recognize Carlyle as a major backer of Sedgwick Claims Management Services, Inc., the massive workers’ comp Third-Party Administrator (TPA) accused by labor groups of being “predatory” and a “menace” to injured workers.

The largest comp TPA in the nation, Sedgwick also used to advertise that it derailed over half of all authorization requests for injured worker treatment as a way to generate a “return on investment” for its clients.  

While California law explicitly prohibits payers from financially incentivizing UR denials, the fact remains that the longer an injured worker remains injured, the more vendor services (from UR to bill review to network contracting) become justifiable. California’s excessive claim durations spell profit for Carlyle, Patient Square, and other entities that recognize how lucrative inefficiency can be.

Now, with some of the same private equity interests in play, Medicare is inviting the scourge of for-profit medical review into its infrastructure. California is a shining example of why this bright idea is doomed to fail.

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