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Did an algorithm deny your Medicare Advantage care? Your appeal rights, Sioux Falls 2026

CMS's own 2024 rule says a software tool can help review your case, but it can't be the whole reason you were told no.

Big Sioux Benefits Data Desk

Published October 8, 2026 · 21 min read · Sourced from CMS.gov and KFF

If your Medicare Advantage plan denied a hospital stay, a rehab stay, a scan, or a procedure, federal rule says that denial cannot legally rest on an algorithm or AI tool alone — your plan is required to weigh your own medical history and your doctor's recommendations, not just a prediction built from other people's data. Most people never hear this. The denial letter rarely says "a tool flagged this," and most denials are never appealed at all.

Every figure in this guide comes from a primary source fetched this week: KFF's January 2026 analysis of CMS prior authorization data, Medicare.gov's own appeals guidance, CMS's own February 2024 memo clarifying its Medicare Advantage rule, the Federal Register rule itself, and a 2022 HHS Office of Inspector General review. No numbers from memory.

Did a computer say no before a person did?

A denial letter from a Medicare Advantage plan almost never explains exactly how the decision was made. It names a service, a date, and a reason — "not medically necessary," "does not meet coverage criteria," or something close to it — and leaves the actual mechanics out. For a growing number of denials nationwide, some part of that mechanics involves software that predicts an outcome, like how many days a hospital or rehab stay should last, before a person signs off on it.

That's not automatically improper. Plans are allowed to use software and predictive tools to help manage a huge volume of requests — 52.8 million of them industry-wide in 2024 alone, as you'll see below. What federal rule does not allow is for that software to be the entire reason your care gets cut short or denied, with no individualized look at your actual condition, your actual doctor's notes, or your actual medical history.

That distinction — assist versus decide — is the subject of a real, specific, citable federal rule. Here in Sioux Falls, Brandon, Tea, and across Siouxland, it matters most at the moments that already feel the most vulnerable: a hospital stay that gets cut short, a rehab stay after a hip or knee replacement that ends sooner than your surgeon recommended, or a scan your doctor ordered that comes back denied.

What counts as an "algorithm denial"

A few terms do a lot of work in this topic, and they're worth pinning down before anything else.

• Prior authorization is a Medicare Advantage plan's requirement that a service be approved before you receive it, used to confirm medical necessity before the plan pays.
• Utilization management is the broader set of tools and processes — prior authorization, concurrent review during a hospital stay, and post-payment claim review — a plan uses to decide what it will cover and for how long.
• Organization determination is Medicare's formal term for any decision your Medicare Advantage plan makes about whether to pay for, provide, or continue a service. A denial is one type of organization determination, and it's the decision you have the right to appeal.
• Medical necessity is the standard a service has to meet for Medicare to cover it — reasonable and necessary for diagnosing or treating your condition, under the law at section 1862(a)(1) of the Social Security Act.

An "algorithm or software tool," in CMS's own words, is anything from a simple decisional flowchart to a more complex predictive system — for example, one that estimates how long a hospital or skilled nursing stay should last, based on patterns across a large population of prior cases. The key legal question isn't whether a tool was used at all. It's whether the tool's output alone became the basis for your denial, without anyone individually re-checking it against your own case.

The CMS rule, in its own words

On February 6, 2024, CMS sent a memo to every Medicare Advantage Organization and Medicare-Medicaid Plan in the country, answering questions about how its CY2024 final rule (CMS-4201-F, finalized April 2023) applies in practice. Question 2 in that memo asks directly: do the new coverage-criteria rules mean plans can't use algorithms or AI to make coverage decisions? CMS's answer is worth reading close to verbatim, because it's more specific than most summaries of it:

CMS ties that requirement directly to an existing regulation, 42 CFR § 422.101(c), which requires a Medicare Advantage plan to base a medical necessity determination on your individual circumstances — your medical history, your physician's recommendations, and your clinical notes — not on a prediction drawn from a broader population. The memo then walks through exactly where this matters most:

Source: CMS — HPMS Memo, “Frequently Asked Questions related to Coverage Criteria and Utilization Management Requirements in CMS Final Rule (CMS-4201-F)” (Feb. 6, 2024), questions 2 and 7.

The memo also addresses bias directly, stating that CMS is "concerned that algorithms and many new artificial intelligence technologies can exacerbate discrimination and bias," and reminding plans of their nondiscrimination obligations under Section 1557 of the Affordable Care Act. None of this bans algorithms or AI from Medicare Advantage. It bans them from being the sole decision-maker.

Where this shows up in real Sioux Falls care

The clearest, most common place this rule matters locally is post-acute care — the stretch of recovery after a hospital stay, often at a skilled nursing facility or through home health, that follows something like a hip or knee replacement. We cover the coverage rules for that surgery in detail in our hip and knee replacement guide, and the skilled nursing side in our nursing home coverage guide — both describe the clinical side of these stays; this guide covers what happens when the plan tries to end one early.

Here's the pattern CMS's memo was written to address: your surgeon orders a rehab stay at a skilled nursing facility after a joint replacement. A length-of-stay prediction tool, trained on a large pool of past patients, estimates you'll be ready for discharge in a set number of days. If the plan issues a notice ending your covered stay on that predicted date — without a clinician re-checking your actual recovery, your actual mobility, and your actual discharge readiness that week — that's the exact scenario CMS's memo says is not compliant. The prediction can inform the review. It cannot replace it.

The same logic applies to inpatient hospital admissions. If a plan denies an inpatient admission or downgrades it to an observation stay based only on a software estimate, without weighing the complex medical factors actually documented in your record that week, CMS's memo says that falls outside what § 422.101(c) allows.

How often this actually happens

Nationally, the scale of Medicare Advantage utilization management is large enough that even a small error rate affects a lot of people. KFF's analysis of CMS's own 2024 data found Medicare Advantage insurers made 52.8 million prior authorization determinations that year, denying 4.1 million of them — 7.7% — in full or in part.

The part of that data that matters most for anyone holding a denial letter today: only 11.5% of denials were appealed at all in 2024, but among the ones that were, 80.7% were fully or partially overturned in the enrollee's favor. Put plainly — most people who get denied don't appeal, and most of the small group who do get at least part of what they asked for.

An older federal review adds useful, if dated, context. In April 2022, the HHS Office of Inspector General published findings from a case-file review of a stratified random sample of 250 prior authorization denials and 250 payment denials, issued by 15 of the largest Medicare Advantage organizations during one week in June 2019. Reviewers found that 13% of the prior authorization denials and 18% of the payment denials in that sample actually met Medicare's own coverage rules — meaning those requests likely should have been approved. That sample is from 2019 and the report is from 2022, well before CMS's 2024 algorithm guidance existed, so treat it as historical context for why CMS tightened the rule, not as a current error rate.

By comparison, Original Medicare runs prior authorization on a much smaller scale: 628,243 reviews completed in fiscal year 2024, with 22.9% — 143,705 requests — denied, per the same KFF analysis. The review processes aren't directly comparable (Original Medicare's figures reflect a narrower set of services subject to prior authorization), but the sheer size of the Medicare Advantage utilization-management system is part of why CMS felt the need to spell out, in writing, what a tool can and can't decide on its own.

The five-level appeal ladder

Every Medicare Advantage organization determination — whether or not an algorithm was involved — comes with the same formal appeal structure, per Medicare.gov's own guidance. Knowing the ladder before you need it is the difference between a frustrating phone call and an actual challenge to the decision.

Source: Medicare.gov — Appeals in Medicare health plans, 2026 dollar thresholds.

Two timing details are easy to miss. First, the 65-day Level 1 deadline is measured from the date printed on the denial notice, not from the date you read it. Second, if waiting for a standard decision could seriously jeopardize your health, you or your doctor can request an expedited appeal at Level 1 or Level 2, which generally must be decided within 72 hours — a real option if you're mid-recovery and a rehab stay is about to be cut short.

How to write an appeal that cites the rule

You don't need a lawyer for a Level 1 or Level 2 appeal, and you don't need to prove an algorithm was involved to win. What helps is writing an appeal that's specific rather than general. Here's the method, in order:

1. Request the plan's written rationale, in full. A denial notice is required to give you a specific reason. If the explanation reads like a generic estimate rather than a discussion of your own medical records, ask the plan in writing for the complete basis of the determination, including any internal coverage criteria cited.
2. Get your medical records and your doctor's recommendation in writing. The single strongest thing you can add to an appeal is a letter from your treating physician addressing your specific, current condition — exactly the kind of individualized evidence CMS's rule says a plan is required to weigh.
3. Name the standard the plan has to meet. You can cite 42 CFR § 422.101(c) directly, and note that CMS's own February 2024 guidance states a prediction or algorithm "alone must not be used as the basis" to deny or terminate coverage for post-acute services, or to deny an inpatient admission.
4. Ask the direct question. Your appeal can explicitly ask whether a software tool or algorithm was used in the determination, and whether a clinician with appropriate expertise reviewed your individual case before the denial was issued — both are things CMS requires the plan to be able to answer.
5. File before the 65-day window closes. You can supplement an appeal with more records after filing; you generally can't file after the deadline without a good-cause exception. When in doubt, file first and gather documents second.

That's the whole method, and it costs nothing to use yourself. Where people most often want a second pair of eyes is step 1 — figuring out whether a denial letter's reasoning is actually specific to their case, or whether it reads like a population-level estimate dressed up as a decision.

A worked example: Frank's knee replacement

Here's how this plays out for a composite situation, built from the rule above rather than from any one client's details. Call him Frank. He's 71, lives in Tea, and had a total knee replacement at a Sioux Falls hospital. His surgeon ordered 14 days of skilled nursing rehab before he'd be safe to return home alone.

Nine days in, Frank's Medicare Advantage plan issued a Notice of Medicare Non-Coverage, ending his covered stay. The stated reason: his case had reached the "expected length of stay" for his procedure type. No new exam was mentioned. No note from the facility's own physical therapist, who had documented that Frank still needed a walker and couldn't yet safely manage stairs, appeared anywhere in the notice.

Frank's daughter, helping from out of state, called the skilled nursing facility and asked for its own clinical notes from that week, then filed a Level 1 appeal citing them — along with a short letter from the facility's physical therapist stating Frank had not yet met safe-discharge criteria. The appeal also asked directly whether a length-of-stay prediction tool had been used, and noted that under CMS's own February 2024 guidance, such a prediction "alone must not be used as the basis" to end post-acute coverage. The plan's reconsideration reversed the termination, extending Frank's covered stay by five more days — the time his own treatment team said he actually needed.

What this rule doesn't cover

It's worth being precise about the edges of this rule, because two related but different issues get confused with it often.

This isn't the same as a retroactive denial. CMS finalized a separate 2026 rule limiting when a Medicare Advantage plan can reopen and reverse an already-approved hospital admission after the fact. We cover that rule, and how it differs from an algorithm-driven initial denial, in our retroactive denial guide.

This isn't the WISeR pilot. CMS has separately tested a contested AI-assisted prior authorization model for certain services under Original Medicare, called WISeR. That pilot explicitly does not include South Dakota among its test states — we cover who it actually affects in our WISeR guide, mainly relevant here if you travel or winter somewhere the pilot runs.

This doesn't guarantee your appeal wins. A plan can still deny your care for a reason that has nothing to do with an algorithm — a service genuinely not covered, a network issue, or documentation that genuinely doesn't support medical necessity. Citing CMS's rule strengthens an appeal where an individualized review seems to be missing; it isn't a blanket argument against every denial.

How a local advisor helps with this

We can't represent you in a formal appeal — that's between you, your plan, and, if it goes far enough, an administrative law judge. Where a conversation with us tends to help is earlier and later in the process: reading a denial letter with you to see whether it actually addresses your individual case, and helping you compare Medicare Advantage plans — scoped to the plans we offer in the Sioux Falls area — on more than premium alone before you're ever in this position.

CMS's own Star Ratings, published every year, are one public signal of a plan's overall quality and member experience, including complaints and appeals handling at a broad level. Here are the five standard Medicare Advantage plans open to anyone with Medicare in Minnehaha County for 2026:

Source: CMS Medicare Advantage / Part D Landscape (PY2026) & CMS Medicare Advantage & Part D Star Ratings (2026), Minnehaha County, 2026.

Both local hospital systems carry strong CMS quality ratings — Sanford USD Medical Center at 5 stars and Avera McKennan at 4 stars, per CMS Hospital Compare — so network fit, not hospital quality, is usually the real deciding factor between them when you're comparing plans ahead of a procedure.

Big Sioux Benefits is a licensed independent insurance agency here in Sioux Falls. We don't work for CMS, any plan's utilization management department, or any single carrier — carriers pay us, not you, so the conversation costs nothing. We do not offer every plan available in your area; any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.

What to watch before this year's enrollment period

1. If you're holding a denial notice right now, check the date on it before anything else — your 65-day Level 1 window starts there.
2. Request your plan's full written rationale for any denial, including whether a software or predictive tool contributed to it.
3. Get your treating physician's current recommendation in writing before you file — it's the single strongest piece of an appeal.
4. This year's Medicare Open Enrollment runs October 15 through December 7, 2026, for coverage effective January 1, 2027 — a natural moment to review your plan's Star Rating and your own experience with it this year.
5. If cost, not denial risk, is the hesitation about appealing, remember that filing a Level 1 or Level 2 appeal costs nothing beyond your time and the documents you gather.

How we know all this: Big Sioux Benefits runs every article through a data desk that cross-references CMS's own rules and guidance memos, KFF's published analyses of CMS data, Medicare.gov's enrollment and appeals guidance, the Federal Register, and federal oversight reports — built by Strategic AI Architects. Every figure on this page was fetched from its primary source on October 8, 2026 and carries the period it covers. This is education, not legal advice; confirm your own appeal rights and deadlines with Medicare.gov or a licensed agent. We take no payment from any carrier to feature a plan.