States, not Washington, will shape the future of AI healthcare
The future of medicine is being built in our states, not in Washington, D.C. Artificial intelligence (AI) is already changing how care is delivered, from reading mammograms and drafting clinical notes to managing billing codes and helping clinicians focus on patients rather than paperwork.
To date, more than 1,200 AI and machine learning–enabled medical devices have already been authorized or approved by the Food and Drug Administration with many more in the pipeline. But the power to decide if, how, and when these technologies reach patients often rests with state policymakers.
The federal government regulates drugs and devices. But the practice of medicine itself is a matter of state authority. That means state legislatures and medical boards, not federal bureaucracies, ultimately determine if AI can help doctors extend their reach, whether patients in small towns can access advanced digital care, and whether new technologies that cut costs and improve outcomes are allowed to thrive.
The question before the states is simple: Will they modernize their laws to unleash innovation—or let outdated regulations and new prohibitions on new AI tools that wall off their citizens from 21st-century medicine?
The States’ Opportunity
The coming decade of AI in healthcare is about reclaiming state leadership in setting the conditions for innovation and competition. The “AI in Healthcare 2025 Toolkit for State Lawmakers” identifies five major levers that states can use today to lead rather than lag: defining AI-supported and AI-driven medicine, recognizing patients’ rights to algorithmic transparency, allowing personalized N-of-1 treatments and home health monitoring, updating reimbursement for FDA-certified AI tools, and applying AI to improve oversight and accountability in healthcare spending.
These are not futuristic ideas. They are pragmatic reforms aimed at improving care, reducing costs, and ensuring that patients — not agencies or vested financial interests — remain at the center of healthcare.
Take the example of documentation and billing. AI-powered software can already generate clinical notes, automate insurance coding, and handle billing, tasks that consume up to half of a physician’s workday. For doctors in small practices or rural clinics, this means reclaiming hours for patient care.
Similarly, tools like Counsel Health, which allows patients to chat with medical AI for free and then add a human doctor to the conversation with a click — all from the patient’s phone. These kinds of innovations make healthcare far more accessible, assuming states are willing to protect these innovations and allow them to flourish.
Overwhelming Bureaucracies and Program Duplications
State health care systems are often weighed down by overlapping and fragmented programs that drain resources and confuse patients. What may have begun as well-intentioned efforts to expand access has become a maze of disconnected initiatives, each with its own applications, eligibility rules, and reporting systems.
This bureaucratic sprawl makes it difficult for patients to find the help they qualify for and nearly impossible for policymakers to track which programs work. Few, if any, states can answer basic questions, such as: How much of every healthcare dollar reaches patients? Which programs improve outcomes, and which merely sustain administration?
Applying AI to backend state program administration can help change that. AI-driven analytics and integrated data systems can identify duplication, flag inefficiencies, and provide real-time visibility into how funds are spent. AI-powered interfaces and APIs can also make benefits more transparent and easier for residents to access through a single point of entry.
By modernizing their data infrastructure and adopting AI-based tools, states can replace outdated bureaucracies with systems that are streamlined, accountable, and patient-centered, ensuring every taxpayer dollar supports better care rather than merely sustaining bloated, self-serving bureaucracies.
Reimagining Care
The timing for this type of reform is ideal. The Centers for Medicare & Medicaid Services (CMS) has launched rural health transformation initiatives that encourage states to pilot new models of care delivery and align incentives around outcomes rather than volume. These efforts open the door for integrating digital tools, telehealth, and home-based monitoring into traditional care frameworks, which are especially critical for rural and underserved communities.
Meanwhile, the rapid adoption of wearable and remote patient monitoring technologies allows clinicians to detect early warning signs of decline, enabling timely interventions before conditions worsen. These innovations don’t just improve clinical outcomes; they help people age in community longer, maintaining independence and safety while reducing avoidable hospitalizations and delaying costly transitions into long-term care facilities. For states confronting mounting Medicaid and long-term care obligations, this is not only good medicine but smart fiscal policy.
Together, CMS reforms, AI-driven analytics, and patient-centered technologies offer a once-in-a-generation opportunity for states to rebuild bloated healthcare bureaucracies into agile, transparent systems that deliver smarter care—wherever patients are, and before crises begin.
Guardrails > Handcuffs
There are justifiable concerns about AI safety and privacy. And these concerns are not to be taken lightly. But states can establish guardrails without handcuffs. Requiring informed consent when AI acts autonomously, ensuring FDA certification or other third-party validation for safety, and mandating annual reporting of outcomes for state-administered pilots and programs are all reasonable protections. What’s dangerous is the reflex to preemptively ban or overregulate, keeping patients partitioned off from better health care access and affordability.
The pace of technology is already outstripping the speed of traditional regulation. Federal agencies move slowly, and national legislation often lags reality. States, by contrast, can act nimbly and experimentally, testing frameworks that both protect patients and encourage innovation.
The guiding principle should be permissionless innovation with accountability, a distinctly American approach rooted in federalism. Let states compete to find the best balance between openness and oversight. Let patients and providers choose the models that work best for them. And let success, not bureaucracy, thrive.
Several states are already demonstrating what balanced, innovation-forward AI policy can look like in practice.
Utah has taken the national lead with a regulatory framework that balances innovation and accountability. Its AI Sandbox gives companies a space to test new tools under clear, transparent rules. Rather than banning technologies or over-regulating promising innovations, Utah’s model promotes supervised experimentation and responsible oversight—building public trust in AI while keeping innovation moving forward. Still in its early stages of implementation, Utah’s approach stands in sharp contrast to the wave of proposals across the country that rely on blanket bans or impose requirements so burdensome they risk stifling all but the largest players in the AI market.
Utah has taken the lead with a regulatory framework that balances innovation and accountability.
Texas has recently enacted a more limited AI sandbox model, scheduled to take effect in 2026. Though narrower in scope and still being developed, it reflects the same core insight: progress and protection need not be at odds. Taken together, these state-level efforts could lay the groundwork for future AI approval pathways that flow from the states to the federal level.
Conclusion: Healthcare in the AI Era
The AI healthcare revolution need not be directed and decided by federal agencies alone; it can be inspired and ignited by governors, legislatures, and medical boards. States can modernize care delivery, lower costs, and extend life-saving technologies to every ZIP code, not just those near major hospitals or to those with high economic status.
By acting now, states can turn the promise of AI into tangible benefits for their citizens: faster diagnoses, lower costs, more personalized care, and stronger fidelity to taxpayers.
The opportunity for reimagining healthcare is here… if we are willing to seize it: Empowering states, providers, and patients to govern themselves, innovate responsibly, and unleash the benefits of modern medicine.
Naomi Lopez is the founder & principal of Nexus Policy Consulting. She is the author of AI in Healthcare 2025: A Toolkit for State Lawmakers (updated August 2025).
