Medical Necessity and the Law

Health insurance companies use "medical necessity" or "medically necessary" to decide what medical treatments they will cover. These companies include public health insurance like Medicare and Medicaid, and private insurance companies. Medically necessary services are services or supplies that meet accepted medical standards and are needed to diagnose or treat medical conditions.

Depending on the plan's terms, many won't cover medical care not approved as "medically necessary." But the definition of the term itself is often a source of confusion and ambiguity.

This FindLaw article explores different definitions of medical necessity and how to appeal a denied claim.

Definitions of Medical Necessity

Different health insurance programs and companies have their own definitions of medical necessity.

Medicare

Medicare is a federally administered health insurance program for older adults and those with kidney disease. For the Medicare program, the Social Security Act defines "medically necessary" for Medicare coverage.

Medicare will not pay expenses that are not "reasonable and necessary" for the following:

• The diagnosis or treatment of an illness or injury or
• To improve the functioning of a malformed body

Medicare has identified specific services that aren't considered medically necessary, including the following:

• When your hospital service exceeds the Medicare-approved length of stay
• Physical therapy treatment that surpasses Medicare's usage limit
• Hospital-administered treatment instead of treatment in a lower-cost setting and
• Prescription of drugs to treat fertility, sexual or erectile dysfunction, or other cosmetic purposes.

Medicaid

Medicaid does not have a definition of medical necessity. Medicaid is a federally mandated, jointly administered public health insurance program. States administer Medicaid following federal regulations. The definitions for determining medical necessity may vary from state to state. Many states define medically necessary as cost considerations that correlate with the goal of keeping costs low.

Although there are differences in each state, they often correspond to Medicare's definition of medically necessary. For example, a nurse practitioner orders a chest X-ray for a Medicaid patient with chest pains. This is likely medically necessary to get an accurate diagnosis.

Other commonalities among state definitions include provisions that the treatment:

• Is generally consistent with accepted principles of medical practice
• Is not experimental
• Is within the bounds of community standards of care
• Significantly benefits the patient and isn't provided only as a convenience to the patient or the physician

Private Insurers

The contracts between the patient and the insurance company define medically necessary definitions for private health insurance. They can be subject to state regulation, and there is a lot of variation in them. For example, Massachusetts defines "health care services consistent with generally accepted principles of professional medical practice."

American Medical Association (AMA) Definition

The Affordable Care Act doesn't directly define medical necessity. Still, the law mandates similar "essential health packages," ensuring that health plans offer comprehensive services. This is a related concept but is broader than the case-specific criteria necessary for medical necessity evaluations.

Yet, The American Medical Association (AMA) defines medical necessity. According to the AMA, medical necessity includes health care services or products that a prudent physician would provide to a patient for preventing, diagnosing, or treating an illness, injury, disease, or its symptoms in a manner that is:

1. By generally accepted standards of medical practice
2. Clinically appropriate in terms of type, frequency, extent, site, and duration and
3. Not primarily for the economic benefit of the health plans and purchasers or for the convenience of the patient, treating physician, or other health care provider

Accessing Coverage

Health plan beneficiaries should first look at their health insurance plan to determine the following:

• Health benefits
• Covered services and
• Policy exclusions

Examples of covered services include:

• Wellness visits
• Immunizations
• Durable medical equipment (like a wheelchair)
• Prescription drugs (some states may opt for older, cost-effective generic drugs)
• Interventions that meet the medically necessary definition

Denial of Coverage

Your insurer can deny a medical claim on the absence of medical necessity. Often, this reflects a disconnect between what your physician considers "medically necessary" and the insurer's coverage rules.

A denial of coverage is understandable for cosmetic procedures like a facelift. In other instances, insurance companies often deny experimental interventions for sickle cell disease. No matter the reason the insurance provider denies your claim, you can appeal its decision.

Appeal Rights

Patients can appeal an insurer's adverse decision under the Affordable Health Care Act (ACA).

The U.S. Department of Health and Human Services offers guidance for anyone in this situation. You can choose from two options:

• Internal review
• External review

Internal review

In an internal review, you can ask your insurance company to "conduct a full and fair review" of their decision. You can also ask the company to speed up the review in urgent cases.

External review

You can ask an independent third party to review your claim. This is often the second step for many health care beneficiaries if the insurance company denies their claim.

Get Legal Help

If you need help understanding medical necessity or if you have a denial of coverage, a health care attorney can help. They have extra experience in health care law and can offer sound legal advice. Speak to an experienced local health care attorney today.