Orlando Harmon
Medical necessity is a term used by health insurance providers to describe the coverage they offer. It refers to the decision by a health plan that a particular treatment, test, or procedure is necessary to maintain or restore a patient's health or to treat a diagnosed medical problem. For a service to be covered by insurance, it must be deemed medically necessary. This determination is made by the insurance provider, and it is one of the most common reasons for a health plan to deny a medical service. It is important to note that what a patient or healthcare provider defines as medically necessary may differ from the insurance plan's definition, and patients are encouraged to review their benefits handbook and understand their health plan's specific requirements to avoid unexpected costs.
| Characteristics | Values |
|---|---|
| Definition | Medical necessity refers to a decision by your health plan that your treatment, test, or procedure is necessary to maintain or restore your health or to treat a diagnosed medical problem. |
| Decision-makers | Health insurance providers, healthcare providers, and health plans. |
| Considerations | The patient's condition, generally accepted medical standards and practices, cost-effectiveness, and clinical appropriateness. |
| Guidelines | Medical necessity guidelines are based on evidence-based practices, medical standards, and the patient's individual needs. |
| Coverage | Health insurance plans provide coverage only for services deemed medically necessary. |
| Denial Reasons | "Not medically necessary" is a common reason for health plans to deny coverage. |
| Preventive Care | Preventive care may be medically necessary but is subject to the terms of the applicable plan documents. |
| Pre-authorization | Health plans may require pre-authorization for non-emergency procedures, even if they are medically necessary. |
| Variability | Medical necessity determinations can vary between providers and plans, and coverage guidelines are subject to change. |
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What You'll Learn
Medical necessity is determined by the insurance provider
Medical necessity is a term used by health insurance providers to describe the coverage they offer to their customers. For a health service or product to be covered by insurance, it must be deemed medically necessary by the insurance provider. This means that the insurance provider must determine that the service or product is essential and appropriate for the patient's condition.
Insurance providers base their decisions on various guidelines, including state and federal benefit mandates, case management procedures, and peer-reviewed studies. They also take into account the recommendations of credible and well-recognized organizations, such as the United States Preventive Services Task Force and the Advisory Committee on Immunization Practices. These guidelines help standardize the definition of medical necessity across the healthcare industry.
In addition, insurance providers consider the cost of the service or product. They will often deny coverage if there is an alternative option with similar outcomes at a lower cost. It is important for patients to understand their insurance plan's definition of medical necessity and to review their benefits handbook before undergoing any expensive procedures.
While doctors and nurses may prescribe treatments that they believe are medically necessary, the insurance provider has the final say on whether or not the treatment will be covered. This can sometimes lead to confusion and frustration when treatments are denied coverage. However, insurance providers play a crucial role in ensuring that healthcare resources are used efficiently and effectively, avoiding unnecessary costs and risks for patients.
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Medical professionals' opinions
There are differing opinions among medical professionals on what it takes for insurance to recognize medical necessity.
Some medical professionals argue that doctors should have complete autonomy in deciding what is medically necessary. They believe that outside influence or scrutiny from non-medical professionals could compromise patient care. This perspective highlights the importance of medical expertise and the potential conflict between cost-containment efforts and the quality of healthcare. Mark, a commentator on this issue, expresses concern about government involvement in determining medical necessity:
> Some nameless, faceless bureaucrat in the government will decide who is or is not eligible for coverage for these X-rays, CT [computed tomography], and MRI scans. Another example is mammograms. Ultimately, it will be our patients who will have to pay for these tests themselves with their health or even their lives, despite having already paid for healthcare through taxes and the additional healthcare levy.
However, others argue that involving a diverse range of experts, including ethicists, scientists, public policy experts, and philosophers, is crucial for making informed decisions about medical necessity. They believe that the government, as the entity responsible for allocating public funds, has a duty to scrutinize spending and represent the public interest. Colleen Flood, a law professor, and Canada Research Chair in Health Law and Policy, supports this viewpoint:
> Doctors have had the reins completely on deciding what is medically necessary and what is not, and that is increasingly going to have to come under scrutiny. It’s beholden on governments, who are spending public money, to take a look. … The government obviously has to be involved in the sense that they set the budgets. Who else is going to represent the public interest if not them?
In addition, some commentators acknowledge the importance of balancing patient care with cost considerations. They emphasize that efficient care can sometimes be better care, even if it means accepting outside influence on medical practices. Mark Stabile, a professor of economics and public policy, offers this perspective:
> There really is a role for people other than doctors in the process. [...] Efforts to contain costs don’t necessarily detract from the quality of health care.
When it comes to insurance recognition of medical necessity, Matthews, another commentator, highlights the need to strike a balance between ensuring patients receive necessary care and avoiding unnecessary tests:
> We want people to get the care they need, but we don’t want people to go through unnecessary tests and we don’t want to pay for it. I really believe doctors want to do what’s right for patients and for the system, and some might interpret this as a challenge to their autonomy, but we have to do what’s right for patients and what’s right for the health care system.
In summary, while there are varying opinions among medical professionals, the debate revolves around the appropriate level of involvement from non-medical professionals, the role of the government in scrutinizing spending, and the potential impact on patient care and costs. These perspectives shape how insurance recognizes and determines medical necessity.
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Preventative care
In an outpatient setting, medically necessary services might include lab tests, x-rays, mental health services, MRIs, or preventative screenings. Inpatient medically necessary services could include hospital care, nursing facility care, hospice, or home health services.
It is important to note that what a patient or their healthcare provider defines as medically necessary may not align with their health plan's coverage rules. Before undergoing any procedure, especially an expensive one, patients should review their benefits handbook to ensure coverage. Some plans may require prior authorization, where the health plan confirms that the care is medically necessary, even if it is deemed so by the provider.
Additionally, insurance plans may have step therapy protocols in place, where patients must first try lower-cost medications before the plan covers more expensive alternatives. Understanding the specific rules, guidelines, and requirements of one's health plan is crucial to ensuring coverage for medically necessary preventative care.
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Medical standards
Standards based on credible scientific evidence published in peer-reviewed medical literature and generally recognized by the relevant medical community are often used to determine medical necessity. These standards are set by professional medical organizations such as the American Medical Association (AMA) and the Centers for Medicare & Medicaid Services (CMS). The guidelines established by these organizations help standardize the definition of medical necessity across the healthcare industry, and insurance companies use them as a basis for coverage decisions and reimbursement.
Additionally, health plans have specific committees that review medical treatments, drugs, and surgical procedures. These committees include impartial expert reviewers who specialize in the same scholarly areas as the authors of the studies they review. Once these expert panels make a new determination, they may update the health plan's Medical Policy Guidelines and Evidence of Coverage, which outlines what the plan considers medically necessary and what it will cover.
It's important to note that what a patient or their healthcare provider defines as medically necessary may not always align with the health plan's coverage rules. Patients are advised to review their benefits handbook and understand their health plan's pre-authorization requirements to avoid surprise medical bills. In most cases, the medical care recommended by a doctor will be considered medically necessary by the health plan, but it is not always guaranteed.
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Patient's individual needs
The concept of medical necessity is important for patients as it ensures they receive appropriate and necessary care, increasing the likelihood of positive health outcomes. It also helps patients avoid unnecessary procedures and their associated financial burdens.
Medical necessity is determined by the patient's individual needs, clinical and environmental factors, and personal values. For example, a patient's condition, age, and lifestyle may influence the type of treatment they require. Patients with the same diagnosis may have different needs depending on their unique circumstances. For instance, an elderly patient with mobility issues may require different treatment or accommodations compared to a younger patient with the same condition but no mobility issues.
Additionally, patients' personal values and beliefs should be considered when determining medical necessity. For example, a patient's religious beliefs may influence their treatment preferences or willingness to undergo certain procedures. Patients' cultural backgrounds and personal experiences may also impact their views on healthcare and shape their individual needs.
It is important to note that insurance companies play a significant role in determining what services and treatments are considered medically necessary for reimbursement. They base their decisions on guidelines established by professional medical organizations, such as the American Medical Association (AMA) and the Centers for Medicare & Medicaid Services (CMS). These guidelines help standardize the definition of medical necessity across the healthcare industry. However, patients may still be responsible for some or all of the cost of medically necessary services due to factors such as copays, deductibles, and coinsurance.
To avoid unexpected expenses, patients should review their insurance plan's coverage details and understand any rules regarding pre-authorization or network restrictions. By being informed and proactive, patients can ensure that their individual needs are considered and that they receive appropriate and necessary care.
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Frequently asked questions
Medical necessity refers to a decision by your health plan that your treatment, test, or procedure is necessary to maintain or restore your health, prevent, diagnose or treat a condition, or treat a diagnosed medical problem.
From a patient's perspective, medical necessity is any health service or product prescribed by a doctor or nurse that will prevent, diagnose or treat a condition. From an insurance provider's perspective, medical necessity is a term used to describe the coverage they offer.
Insurance companies base their decisions on guidelines established by professional medical organizations, such as the American Medical Association (AMA) and the Centers for Medicare & Medicaid Services (CMS). These guidelines help standardize the definition of medical necessity across the healthcare industry.
First, look at your Evidence of Coverage (EOC) booklet to see what medical services are included and excluded from coverage. Then, review your benefits handbook to ensure the procedure is covered. If you are unsure, call your health plan's customer service representative.
To avoid surprise medical bills, it is important to follow all the procedures your health plan has in place, including obtaining prior authorization, staying in-network, and following step therapy rules.
