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What Is Medical Necessity?
Medical necessity is a term used by health insurance
companies to describe the coverage that is offered under
a benefit plan. In the policy and benefit summary, the
language that informs a person about what is covered
under their insurance plan will generally describe benefits
that are available “when medically necessary.” So, what
does this mean?
How does medical necessity affect coverage for my
health care services?
The way your health plan defines medical necessity impacts how it decides
which health care services it will pay for. Generally, health plans pay a
portion of the bill for covered services that fit the definition of medical
necessity.
Health insurance plans will provide a definition of “medical necessity” or
“medically necessary services” in the policy. There may also be a definition
that is found in state law. The following elements may be included within a
definition for “medical necessity.” These are services that are:
· provided for the diagnosis, treatment, cure, or relief of a health condition,
illness, injury, or disease; and except for clinical trials that are described
within the policy, not for experimental, investigational, or cosmetic
purposes;
· necessary for and appropriate to the diagnosis, treatment, cure, or relief
of a health condition, illness, injury, disease or its symptoms;
· within the generally accepted standards of medical care in the
community; and/or
· not solely for the convenience of the insured, the insured’s family or the
provider.
Policy language may also include provisions to consider:
· the cost effectiveness of the requested treatment;
· alternative services or supplies for covered services; and/or
· the setting where medically necessary services are eligible for coverage.
2 NAIC / UNDERSTANDING HEALTH CARE BILLS: WHAT IS MEDICAL NECESSITY?
Self-funded plans that are not under state insurance regulatory authority
typically hire Third Party Administrators to administer their health benefits.
The Summary Plan Description, which describes the covered services
and issued to covered employees, may include a definition for medical
necessity.
Medicare defines “medically necessary” as health care services or supplies
needed to diagnose or treat an illness, injury, condition, disease, or its
symptoms and that meet accepted standards of medicine.
Each state may have a definition of “medical necessity” for Medicaid
services within their laws or regulations.
How is “medical necessity” determined?
A doctor’s attestation that a service is medically necessary is an important
consideration. Your doctor or other provider may be asked to provide a
“Letter of Medical Necessity” to your health plan as part of a “certification”
or “utilization review” process. This process allows the health plan to
review requested medical services to determine whether there is coverage
for the requested service. This can be done before, during, or after the
treatment.
A “precertification review” is conducted before the treatment has been
provided and allows the health plan to decide if the requested treatment
satisfies the plan’s requirements for medical necessity. This can be done
by reviewing the Letter of Medical Necessity, medical records, and the
plan’s medical policies for coverage.
A “concurrent review” occurs during the treatment to decide if the
ongoing treatment is medically necessary.
A “retrospective review” occurs after the treatment has been provided to
decide if the services were medically necessary, experimental, cosmetic or
sometimes whether there was truly a need for emergency services.
What is a medical policy?
Definitions for medical necessity include a requirement that the treatment
is within the accepted standards in the medical community. This is defined
in the health plan’s medical policy.
A health plan must make its medical policy available to you if it is used to
make a decision to deny you coverage.
3 NAIC / UNDERSTANDING HEALTH CARE BILLS: WHAT IS MEDICAL NECESSITY?
What about experimental, investigational or
cosmetic services?
Some definitions of medical necessity include the requirement that
they are “not for experimental, investigational or cosmetic purposes”.
Health plans may use their medical policies to determine if a treatment
is considered experimental for your condition. This holds true for
conditions that can be considered cosmetic but may also have a medical
purpose. Medical records may be used to help make medical necessity
determinations, but decisions may be based on the available scientific
literature as well.
Does medical necessity affect emergency services?
Emergency services may be reviewed retrospectively to see if the
care was appropriate to your diagnosis and medically necessary for
an emergency level of care. The standard for making this coverage
decision is made on the “prudent layperson” standard, which allows that
a precertification is not necessary if a prudent layperson would believe
that an emergency condition existed and that a delay in treatment would
worsen that condition.
