From your doctor or nurse practitioner's perspective, medical necessity refers to any health service or product they prescribe for you that will prevent, diagnose or treat a condition. These services and products follow medical standards (like published guidelines, for example). From your insurance provider's perspective, a medical necessity is a term all health insurance providers use to describe the coverage they offer you.
When it comes to your medical insurance plan, it’s essential to understand the term “medical necessity.” How your insurance provider defines what is “medically necessary” is directly correlated to what covered services the plan will pay for—these services or products must fit the definition of medical necessity defined by your plan.
Keep reading to understand what medical necessity is, who determines if a procedure is medically necessary, why sometimes services deemed medically necessary by your doctor might get denied by your insurance provider—and what you can do about it.
A medical necessity applies to any number of services, from flu shots and dental exams to wheelchairs and MRIs. A doctor may attest that a service is medically necessary, therefore providing a “Letter of Medical Necessity” to your health plan for their review. The health plan determines if there will be coverage for the requested service. There are four processes for review:
- Precertification Review (submitted before the treatment)
- Concurrent Review (submitted during the treatment to decide if ongoing is necessary)
- Retrospective Review (submitted after the treatment)
- Certification Review (submitted before, during, or after treatment)
Your health plan will include their definition of medical necessity within the plan. Some elements of medical necessity include:
- Services that are necessary for the treatment, cure, or relief of an illness, injury, or disease.
- Services explicitly provided for the diagnosis, treatment, cure, or relief of an illness, injury, or disease that are NOT for investigational, experimental, or cosmetic purposes.
- Services that are appropriate in terms of frequency, duration, and location and also considered effective.
As mentioned, your health plan’s medical policy defines what is a medical necessity. Reviewing and understanding what your specific plan deems medically necessary for particular conditions is essential. Our experts unpack all the details in our video: What Does Medical Necessity Mean, and Why Should You Care.
Why Is My Procedure Not Considered Medically Necessary?
The determination of “not medically necessary” is one of the most common reasons for a health plan to deny a medical service. The confusion about this type of denial is that your healthcare professional ordered the test, prescribed the medicine, recommended the procedure or treatment, or kept you in the hospital a bit longer, so why is it deemed not medically necessary by the insurance provider?
How is it that a licensed medical professional has ordered a drug, medicine, or test or kept you in the hospital, and then your health plan says it’s not medically necessary? Is your health plan practicing medicine without a license?
The answer is a bit complicated. Health plans include language in their Evidence of Coverage (EOC) that states what they will cover and why. The EOC consists of any treatments, tests, or procedures they determine are required to diagnose and treat a medical problem. Review your plan’s Evidence of Coverage.
There’s not one standard set of criteria used by private health plans. But they are similar.
Protip: When your insurance provider denies a medical service because it is deemed not medically necessary, it’s always best to first look at your Evidence of Coverage (EOC) booklet. In it, you’ll find what medical services are specifically included and excluded from coverage.
How Do Health Plans Decide On What’s Medically Necessary?
Because of the Affordable Care Act, there are 10 essential services that are included in the mandated coverage category. For deciding coverage parameters and what’s medically necessary for other services and procedures outside of the mandated coverage categories, health plans and Medicare rely on decisions made by credible and well-recognized organizations like the United States Preventive Services Task Force, Advisory Committee on Immunization Practices, and the Health Resources and Services Administration.
Be aware that coverages and guidelines for coverage are a moving target. What is covered today changes over time as new procedures, diagnostic tests, medications, and guidelines are adopted. The essential mandated categories defined by the Affordable Care Act do not change.
What’s the Difference Between Preventative vs. Diagnostic and Why You Should Care
If you get a routine screening test like a colonoscopy or mammography, these are often covered in full. But when something abnormal is found that requires another identical test, your insurance will cover the 2nd test—but not at 100%.
The first test is considered “preventive,” but the second is “diagnostic.” Be aware of these distinctions. They can mean a big difference in what your insurance plan covers.
Who Exactly Makes the Decisions About What Medical Services Are and Are Not Covered?
Health plans have specific committees that review medical treatments, drugs, and surgical procedures. These committees meet regularly and keep up with the latest published papers. They rely on peer-reviewed studies and expert opinions. Thus, reviewers are impartial experts who specialize in the same scholarly areas as the authors.
Once the expert panel makes a new determination, they may update the health plan’s Medical Policy Guidelines and Evidence of Coverage—what your plan considers medically necessary and what they will cover.
But if you as a plan member undergo a treatment or a procedure, or take a drug that’s excluded under these medical policy guidelines, a letter of denial is issued. That letter might include language that states that the denial is due to not meeting medical necessity guidelines or that the treatment, procedure, or drug was investigational or experimental.
Remember that if your doctor or healthcare professional recommends “experimental or investigational” procedures, drugs, or other treatments, your health plan will not cover those. That means 100% out-of-pocket costs for you. Keep that in mind when agreeing to go ahead with the recommendation.
Further, it means that scientific evidence has yet to confirm the safety and effectiveness of the health outcomes.
Protip: Bottom Line: If you are considering a treatment or procedure that falls into this category—investigational or experimental—safety is a number one concern. Ask questions about safety and ask to see as much evidence as is available to support the safety of the treatment or procedure. And, of course, ask about the costs.
What Are Some Examples of Medical Necessity?
In an inpatient setting, some medically necessary services might be hospital care, nursing facility care, hospice, or home health services. In an outpatient setting, some medically necessary services might be lab tests, x-rays, mental health, an MRI, or preventative screenings.
Unfortunately, sometimes not all will be deemed a necessity by your health provider.
Medical necessity includes treatments and treatment settings, sometimes referred to as “level of care.” For example, you undergo a surgical procedure like joint replacement. You meet all the acute needs during hospitalization, your vital signs are stable, and you can perform most of your regular daily activities. Let’s say medical necessity guidelines in your health plan approve going home to complete rehabilitation and will not approve going to a “lower level of care” for physical rehabilitation. Both options are available, but based on your condition at the time of discharge, the plan will only “cover” care at home. If you want to go to a rehabilitation facility, your doctor will need to make the case and get approval. This is one example of how medical necessity determinations by your health insurance plan work.
What Are Some Common Examples of Medical Necessity Denials?
An insurer can argue that if they pay for experimental treatments, they are subsidizing medical research and paying for a treatment that is not approved. In this case, they deny your claim.
The Second Opinion is Out of Network
If your diagnosis feels serious to you, you may want to get a second opinion from a specialist not in your network. Even though you know they are the best of the best, your claim will be denied for being out of network.
Length of Stay Guidelines in Hospital Don't Match With How You Are Feeling
On occasion, you or a loved one may want to remain in the hospital for a bit longer because of how you are feeling. But, the health plan or Medicare states otherwise—that it’s not medically necessary to remain. In this case, the so-called “length of stay” guidelines are applied and your claim will be denied.
Less Expensive Alternatives Available
Another situation related to medical necessity occurs if you go to an emergency room for treatment when a less expensive alternative may be available or without calling your primary care physician. In that case, you may be issued a denial. That’s why it’s always important to check your policy to see what is and is not considered medically necessary and how to handle various emergency situations.
From Medical Necessity to Medical Appeal
From referrals and pre-authorizations to committees and guidelines, understanding every corner of your health plan is important. If your insurance provider denies the medical claim you believe is necessary for your healthy recovery, it’s not the end of the road. You have the right to appeal!
To learn more about how to file an appeal, read our blog post, How to File a Medical Appeal for Insurance Denial or check out the video and listen to our experts map out the steps of the appeal process when your provider denies your insurance claim. You have options!
Being involved in your healthcare means learning how to navigate the healthcare system. Check out our other blog posts, videos, and tools on United States of Healthcare to learn the ins and outs of today’s complicated medical world. Our tools and resources can help you understand the basics of managing your healthcare.
About the Authors
Alan P. Feren, MD
Dr. Feren has over 50 years of experience on both sides of the stethoscope—a physician giving care, and a patient receiving care. He is an expert in developing content that supports and empowers patients to be true partners in their care. He is a board-certified surgeon and a Fellow of the American College of Surgery. Following clinical practice, he served as a medical director for a major health insurer. As a staunch patient advocate throughout his varied career, he fully understands the patient experience and is often called upon by brokers, patients, and their representatives to help navigate the complex world of healthcare and health insurance denials. He truly knows the ins and outs of insurance claims and how decisions are made as he has made them himself!
Jordan Shields is an employee benefits consultant with over 45 years of experience. His client work has included hundreds of group meetings and thousands of individual conversations on advocacy, preparedness, and problem resolution. Despite his many travels, experiences, and writings, the one thing that still excites Jordan the most is when he gets the opportunity to sit down, one on one, and help guide clients through understanding their benefit coverage options and making their own informed decisions. Hearing them say, “You really made it simple for me. Thanks for your help,” is what truly satisfies him.
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