What Is Medical Necessity (and How Does It Affect Your Insurance)?

Woman with doctor getting medically necessary test results
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The concept of medical necessity is key when it comes to understanding your health insurance and coverages. If you have a procedure done, or service provided and it is not covered by your plan, you may find out that it was due to the fact that it was not medically necessary. Medicare, for example, has specific criteria on what is considered a medical necessity. Here are some definitions of medical necessity.

What is Medical Necessity?

Medical necessity can be defined as a medical procedure, service, or test that is required following a diagnosis by a medical doctor.

The definition of Medical Necessity under the Social Security Act is

… no Medicare payment shall be made for items or services that are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.

Medicare.org defines Medical Necessity as “health-care services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.”

How Does Medical Necessity Affect Your Insurance?

When it comes to getting paid for a health insurance claim you need to make sure whatever services or procedures you have done will be covered. One of the keys in getting reimbursed for a medical expense is understanding what your policy will see as a medical necessity. Even though there are lists (which you can reference below) of some typically accepted procedures or preventative care that may fall under the category of medical necessity, sometimes whether something meets the criteria is not as clear.

If your health insurance plan does not recognize something as medically necessary it will affect your ability to get paid back for medical expenses or be covered under your plan.
Person looking over medical test options with doctor for medical necessity
Going over the options with your doctor and health insurance provider will help you understand what is medically necessary. asiseeit/E+/GettyImages 

For example, in some cases, plastic surgery may be considered medically necessary and could be covered under a health care plan, however in most cases it is not because it is seen as an elective procedure. Click here for more examples of when plastic surgery may be covered and which different procedures are or are not covered.

How To Know If Something Will Be Covered as a Medical Necessity

Before getting a medical procedure or tests, you should do your best to understand if it will be covered by your healthcare plan first. The first step is making sure a doctor has approved or requested the necessary treatment or tests. Besides having a doctor's assessment, you will also have to meet additional criteria. Just because a doctor orders tests, it does not mean they will be considered medically necessary by your health insurance.

How to Check Medically Necessary Coverage Criteria

  • Check your health insurance documents, or call your health insurance and ask them what kind of coverage you have for the specific procedure or test. There may be exclusions or limitations for the amount they will pay.
  • Find out if there are limits on how many times you will be covered for the specific service, test or treatment. Sometimes a health insurance plan will limit the number of times, or the total amount payable for a procedure, so finding out if it's covered may be misleading, find out for how often, how many times and how much.
  • Find out if the whole procedure and related aspects are covered. Sometimes only parts of the procedure or tests are covered, or you have options. Go over these with your doctor too. Going for the most expensive options may not be covered.
  • Find out if you have to go to a specific in-network care center or hospital to be covered. Sometimes going to a lab, doctor or hospital or clinic outside of your health network will exclude you from being covered. For example, if you are in a Medicare Advantage Plan, then you may have more options.

    Examples of What is Not Considered Medical Necessity

    • When a hospital surpasses the health plan or Medicare-approved length of stay.
    • Even if Physical Therapy is covered or may be considered medically necessary, there is usually a limit on the amount of treatment that falls into the medically necessary category, so be sure and find out because there is a limit on these types of services.
    • Having treatments provided in a hospital or location when there were other less expensive settings that you could have had the treatment at. (This is why it is so important to check with your Medicare or other health plans before you decide where to get services or treatments - You do not want to be out of pocket for no reason).
    • Certain prescription drugs may not be considered medically necessary, for example, drugs used to treat fertility, weight loss or weight gain, among many others.

    Who Determines What Is a Medical Necessity?

    There is no difference in the definition of "medical necessity" based on whether you are on Medicare vs. Medicaid, however the list of included services in any health plan may vary because the federal government will create the guidelines on some levels, and then the individual provider of the Medicare plan and local state guidelines will also dictate what will be covered. You can check the National Coverage Determinations (NCD) list here, or learn more about Local Coverage Determinations here. However, an easier resource list for most people would be the Medical Preventative Services Chart here, because you can click through on the category you are interested in learning more about

    Preventative Services Covered as Medical Necessity

    Some preventative services may be covered as medical necessities, for example, the annual wellness visit or certain tests or procedures that prevent health issues or may identify them early. You might be surprised to see the list of possible coverages, you can see the list in our Guide to Preventative Services Covered by Medicare which may help you determine if a test, procedure or service would be covered as a medical necessity under Medicare. You may also want to reference the List of services not covered by Medicare here.