What is Medical Necessity?

md.jpgThe term “medically necessary” in the context of Medicare and Medicaid reimbursement has been under some scrutiny lately. Medicare defines “medical necessity” as services or items reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Medicaid has a similar definition. For items or services where there is no specific limitation based upon a coverage policy, medical necessity has often been left to the good faith determination of a physician. However, in several prosecutions of physicians for infusion of HIV drugs, the government has relied on fraudulent diagnosis or unnecessary prescribing of medications as a basis of prosecution, citing to the physician motive of profit over appropriate patient care. In addition, the 11th Circuit Court of Appeals in Atlanta has recently held that the Medicaid program in Georgia can overrule a physician’s determination of medical necessity.
The case involved a young girl whose physician ordered additional nursing care than was available under a Medicaid policy. A Federal District Court Judge found that the state could not override the physician’s order and that “the state’s discretion is limited to a review of the request for fraud, abuse of the Medicaid system, and whether the service is within the reasonable standards of medical care.” The Eleventh Circuit disagreed, saying both the state and the treating physician have roles in determining what is medically necessary. It cited a federal regulation that says a Medicaid agency “may place appropriate limits on a service based on such criteria as medical necessity or utilization control procedures.” The Court concluded that “A private physician’s word on medical necessity is not dispositive.”
The case is Moore v. Medows, No. 08-13926. To read the case, click here. To read more, click here.