What is a medical necessity?
Medical necessities are an indication created by health insurance companies to determine “medically necessary” procedures and interventions. Payors, including private health insurers, Medicare and Medicaid, use this distinction to indicate which healthcare services they cover. Specific policies differ by insurer. For example, if a healthcare service is not “medically necessary,” the insurer may not cover all or any of it.
Notably, state law may also determine the definition of a medical necessity.
Generally, medically necessary services include those that are:
- Accepted by medical standards
- Appropriate and necessary to treat, cure, relieve or diagnose an injury, illness, disease or condition
- Provided to treat, cure, relieve or diagnose an injury, illness, disease or condition (not including clinical trial or experimental, cosmetic or investigative services)
Often, policies factor in costs, settings and alternative services, as well.
Why are medical necessities important to healthcare?
Medical necessities are an important component of healthcare because they indicate which services an insurer will cover. This information can help beneficiaries and their families make informed decisions around care, like selecting the most affordable care option.
Medical necessities also save healthcare costs, as they prevent the seeking of and payment for unnecessary care.