Understanding Medical Necessity Decision-Making

The term "medical necessity" is used in insurance contracts to refer to medical services that are generally recognized as appropriate for the diagnosis, prevention, or treatment of disease and injury. Although insurers have a contractual obligation to reimburse patients for these services, there is no consensus on how to define and apply the term. This project will provide critical information to federal and state policymakers about the definition and application of medical necessity by managed care organizations, the use of clinical evidence and cost-effectiveness in determining medical necessity, and the impact, if any, of state regulation on decision-making criteria and processes.