NCPA - National Center for Policy Analysis

"Medical Necessity" is a Vague Standard

August 3, 2001

A major aim of the Patients' Bill of Rights (PBOR) is to expand the ability of patients to sue their health plan when they are denied coverage for a "medically necessary" treatment and suffer harm as a result.

The problem is that rather being a standard of care, "medical necessity" is a vague phrase with no generally accepted definition among insurers, doctors or patients.

  • At one extreme, an intervention may be understood as medically necessary only if it is essential to improve or cure a disease -- which could preempt many currently standard interventions, such as epidural anesthesia for normal vaginal childbirth.
  • By contrast, Medicare defines "reasonable and necessary" interventions as those which are "safe and effective, not experimental, and appropriate."
  • Another common definition is "sufficiently accepted within the medical community to be covered as acceptable medical care."

A uniform definition might not help much. Medicare ostensibly provides uniform benefits, even though various insurers act as intermediaries. But a General Accounting Office study found wide variations:

  • Medicare payment for a chest x-ray was 451 times more likely to be denied in Illinois than in South Carolina.
  • Payment of a physician office visit was almost 10 times more likely to be denied in Wisconsin than in California.
  • And payment for real-time echocardiography was nearly 100 times more likely to be denied by Transamerica Occidental than by Blue Shield of California.

Yet many health plan contracts specify that they will cover all "medically necessary" treatments. When patients sue on the basis of such vague promises, they win.

If health plans spelled out in their contracts precisely what is covered, and how coverage guidelines are developed and revised, experts say consumers could compare what is actually offered, instead of vague promises open to differing interpretations.

Source: E. Haavi Morreim (University of Tennessee), "The Futility of Medical Necessity," Regulation, Summer 2001, Cato Institute, 1000 Massachusetts Avenue, N.W., Washington, D.C. 20001, (202) 842-0200.

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