A national study of commercial health insurance and medicaid definitions of medical necessity: what do they mean for children?

OBJECTIVE: To analyze medical necessity standards used by state Medicaid agencies and the largest commercial insurers in the United States on the basis of criteria related to scope of health problems covered and requirements for effectiveness and cost.
METHODS: Information was obtained from managed care contract documents used by the 45 state Medicaid agencies enrolling children into managed care organizations and from certificates of coverage used by the largest health maintenance and preferred provider organization insurers in each state.
RESULTS: Commercial insurers are more likely than Medicaid agencies to articulate medical necessity standards that limit coverage to treatment for illnesses and injuries and to include stringent requirements for cost and evidence of effectiveness.
CONCLUSION: To reduce the discretion retained by insurers in determining medical necessity, particularly around the scope of health problems covered, much greater clarity and uniformity in medical necessity language will be required in the future.