Medicaid Managed Care - U.S. Senate Special Committee on Aging

Definitions of "Medically
Necessary" Services
Defining 'Medically
POLICY ANALYSIS BY
758
More frequently, however, managed care plans operate without arbitrary
upper limits on the length of specific treatments, and instead provide
care in an individualized manner. To do this, they set up internal
systems to determine when a service is medically necessary for a particular
individual. Utilization review and prior authorization are two com-
mon mechanisms for doing this?
'Medically necessary' definitions, in effect, set the boundaries between
what the managed care contract will cover and what is left as the
public agency's continuing responsibility (such as housing, job training,
etc.)-or as no one's responsibility at all.
Before creating a state definition of medically necessary services, it is
important to understand <strong>Medicaid</strong> law and regulations and the courts'
interpretations of those rules.
Because, broadly speaking, individuals have no legal right to mental
health services provided by the government, access to mental health
services and supports is at government discretion.' The <strong>Medicaid</strong> statute
defines the rights and entitlements of eligible individuals. Eligible individuals
are entitled to the array of health and mental health services and
supports described in the state <strong>Medicaid</strong> plan. For adults, beyond a minimal
list of mandatory services, states generally have the flexibility to
provide only the services in thlestate <strong>Medicaid</strong> plan. Children have a
greater entitlement. <strong>Medicaid</strong> law requires states to furnish children
'necessary health care, diagnostic services, treatment and other measures
(authorized under <strong>Medicaid</strong> law) to correct or ameliorate defects
and physical and mental illnesses and conditions whether or not such
services are covered under the state plan."
When states shift to managed care, the waiver plan approved by the
federal Health <strong>Care</strong> Financing Administration supersedes the state <strong>Medicaid</strong>
plan as the basic document defining eligible individuals' right to
services. However, even under a waiver, certain aspects of <strong>Medicaid</strong> law
remain in effect, including federal requirements concerning the provision
of medically necessary services.
<strong>Medicaid</strong> law permits states to define the 'amount, duration and
scope' of any covered service and to 'place appropriate limits on a service
bas-iesnuch criteria as medical necessity or on utilization control
procedures."
This means, for example, that states may require authorization to be
obtained prior to receipt of services or may limit certain procedures
Necessay" Service, to Protect Plan Members
THE BAZELON CENTER FOR MENTAL HEALTH LAW 4