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

Who Should Define
What Is Necessary?
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In an earlier decision, this same court held.
Tbe decirion of wheO r or not certain treatment or ap articslar tye of srgry is
'medically necesary' rests with the indioiduala recipientphysician and nor with
derncalpersonnel orgovernment offitials"
Thus, federal rules, supported by court decisions, prevent states
from limiting access to <strong>Medicaid</strong> services through arbitrary means that
have the effect of denying care solely because of the diagnosis or type of
illness or condition.
Federal rules, again supported by court decisions, also require states
to protect consumers' access to services that are necessary to 'reasonably
achieve their purpose,"" and courts have required that these densions
rely heavily on treating physicians' judgments, and that they not
be made by clerical personnel or government officials.
States cannot meet these responsibilities if they cede to a managed
care entity the full responsibility for determiimng when a service will be
considered medically necessary.
Finally, other aspects of <strong>Medicaid</strong> law affect the process of makling final
determinations regarding the necessity of a service. <strong>Medicaid</strong> has a
defined system for appeals and fair hearings for <strong>Medicaid</strong>-covered individuals,
and these rules cannot be overridden by a move into managed
care.
States, as guardians of the public trust, must themselves both decide
what services are to be covered in the plan (i.e., define the benefit package)
and set the parameters as to who receives these services, when and
for how long. It is the state, with appropriate public input, that must develop
as part of its contracting process the specific definition used to determine
when services are medically necessary.
One option would be for the legislature to define the term-and then
require that managed care contracts be consistent with this legislative
definition. Alternatively, the state agency (either <strong>Medicaid</strong> or mental
health authority) could define the term.
Contracts now in place between states and managed care entities
show a disturbing trend. Although states frequently provide detailed descriptions
of a broad benefit package that covers a wide array of appropriate
services, contracts generally provide little, if any, guidance to
managed care firms regarding apprepfiate decisions on the necessity of
care. Some states have no definition at all of 'medically necessary."' As
a result, managed care plans are deciding, with little or no public input,
Defining 'Medically Necessary' Sevices to Protect Plan Members
POLICY ANALYSIS BY
THE BAZELON CENTER FOR MENTAL HEALTH LAW 6