Vol. 6, No. 3 May/June 1998	Previous Issues Subscribe to AT Messenger Download PDF Viewer
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Medicaid’s New Definition of Medical Necessity

Laura J. Waterland, Esq. Staff Attorney,
Disabilities Law Program

Users of assistive technology (AT) often look to the Medicaid program to fund needed devices and services, perhaps without a clear understanding of the scope of Medicaid coverage. The Delaware Medicaid Office recently issued a new regulation defining the concept of “medical necessity” in an effort to bring into clearer focus the scope of services it intends to provide Delaware’s Medicaid recipients.

Medicaid is a federal/state cooperative program designed to provide payment for medical services for certain low-income populations. While the United States Congress enacted the controlling legislation (Title XIX of the Social Security Act) and regulations (42 CFR Parts 430- 498), states have considerable flexibility in formulating eligibility, benefits and reimbursement policies. Each state documents these policies in a state Medicaid Plan, which must be approved by the Health Care Financing Administration (“HCFA”). HCFA also grants waivers to states to alter Medicaid rules and requirements; Delaware’s Medicaid managed care program, Diamond State Health Plan, operates under such a waiver.

States continue to struggle to keep up with the burgeoning demand for services and to keep costs under control. One way states can control Medicaid spending is to impose additional criteria for payment. Medicaid law permits states to “place appropriate limits on a service based on such criteria as medical necessity or on utilization control procedures.” 42 CFR § 230(d). Federal law does not define “medical necessity,” leaving it to the states to do so. This power to create definitions must be exercised consistently with the purposes of the Medicaid statute, however.

The Delaware Medicaid program has always limited its payment for services to those which are “medically necessary” but, until recently, the term had never been defined. The new regulation, which went into effect in January 1998, defines medical necessity as:

the essential need for medical care or services (all covered Medicaid Plan services, subject to age and eligibility restrictions and/or EPSDT requirements) which, when prescribed by the beneficiary’s primary physician care manager and delivered by or through authorized providers, will:

• be directly related to the diagnosed medical condition or the effects of the condition of the beneficiary (the physical or mental functional deficits that characterize the beneficiary’s condition), and be provided to the beneficiary only;
• be appropriate and effective to the comprehensive profile (e.g. needs, aptitudes, abilities, and environment) of the beneficiary and the beneficiary’s family;
• be primarily directed to treat the diagnosed medical condition or the effects of the condition of the beneficiary in all settings for normal activities of daily living, but will not be solely for the convenience of the beneficiary, the beneficiary’s family, or the beneficiary’s provider (this means that services which are primary used for educational, vocational, social, recreational, or other non-medical proposes are not covered under the Medicaid program);
• be timely, considering the nature and current state of the beneficiary’s diagnosed condition and its effects, and will be expected to achieve the intended outcomes in a reasonable time;
• be the least costly, appropriate, available health service alternative, and will represent an effective and appropriate use of program funds;
• be the most appropriate care or service that can be safely and effectively provided to the beneficiary, and will not duplicate other services to the beneficiary;
• be sufficient in amount, scope and duration to reasonably achieve its purpose;
• be recognized as either the treatment of choice (i.e. prevailing community or statewide standard) or common medical practice by the practitioner’s peer group, or the functional equivalent of other care and services that are commonly provided;
• be rendered in response to a life threatening condition or pain, or to treat an injury, illness, or other diagnosed condition, or to treat the effects of a diagnosed condition that has resulted in or could result in a physical or mental limitation, including loss of physical or mental functionality or developmental delay,

and will be reasonably determined to:

• diagnose, cure, correct or ameliorate defects and physical and mental illnesses and diagnosed conditions or the effects of such conditions; or
• prevent the worsening of conditions or effects of conditions that endanger life or cause pain, or result in illness or infirmity, or have caused or threaten to cause a physical or mental dysfunction, impairment, disability, or developmental delay; or
• effectively reduce the level of direct medical supervision required or reduce the level of medical care or services received in an institutional setting or other Medicaid program; or
• restore or improve physical or mental functionality, including developmental functioning, lost or delayed as the result of an illness, injury, or other diagnosed condition or the effects of the illness, injury, or condition; or
• provide assistance in gaining access to needed medical, social, educational and other services required to diagnose, treat, or support a diagnosed condition or the effects of the condition,

in order that

the beneficiary might attain or retain independence, self-care, dignity, self-determination, personal safety, and integration into all natural family, community, and facility environments and activities.

The medical necessity analysis does not limit the type of services covered under the Medicaid plan. Instead, the Medicaid office or Managed care Organization (“MCO”) reviews an individual recipient’s request (which must come through the primary care provider) for covered services and evaluates that individual’s need under this new definition. The recipient must satisfy all nine of the criteria listed in the first section of the definition, and then meet at least one of the criteria in the second section, which follows the phrase “and will be reasonably determined to.”

Consequently, AT services will continue to be provided under Medicaid. However, any individual requesting AT services must satisfy the medical necessity criteria in order for payment to be approved for AT services.

The impact, if any, that this new definition will have on approval of payment for AT is unclear. There is undoubtedly a tension between services to improve function and the narrower concept of “medical” treatment. An AT device is defined in the “Tech Act,” 29 USC Chapter 24, as “any item, piece of equipment or product system....that is used to increase, maintain or improve functional capabilities of individuals with disabilities,” 29 USC § 2202(2). On the one hand, the State Medicaid office in its comments accompanying the regulation (Medical Necessity Overview, January 1, 1997) stressed that “diagnosed functional and developmental deficits are considered to be medical conditions.” Furthermore the regulation contains many phrases and terms that could easily encompass AT-related goals, such as “directly related...to the effects of the condition”; “primarily directed to treat...the effects of the condition, in all settings for normal activities of daily living”; and “restore or improve physical functionality, including developmental functioning, lost or delayed as a result of illness.” Moreover, the overriding goal of the regulation is to assist recipients in attaining and retaining independence.

On the other hand, the regulation excludes “services which are primarily used for educational, vocational, social, recreational or other non-medical purposes.” So, we have specifically included in the definition services that will restore or improve physical and mental functionality, yet the definition excludes services that are “primarily educational, vocational, social, or recreational purposes,” which are most of the realms in which people function. It is hard to reconcile the language and even harder predict how it will be applied.

How best, then, to maximize the chances of obtaining Medicaid funding for AT?

• Primary Care Physicians (PCPs) must become familiar with this regulation and must carefully link the patient’s diagnosis to the need for the AT. The PCPs should use the language in the regulation when writing orders.
  
• Patients must be prepared to challenge denials of services for AT or any other services that are deemed “not medically necessary.” MCOs may take an overly restrictive approach to approving AT when it has applications that extend beyond what is thought of as “medical.”
  
• As a last resort, apply for funding from other sources, such as the Division of Vocational Rehabilitation or the Department of Education. Consider requesting AT as a reasonable accommodation under the Americans with Disabilities Act.
  

Please call the Disabilities Law Program to consult with an advocate if you encounter any difficulties with the new medical necessity regulation. In New Castle County, call 575-0660; in Kent County, call 674-8500; and in Sussex County, call 856-0038.