Decreasing Variation in Medical Necessity Decision Making

Center for Health Policy, Stanford University

The objective of this report was to reduce the variation of both the definition of "medical necessity" and the medical decision-making processes among managed care plans.

August 1999

Health insurance contracts involve agreements to provide medically necessary diagnostic and treatment services. Insurers, including managed care plans, often approve or deny treatment or care for their members based upon a determination about the medical necessity of the intervention. Over the past several decades, the term "medical necessity" has enabled insurance plans and physicians to make flexible and subjective judgments about coverage that have gone largely unchallenged.

This report is based on a study of "medical necessity" decision-making policies and practices in California health plans and medical groups. The study was conducted by Stanford University's Center for Health Policy in partnership with the Integrated Healthcare Association in an effort to inform the debate and promote constructive dialogue among policymakers, consumers, purchasers, providers, medical groups, and plans. The project goal was to reduce the variation in both the definition of medical necessity and the medical decision-making processes in California managed care plans.

The complete report is available under Document Downloads below.