Medical Necessity

Medical necessity is the standard a health plan uses to decide whether a service is covered. Generally, a service is medically necessary if it's consistent with the diagnosis, meets accepted medical practice standards, is not primarily for the convenience of the patient or provider, and is the most appropriate level of service that can be safely provided. Plans use internal criteria (often licensed from vendors like MCG or InterQual) to apply the standard consistently.

Where this shows up: prior authorization denials, retrospective claim denials, and step-therapy requirements all trace back to a medical-necessity determination. A plan might deny an MRI as "not medically necessary" if conservative treatment wasn't tried first. It might deny a specific brand-name drug as not medically necessary if a generic or preferred alternative would serve. These denials are appealable — usually through a plan-internal appeal first, then an external review by an independent medical reviewer if the internal appeal fails. Success rates on external reviews run 30 to 50 percent depending on the state and issue type, which tells you a meaningful share of initial denials get overturned.

The takeaway: never accept a medical-necessity denial as final. Request the specific criteria the plan applied, have the treating provider submit a letter of medical necessity addressing each criterion, and escalate to external review if the internal appeal fails.