What is the difference between medical necessity and covered benefits?

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Medical necessity and covered benefits are related but distinct concepts in healthcare billing and insurance:

Medical Necessity:

• Refers to services or procedures that are reasonable, necessary, and appropriate based on a patient’s diagnosis or condition.

• Determined by clinical standards and medical judgment.

• Ensures the care provided is essential to diagnose, treat, or manage a health problem.

• For example, an MRI for unexplained severe back pain may be medically necessary.

• Medical necessity is often defined by payer policies and clinical guidelines.

Covered Benefits:

• Are the specific services or treatments that an insurance plan agrees to pay for, as outlined in the member’s policy.

• Defined by the insurance contract and can vary widely between plans.

• Includes services explicitly listed as covered (e.g., office visits, lab tests) and excludes those considered experimental or elective.

• For example, an insurance plan might cover physical therapy but exclude chiropractic care.

Key Differences:

• Medical necessity focuses on whether a service is appropriate and needed for the patient’s health.

• Covered benefits define if the insurance plan will pay for that medically necessary service.

• A service can be medically necessary but not covered if it’s excluded from the plan.

• Conversely, a covered benefit may still require proof of medical necessity before payment.

Summary:

Medical necessity justifies the need for care; covered benefits define what the insurance plan will pay for. Both must align for reimbursement to occur.

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