Basic Coverage Rules for Medicare

by Debbie Mackaman, RHIA, CPCO, CCDS

Just in time for the start of a new school year, I thought it would be a good time to look at basic coverage rules that guide payment for Medicare services. When screening for services prior to issuing an ABN or when reviewing denials after the service has been billed and subsequently denied, providers often struggle with finding a solid definition of “not medically necessary.” Understanding the coverage definitions from the perspective of the payer, as well as how to stay current with guidelines, may help facilities improve billing practice when this common issue is involved.

In general, when CMS or one of its Medicare Administrative Contractors (MAC) identifies a service as not being medically necessary, they are referring back to the SSA which further defines an item or service as not reasonable and necessary for the diagnosis or treatment of an illness or injury or to improve the functioning of a malformed body member; not reasonable and necessary for the prevention of an illness; or, when a screening service is performed more frequently than what is considered to be necessary.

The relationship between the patient and healthcare provider, as well as the medical decisions to which these two parties agree, remain vitally important. However, Medicare generally uses the statement “not reasonable and necessary” in reference to payment for the services.  

CMS develops national coverage determinations (NCD) to describe nationwide Medicare coverage for an item or service. NCDs are binding on all Medicare contractors and, in most cases, on administrative law judges during the appeals process of Medicare claims. A comprehensive database of coverage policies and related documents can be found in the Coverage Database located on the Medicare Coverage Center website. In addition to the NCD, CMS often publishes Coverage Decision Memorandum and National Coverage Analyses (NCA) that explain the clinical basis and rationale behind the coverage decision.

Although CMS publishes those coverage policies in the online version of the Medicare National Coverage Determinations Manual, other internet-only manuals may provide coverage-related instructions as well. These other Medicare manuals include the Medicare Benefit Policy Manual, the Medicare Claims Processing Manual, the Medicare Secondary Payer Manual, and the Medicare Program Integrity Manual.

An item or service provided in the context of an approved clinical study may be considered for coverage by CMS; additional clinical data may need to be collected. Under a coverage with evidence (CED) policy, the routine costs that are associated with the service are covered as long as the item or service is generally covered for Medicare beneficiaries. CMS maintains The list of CED  these specific policies can be found on the CMS website.

To read the complete, detailed artcile that appeared on Medicare Compliance Watch, click here.