Published on:

CMS Codifies Definition of “Reasonable and Necessary” in Medicare Coverage Determinations

On January 14, 2021, the Centers for Medicare & Medicaid Services (CMS) issued a final rule codifying a definition for “reasonable and necessary” coverage under Medicare Part A and Part B. CMS hopes codifying the meaning of “reasonable and necessary” will provide clarity and consistency to the current process of coverage determination for items and services under Part A and Part B. The final rule takes effect on March 15, 2021.

The definition of “reasonable and necessary” has three components: an item or service is required to be 1) safe and effective, 2) not experimental or investigational, and 3) appropriate for Medicare patients. Whether an item or service is appropriate for Medicare patients will be based on the duration and frequency deemed appropriate for the item or service and whether the item or service:

  • Is provided in accordance with accepted standards of medical practice
  • Is provided in a setting appropriate to the medical needs of the patient
  • Is requested and provided by qualified personnel
  • Meets but does not exceed the needs of the patient
  • Is at least as beneficial as a current and available alternative
  • Is covered by a commercial insurer, except where there are clinical relevant differences between Medicare beneficiaries and those who are commercially insured

This codification closely resembles the definition currently present in Chapter 13 of the Medicare Program Integrity Manual, which defined reasonable and necessary as it relates to LCDs and Medicare contractors. Typically, the determination of whether an item or service is reasonable and necessary by CMS and Medicare Administrative Contractors (MACs) has been made on a case-by-case basis. However, the new rule codifies the Program Integrity Manual definition of reasonable and necessary, with certain modifications, including references to Medicare patients and commercial health insurer coverage policies.

CMS has clarified that MACs can continue to make determinations in evaluating individual reimbursement claims, confirming that this general definition of reasonable and necessary does not mean an item or service is reasonable and necessary in all situations regarding individual claims for reimbursement. In order to address concerns from the American Hospital Association (AHA) regarding the consideration of commercial health insurance coverage in Medicare coverage determinations and the potential for reduced transparency, CMS will release later guidance on how the agency will determine the relevancy of commercial coverage related to the item or service’s coverage under Medicare.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding new developments in Medicare and other CMS rules and regulations. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or

Contact Information