Through this policy statement, the American Academy of Pediatrics advocates that all health care insurers adopt consistent medical necessity definitions that reflect the needs of infants, children, adolescents, and young adults (hereafter noted as “children”) as a function of developmental, epidemiologic, dependency, demographic, and cost-related factors that change over the pediatric continuum and that differ from adults. Optimally, the scope of benefits defined in health care contracts should address the complete spectrum of health care needs of children and families, but in reality, many plans offer a limited scope of benefits for children. Even if a proposed intervention falls within the scope of benefits or is not specifically excluded from coverage, the health plan may still deny the intervention. In such cases, contractual language may allow an appeal to succeed if the provider demonstrates medical necessity. With the assistance of experienced pediatric physicians and other providers with pediatric expertise, health care payers and agencies should clearly detail the processes that define, evaluate, and determine medical necessity and through which providers may appeal decisions. A basic requirement for any medical necessity process is the consideration of input from the physician(s) caring for a pediatric patient for whom a medical necessity determination is necessary.
Since its 2005 statement “Model Contractual Language for Medical Necessity for Children,” the American Academy of Pediatrics (AAP) has consistently articulated recommendations that emphasize the differences in both the definition and application of medical necessity for the pediatric population regarding benefit determinations for insurance decisions.1 The Institute of Medicine (now the National Academy of Medicine) defines medically necessary services as those that are (1) clinically appropriate for the individual patient; (2) based on the best scientific evidence, considering the available hierarchy of medical evidence; and (3) likely to produce incremental (and/or future) health benefits relative to the next best alternative that justify any added cost.2 The term “medical necessity” refers to medical services that the medical community generally recognizes as being appropriate for the diagnosis, prevention, or treatment of disease and injury.3 Individuals with health insurance coverage are often unaware of benefit or payment restrictions for the medical services they seek.4,5 In addition, a plan may cover services ordered by a physician only if the services are deemed medically necessary. Private and public payers may prospectively define the scope of benefits or adjudicate a request for a medical treatment of an individual patient on the basis of a determination of medical necessity. According to the Center for Health Policy of Stanford University, the determination of medical necessity has become an increasingly important process that affects health care delivery and that impacts consumers, providers, courts, state and federal government, and regulators and accreditors in different yet critical ways.6
In this context, decision-makers must be knowledgeable about the full breadth of developmental conditions and therapies in pediatrics because adult standards are often not applicable to the needs of children. The need for specific attention to pediatric issues around medical necessity determinations arises from the unique characteristics of infants, children, adolescents, and young adults, and the medical conditions that affect them. Forest and colleagues,7 along with Stille and colleagues,8 have captured these unique child and adolescent issues in the following “5D’s of pediatrics” rubric:
Development: Growth and maturation occur continuously from birth through young adulthood
Dependency: Reliance on parents and other adults for caregiving and access to health care
Differential epidemiology: Unique patterns for health, illness, and disability
Demographic patterns: Relatively high rates of poverty and increasing ethnic diversity
Dollars: Overall costs are relatively small and return on investment occurs over an extended time period
In consideration of this 5D rubric, the AAP reaffirms that the following definition for medical necessity best guides benefit determinations for the specific needs of infants, children, adolescents, and young adults on the basis of the AAP policy statement “Guiding Principles for Managed Care Arrangements for the Health Care of Newborns, Infants, Children, Adolescents, and Young Adults” and Bright Futures guidelines, which state, respectively,
“…health care interventions that are evidence-based, evidence-informed, or based on consensus advisory opinion and that are recommended by recognized health care professionals or organizations, such as the AAP, EPSDT services, and Bright Futures, to promote optimal growth and development in children and youth and to prevent, detect, diagnose, treat, ameliorate, or palliate the effects of physical, genetic, congenital, developmental, behavioral, or mental conditions, injuries, or disabilities.”9
CONSIDERATIONS FOR MEDICAL NECESSITY
Evidence-based and evidence-informed practices are widely embraced as appropriate frameworks to guide which health care services should be included in what is covered by a payer or health care agency. Evidence-based practice is rooted in the acquisition and interpretation of scientific evidence. Robust randomized, controlled clinical trials that demonstrate a salutary effect of the intervention on health outcomes provide the highest level of evidence.13 In the absence of such trials, methodologically sound observational studies that support a causal relationship between the intervention and improved health outcomes can be used. Less methodologically sound observational studies and uncontrolled clinical series may be suggestive but cannot be used to document a causal salutary relationship unless the magnitude of the effect observed far exceeds what would be expected on the basis of the natural history of the medical condition or the confounding effect of potential experimental biases. In reality, the amount and quality of available scientific evidence may not always be sufficient to determine the efficacy of a given service or intervention. Therefore:
For newly developed services and interventions (including those in the setting of emerging diseases) for which adequate clinical trials have not yet been conducted, effectiveness should be determined on the basis of clinical judgment after assessing the professional standards of care for children or via the development of carefully developed consensus opinion from pediatric expert panels.
For currently available, existing services and interventions, effectiveness for children should be based on the available scientific evidence. If insufficient scientific evidence for children exists, then currently accepted professional standards of care for children must be considered. If professional standards of care for children do not exist or are outdated or contradictory, then decisions about existing interventions must be made in light of consensus pediatric expert opinion that is based on a combination of clinical experience and the interpretation of available published clinical evidence.
Lack of conclusive scientific evidence should not automatically result in a decision to deny coverage of new or existing services and interventions. Medically necessary health interventions are intended to promote normal growth and development and prevent, diagnose, detect, treat, ameliorate, or palliate the effects of a physical, mental, behavioral, genetic, or congenital condition, injury, or disability. From a pediatric perspective, medically necessary services and interventions should:
assist in achieving, maintaining, or restoring health and functional capabilities without discrimination on the basis of a congenital/developmental anomaly or previous status of disability;
be appropriate for the age and developmental status of the child;
consider the setting that is appropriate to the specific needs of the child and family; and
reflect current bioethical standards.
In addition to evidence, the Centers for Medicare and Medicaid Services advocates that medical necessity determinations be made in large part on the basis of the concepts of reasonableness and necessity.14–16 Writing on the importance of these concepts but recognizing the concurrent difficulty in operationalizing these concepts in the clinical environment, Neuman and Chambers (2012) stated providing an operational definition of what is reasonable and necessary will be an “enduring challenge” because evidence-based clinical guidelines do not always clearly address the “complexity of individual cases.” Furthermore, they noted that a determination of “reasonableness” is fraught with greater complexity because this synthesizes the interplay among benefits, risks, and costs.6
As good stewards of finite medical resources, physicians should make decisions about the medical necessity of an intervention in consideration of both its effectiveness and cost. On one hand, the most effective intervention may not be the one with the lowest cost but still represents the optimal choice.17 On the other hand, a very expensive intervention that provides minimal benefit beyond another with a modest cost cannot be advocated to be superior nor to be the optimal choice. In real-world clinical situations, subjective considerations, as well as quantitative assessment, may influence the assessed value of an intervention. A patient and family may have a much different perspective of value than the provider or the payer. An intervention that has value satisfies measures of pediatric health care quality (ie, access to age-appropriate care, in an appropriate setting, by appropriate personnel) and also achieves a desired outcome at a reasonable cost and at a reasonable dose or intensity. Even though resources may be limited, ethical pediatric practice dictates that every child, with or without disability, deserves the opportunity to achieve his or her optimal developmental potential.
Individual medical necessity decisions are often difficult and complex. The delivery of care in a setting that incurs lower cost is a reasonable option if the quality of care adheres to applicable standards. A high cost of an intervention should not be the sole basis for denial of services, but as cost escalates, it becomes more important that the intervention achieves a meaningful incremental benefit and has a compelling evidence basis compared with the next best and less expensive intervention. As AAP past president Sandra G. Hassink, MD, expressed in response to the findings of an Alternative Payment Model Framework and Progress Tracking Work Group (letter dated November 18, 2015, available on request), an intervention in pediatrics may have added value because of its continuing long-term return (eg, promotion of healthy diet and exercise) and its benefits for parents and siblings (eg, effective mental health treatments can reduce toxic stress to the family).
As the pharmacopeia and technology of medicine have advanced, the need to make medical necessity decisions for new investigational treatments and devices that offer an uncertain or, at most, modest prospect of benefit has become both more common and more complex. In the early stages of development, new medications and devices are properly studied under investigational research protocols that may cover most costs associated with treatment. But some treatments may be promoted or requested on the basis of extrapolation from similar therapy or preliminary work that shows a promise of benefit without conclusive determination of efficacy and safety. Conflict may arise between the provider who advocates for the patient and the payer who has policies that have specific criteria for approval of investigational treatments. A very high cost of treatment or the expectation of only a marginal or modest average benefit injects even greater controversy into the adjudication of medical necessity from the perspective of the reasonableness of the treatment. Individual patient factors may also impact the decision-making process. Unfortunately, absolute guidance that can apply to every determination related to the approval of experimental or investigational treatment is not possible. Providers and payers will have to work together in good faith to chart a treatment course and consider potential “if–then” branching points.
Health equity and justice demand that, in no case, should patient factors such as age, race, socioeconomic status, or immigration status play a role in decisions of medical necessity.
Early Periodic Screening Diagnosis and Treatment (EPSDT) Scope of Benefit Standard as a Model for Medical Necessity
Medicaid adopted the EPSDT standards as a mandatory component in their statutory pediatric scope of benefits (42 CFR §441.50-441.62 ).3,18 The preventive health care services of EPSDT closely align with the AAP Bright Futures: Guidelines for Health Supervision of Infants, Children, and Adolescents, Fourth Edition.10 The EPSDT set of services ensures access to care commensurate with each child’s medical needs including age-appropriate physical health, mental health, and developmental care services across the pediatric continuum3 and provides a useful and relevant framework for making a determination of pediatric medical necessity. The impact of the EPSDT mandate in framing the requirements for a robust and comprehensive medical necessity approach is significant because Medicaid and the Children’s Health Insurance Program cover ∼39 million children in 2021.19 No regulations compel other governmental and private payers to provide the EPSDT benefit. Individual states enjoy wide discretion in defining the scope of “pediatric services, including oral and vision care,”20 1 of the 10 categories of essential health benefit coverages listed in the 2010 Patient Protection and Affordable Care Act that most health insurance plans must provide.21
Under Medicaid, States are required to establish a periodicity schedule for each type of screening service included in the EPSDT standard: medical, vision, hearing, and dental, in consultation with recognized professional organizations. Although states have the discretion to follow other schedules, federal regulations recommend that states follow the periodicity schedule for preventive services outlined in the AAP Bright Futures guidelines, which provides an evidence review for inclusion on the periodicity schedule. States are required to cover visits outside of the periodicity schedule if such visits are necessary to determine the need for further care in children with various conditions.13 The state’s Medicaid program is required to pay for a complete diagnostic evaluation if a need for additional evaluation of a child’s health is determined during a periodic or interperiodic screening. Furthermore, if a health condition is discovered, EPSDT requires the state to ensure the provision of necessary treatment. All conditions, medical, mental, developmental, acute, and chronic, must be treated, including conditions not newly discovered during a screen.
States are required to provide all medically necessary services mandated by EPSDT, regardless of whether those services are part of the individual state’s Medicaid program.13 This requirement also pertains to Medicaid managed care programs. This federal treatment requirement and EPSDT’s definition of medical necessity are intended to ensure uniform and comprehensive health insurance coverage for children and adolescents covered within the Medicaid program across the nation.
Although legal interpretations of medically necessary care for children are varied, the courts have encouraged a broad interpretation of the EPSDT medical necessity standard in relation to the goals of the Medicaid program, which at its core is the improvement of the health of the program’s recipients. Furthermore, courts have upheld physician discretion in making determination for medically necessary treatment; states may review the treating physician’s determination of medical necessity, but they must defer to his or her recommendation.
The extensive benefits and broad medical necessity standards adapted by the EPSDT allow Medicaid to effectively fulfill the needs of children facing serious, often lifelong diseases and disabilities by providing access to specialized services frequently needed by these children including rehabilitative and habilitative services, extended inpatient care, physical and speech therapy, eyeglasses, hearing aids and other durable medical equipment, private duty nursing, medically necessary prescription drugs, and targeted case management services. Adequate nutritional support, enteral or parenteral, is a medical necessity for certain pediatric patients with conditions that affect intake, absorption, or metabolism of the nourishment they need to grow properly. Furthermore, EPSDT services do not distinguish between acute conditions that are curable with finite treatment and lifelong chronic conditions whose effects and severity can only be ameliorated by provision of long-term health care services. This extensive coverage protects children with disabilities and special health care needs from limitations on services.
PEDIATRIC-SPECIFIC ISSUES OF MEDICAL NECESSITY
Several pediatric conditions illustrate nuances in determinations of the medical necessity of interventions. We provide 3 brief examples related to the prescription of rehabilitation and habilitation services, the use of off-label medications, and considerations related to the discharge of the medically complex pediatric patient.
Habilitation and Rehabilitation Services
Accessible pediatric rehabilitative and habilitative services are essential to meet the Medicaid program’s EPSDT requirement. The Patient Protection and Affordable Care Act specifically recognizes these services as the seventh of the 10 categories of essential health benefits.21,22 However, many health care plans only cover rehabilitative services that aim to restore a lost function. Fewer plans explicitly include habilitative services that facilitate acquisition of a function or skill not yet attained. The Centers for Medicare and Medicaid Services defines habilitation as “health care services that help a person keep, learn, or improve skills and functioning for daily living.”23 As medical knowledge has advanced, health care providers have recognized that children who were thought to have limited potential function or to be destined to exhibit functional deterioration over time may improve, or at least maintain, function with a rigorous therapeutic program or with innovative approaches. Furthermore, children continue to gain skills as they advance in age, and therefore, interventions that sustain continued acquisition of developmental milestones are medically necessary, as are interventions that maintain or at least slow the loss of a skill. Children are fundamentally different from adults, who display a static acquisition of skills, and for whom rehabilitation is focused solely on the restoration of prior functionality. Indeed, therapies may potentiate acquisition of function in children that otherwise might not have been acquired. Examples include the prescription of regular physical and occupational therapies in children with cerebral palsy, which serve to prevent further loss of motor function, and the prescription of speech therapy or corrective hearing devices in children with trisomy 21, which helps the child achieve greater developmental autonomy.
The AAP provides guidance for pediatric care providers related to the prescription of therapy services in its clinical report “Prescribing Physical, Occupational, and Speech Therapy Services for Children With Disabilities,” which offers detailed information on how best to consider the incorporation of therapy services in a reasonable, clinically relevant treatment plan.24 That report addresses issues related to the amount, frequency, and duration of therapies, which often result in contentious negotiations with payers. Decisions about the dose titration and the mechanism of provision (direct or consultative) of habilitative and rehabilitative therapies must consider the prognosis of the child and the trajectory of change with therapy. Although reasonable health care providers may formulate slightly different prescriptions, it should be everyone’s goal to avoid grossly excessive (ineffective) or grossly deficient (insufficient) doses. For children with chronic conditions, family participation in training as guided by consultative therapy is critical for maintenance or improvement of function or milestones.
Off-label Prescription Drug Use
Many drugs that physicians prescribe to treat children with both common and rare diseases are used “off-label.”25 This term refers to use of a drug that is not included in the package insert (approved labeling) for that drug. Because a significant number of medications are brought to market without the pediatric trials that would be required for official labeling, the AAP has stated that off-label use is neither improper nor investigational if based on sound use of available scientific evidence, expert medical judgment, and published, high-quality literature that supports extrapolation of use to the pediatric setting. Therefore, because of the realities and expense required, the lack of pediatric labeling by itself should not be used to deny treatment to pediatric patients and equate to a lack of medical necessity. Furthermore, less-expensive therapeutic alternatives considered appropriate for adults should not automatically be considered appropriate first-line treatment in children.
Discharge to Home for a Child With Medical Complexity
The AAP defines children with medical complexity as the subset of children with special health care needs who have one or more chronic diagnoses, functional limitations often associated with the need for technology assistance, and high health care utilization.26 Children who are technology dependent are those who use medical devices that are essential to avoid adverse health consequences and additional hospitalizations. Because of advances in medical care, children with medical complexity can be discharged from the hospital while still requiring interventions that previously would have been available only while hospitalized. As a result, discharge planning requires attention to the home’s physical environment, the ability and capacity of family caregivers to provide necessary care, the provision of significant training for caregivers, and coordination of services and supports with community-based organizations and agencies that provide the in-home resources, such as home nursing and durable medical equipment. The child’s medical condition defines the medical necessity of the care required, but the discharge planning requires attention to elements of the child’s and family’s environment and community that may seem beyond the typical medically oriented aspects of care. The AAP clinical report “Home Care of Children and Youth With Complex Health Care Needs and Technology Dependencies”26 defines the home and community assessments required for robust discharge planning for children with medical complexity and technology dependence. For example, the home assessment requires that attention be focused on ensuring that the home environment is adequate, safe, and accessible, with specific attention to such far-ranging issues as the home’s structure; electrical systems (eg, the availability of 3-pronged plugs and 220-voltage service essential for medical equipment); bathroom and ramp access; the condition of heating, hot water, clean water, and air conditioning systems; driveway access; telephone accessibility; and, in relevant situations, the availability of snow removal.26 If these elements are not suitable, then discharge to home may not be possible and a safe discharge may require the option of medical foster care or a skilled nursing facility. Therefore, the social or resource issues in the child’s home may justify continued institutional care when other options are not available. Additionally, the community’s ability to provide predictable and appropriately skilled nursing coverage must be assessed, including what alternatives exist if necessary nursing care is not available.
In addition to details in the clinical report discussed in the previous paragraph, the AAP issued a complementary clinical report, “Parent–Provider-Community Partnerships: Optimizing Outcomes for Children With Disabilities,” which offers suggestions on how best to meet the “multifaceted, medical, developmental, educational, and habilitative needs” of children and families dealing with special health care needs and medical complexity.27 Additionally, for both children with and without disabilities, providers can use the following resources that supply templates and tips on key elements to draft an effective letter arguing for the medical necessity of an intervention:
Medicaid, Medicaid managed care, and all other governmental and private payers are urged to implement the following recommendations in their health care plans:
Incorporate the EPSDT scope of benefit standard as their model for pediatric benefits and as the framework for decisions related to medical necessity. The opportunity for a child to achieve optimal growth and development should be a universal expectation limited only by the biological realities of a given condition and not by the benefit determination of an insurance program. Contractual agreements should feature essential language that recognizes the unique needs of the pediatric population and, hence, guarantee care that is at least equitable to care provided for adults.
Provide full transparency to patients, families, and providers with respect to the pediatric scope of benefits.
Incorporate the following definition of medical necessity in all decisions related to medical necessity: “health care interventions that are evidence based, evidence informed, or based on consensus advisory opinion and that are recommended by recognized health care professionals or organizations, such as the AAP, EPSDT services, and Bright Futures, to promote optimal growth and development in children and youth and to prevent, detect, diagnose, treat, ameliorate, or palliate the effects of physical, genetic, congenital, developmental, behavioral, or mental conditions, injuries, or disabilities.”
Adopt the federal statutory definition of the EPSDT benefit (42 CFR §441.50-441.62 ).
Provide benefits coverage and related payment for interventions that clearly fall within a health plan’s scope of benefits, are not specifically excluded, and are deemed medically necessary.
Articulate a clear process for the evaluation and determination of medical necessity, including the following:
how to provide clinical and scientific evidence that supports the efficacy and value of interventions that meet the needs of the individual child;
how to incorporate and value appropriate pediatric medical subspecialty, pediatric surgical specialty, or expert opinion or testimony that supports the use of an intervention;
how to assist families or physicians who wish to appeal medical necessity denials; and
how and when coverage decisions will be made.
Angelo P. Giardino, MD, PhD, FAAP
Mark L. Hudak, MD, FAAP
Beena G. Sood, MD, MS, FAAP
Stephen A. Pearlman, MD, MSHQS, FAAP
Committee on Child Health Financing, 2017–2020
Jonathan Price, MD, FAAP, Chairperson (2018–2022)
Mark L. Hudak, MD, FAAP, Chairperson (2014–2018)
Suzanne K. Berman, MD, FAAP
Mary L. Brandt, MD, FACS, FAAP
Kenneth M. Carlson, MD, FAAP
Mike Chen, MD, FAAP
Sandy L. Chung, MD, FAAP, FACHE
Alison A. Galbraith, MD, FAAP
Angelo P. Giardino, MD, PhD, FAAP
Lawrence D. Hammer, MD, FAAP
Kimberly Heggen, MD, FAAP
William Moskowitz, MD, FAAP
William Moskowitz, MD, FAAP
Stephen A. Pearlman, MD, MSHQS, FAAP
Beena G. Sood, MD, MS, FAAP
Renee Turchi, MD, MPH, FAAP
Lou Terranova, MHA
Drs Giardino and Hudak harmonized all contributions to produce the final statement, and all authors contributed to the initial draft and to all revisions and reviewed and approved the final statement. Other members of the Committee on Child Health Financing provided guidance on content and key edits.
This document is copyrighted and is property of the American Academy of Pediatrics and its Board of Directors. All authors have filed conflict of interest statements with the American Academy of Pediatrics. Any conflicts have been resolved through a process approved by the Board of Directors. The American Academy of Pediatrics has neither solicited nor accepted any commercial involvement in the development of the content of this publication.
Policy statements from the American Academy of Pediatrics benefit from expertise and resources of liaisons and internal (AAP) and external reviewers. However, policy statements from the American Academy of Pediatrics may not reflect the views of the liaisons or the organizations or government agencies that they represent.
The guidance in this statement does not indicate an exclusive course of treatment or serve as a standard of medical care. Variations, taking into account individual circumstances, may be appropriate.
All policy statements from the American Academy of Pediatrics automatically expire 5 years after publication unless reaffirmed, revised, or retired at or before that time.