How it works
Medicare covers services that are “reasonable and necessary.” It sets detailed criteria in national coverage determinations (NCDs) and local coverage determinations (LCDs), which list covered indications and often the diagnosis codes that support them. Commercial plans publish their own medical policies. The diagnosis codes and documentation on the claim must show that the criteria were met.
Why it matters
Services that do not meet the criteria are denied (often CO 50). For Medicare patients, when a provider expects a service may not be covered, an Advance Beneficiary Notice of Noncoverage (ABN) signed before the service can allow the patient to be billed if Medicare denies it.
Example
A test is ordered for a diagnosis not listed in the applicable LCD. The practice checks the policy before scheduling; the patient either has a qualifying condition documented or signs an ABN.