MEMO

To: TennCare Oversight Committee
From: James S. Powers, MD
RE: Medical Necessity Definition
Date: April 21, 2004

1. Members of the TennCare Oversight Committee, I thank you for the opportunity

to provide testimony 4/19/04 on proposed TennCare legislation from the perspective of patient safety.

2. At the request of the Committee I have researched the definition of Medical Necessity and have drawn upon the following sources:

a) 2004 State by State Guide to Managed Care Law, compiled by L. MacEachern, edited by D. Levy, ASPEN Publishers, NY, 2004

b) A Nationwide Study of Medicaid Managed Care Contracts, 3^rd Ed., 1999

c) State Medicaid Program Definitions of Medical Necessity, Dept. of Health Policy, George Washington University Medical Center Web site http://www.gwhealthpolicy.org/downloads/epsdt_table2data.pdf

3. There are 26 states that define medical necessity by statute, and only two mention cost. These are Hawaii and North Carolina.

a) Hawaii: A health intervention is medically necessary if it is recommended by the treating physician or treating licensed health care provider, is approved by the health planís medical director or physician designee, and is: (1) for the purpose of treating a medical condition; (2) the most appropriate delivery or level of service, considering potential benefits and harms to the patient; (3) known to be effective in improving health outcomes; provided that: (a) effectiveness is determined first by scientific evidence, (b) if no scientific evidence exists, then by professional standards of care, and (c) if no professional standards of care exist or if they exist but are outdated or contradictory, then by expert opinion; and (4) cost effective for the medical condition being treated compared to alternative health interventions, including no intervention. For purposes of this paragraph, cost-effective shall not necessarily mean the lowest price.

b) North Carolina: Those covered services or supplies that are (1) provided for the diagnosis, treatment, cure, or relief of a health condition, illness, injury, or disease, and not for experimental, investigational, or cosmetic purposes; (2) necessary for and appropriate to diagnosis, treatment, cure, or relief of a health condition, illness, injury, disease, or its symptoms; (3) within generally accepted standards of medical care in the community; and (4) not solely for the convenience of the insured, the insuredís family, or the provider. (Additionally, when faced with a number of appropriate treatment options, this law expresslypermits managed care plans to compare thecost effectiveness of alternative services or supplies when determining which services or supplies will be covered.)

3. There are 24 states which define medical necessity by regulation and nine include cost containment language: AK, CO, DE, FL, ID, OR, SD, UT, and WY.

All specifically indicate that medically appropriate and prescribed care, consistent with accepted standards of medical practice is to be followed. Among equally effective treatments, the least costly alternative will be provided.

4. Tennessee does not currently define medical necessity by statute. The proposed legislation is unique among the states, in that it defines medical necessity as the least costly alternative that is adequate to address the medical condition of the enrollee. The proposed legislation also states that the needs of the enrollee need not be based upon the prevailing practice of any geographic area. This definition is quite different from the CMS definition of medical necessity:

a) CMS: Services or supplies that are proper and needed for the diagnosis, or treatment of your medical condition; are provided for the diagnosis, direct care, and treatment of your medical condition; meet the standards of good medical practice in the local area; and are not mainly for the convenience of you or your doctor.

5. Tennesseeís proposed definition of medical necessity has great potential to harm patients. It gives state officials ultimate power to determine the definition of adequate care and which treatment would be provided, based on cost. It would deprive patients appropriate care determined to be in their best interest by their treating physician. Tennessee physicians may refuse to participate in TennCare due to ethical concerns about the programís failure to provide for standards of care. The proposed legislation would also likely be challenged by CMS as it is in apparent conflict of the Patient Protection Act of 1996 (Patient Access to Needed Health Care Act, and Physician involvement in Health Benefits Act.)

6. I submit these comments and perspectives from other state Medicaid programs for your review. On behalf of medically needy Tennesseans, I trust that you will support TennCare legislation which is consistent with the standards of good medical practice.