The denial report for a family practice showed 41 lines of CO-50 in one month, almost all of them vitamin D tests, CPT 82306, billed with Z00.00 or E78.5. The biller had been appealing each one with a copy of the office note. Every appeal lost. The Medicare contractor had published, in a billing and coding article anyone could read, the exact list of ICD-10-CM codes that support the test, and neither the ordering physician nor the biller had ever opened it. The notes were fine. The diagnosis on the order did not match a covered indication, and no amount of appeal letter was going to change what the article said.
We see this pattern constantly, and not just with labs: therapy visits past a threshold without the KX modifier, screening ECGs billed as diagnostic, injections given more often than the local policy allows, imaging ordered with a symptom code the policy does not list. The fix is never a better appeal. It is reading the coverage rule before the service is ordered or at least before the claim is filed, and that requires knowing where the rules live and how they rank.
The direct answer: "medically necessary" for Medicare means reasonable and necessary for the diagnosis or treatment of illness or injury under section 1862(a)(1)(A) of the Social Security Act. CMS applies that standard nationally through National Coverage Determinations (NCDs), which bind every Medicare contractor; where no NCD exists, each Medicare Administrative Contractor (MAC) may issue a Local Coverage Determination (LCD) for its jurisdiction, with the covered CPT, HCPCS and ICD-10-CM codes listed in a companion Billing and Coding Article. All of them are searchable in the Medicare Coverage Database. Commercial payers and Medicaid write their own medical policies, and Medicare Advantage plans must follow NCDs and LCDs where coverage criteria are fully established. Check the applicable policy for the code, the diagnosis and the frequency before billing, and issue an Advance Beneficiary Notice when you expect Medicare to deny.
What each term means, in plain words
Medical necessity is the legal standard, not a document. For Medicare it comes from the statute: the programme pays only for items and services that are reasonable and necessary for diagnosis or treatment, or that fit a listed exception such as certain preventive services. CMS's Program Integrity Manual (Chapter 13) tells contractors what "reasonable and necessary" means in practice: the service is safe and effective; not experimental or investigational; and appropriate, meaning furnished in accordance with accepted standards of medical practice, in a setting appropriate to the patient's needs, by qualified personnel, at a frequency and duration the condition requires, and meeting but not exceeding the patient's medical need. Every coverage document below is an application of that standard to a particular service.
A National Coverage Determination is CMS's own, nationwide decision about whether and under what conditions Medicare covers a specific item or service. NCDs are published in the Medicare National Coverage Determinations Manual (Publication 100-03) and numbered by section, for example NCD 210.3 for colorectal cancer screening tests, NCD 190.23 for lipid testing, or NCD 20.4 for implantable automatic defibrillators. An NCD binds every MAC, every Medicare Advantage plan and every appeals body short of the courts. NCDs are developed through a public process with a formal tracking sheet, proposed decision and comment period, and there are only a few hundred of them, so most services have no NCD at all.
A Local Coverage Determination is a decision by one MAC about coverage within its jurisdiction when there is no NCD, or when an NCD leaves room for interpretation. LCDs have document numbers beginning with L (for example L34xxx or L39xxx) and follow the process in Program Integrity Manual Chapter 13, which the 21st Century Cures Act of 2016 tightened: a proposed LCD, an open meeting, a comment period of at least 45 days, a response to comments, and a notice period of at least 45 days before the final LCD takes effect. Because each MAC writes its own, the same test can be covered for one list of diagnoses in one state and a different list in the next. There are seven MAC companies administering the Part A and B jurisdictions and the four DME jurisdictions, among them Noridian, Novitas, National Government Services, Palmetto GBA, WPS, First Coast and CGS; your practice's rules are the ones written by the MAC that pays your claims.
A Billing and Coding Article is the companion to an LCD that lists the codes: the CPT and HCPCS codes the policy covers, the ICD-10-CM codes that support medical necessity for them (often in numbered groups), the codes that will be denied, documentation requirements, frequency limits and modifier instructions. Articles have numbers beginning with A. The codes were moved out of LCDs into articles by 2019 as part of the Cures Act transparency changes, which is why an LCD read on its own now looks strangely code-free; the article is where the denial in our opening scene was written.
A commercial medical policy (sometimes "clinical policy bulletin" or "coverage guideline") is a payer's own statement of when it considers a service medically necessary. Commercial payers are not bound by NCDs or LCDs and their policies often differ from Medicare's, sometimes more restrictive, sometimes less. They are published on each payer's provider portal and change on the payer's schedule. State Medicaid programmes publish their own coverage rules in provider manuals and fee schedules, and Medicaid managed care plans generally follow the state's rules with their own utilisation management on top.
Medicare Advantage criteria are a special case. Under 42 CFR 422.101(b)(6), as revised for 2024, an MA plan must follow Traditional Medicare coverage criteria (statute, regulations, NCDs and LCDs) when those criteria are fully established, and may apply its own internal, publicly posted, evidence-based criteria only where Medicare's criteria are not fully established. A medical necessity denial from an MA plan for a service that an LCD plainly covers is appealable on exactly that ground.
The comparison table
| Feature | NCD | LCD | Billing and Coding Article | Commercial medical policy | Medicare Advantage criteria |
|---|---|---|---|---|---|
| Who writes it | CMS | One MAC for its jurisdiction | The same MAC, as companion to an LCD or on its own | Each commercial payer | The MA plan, within federal limits |
| Geographic scope | National | The MAC's states | The MAC's states | The payer's products, often national | The plan's service area |
| Identifier | Manual section number (e.g. 190.23) | L number (e.g. L34xxx) | A number (e.g. A56xxx) | Payer's own numbering | Plan's own numbering |
| Contains CPT/ICD-10 code lists | Sometimes (lab NCDs do) | No, since 2019 | Yes, this is where the codes live | Usually yes | Usually yes |
| Where to find it | Medicare Coverage Database; NCD Manual 100-03 | Medicare Coverage Database; MAC website | Medicare Coverage Database; MAC website | Payer provider portal | Plan provider portal (must be public) |
| Binding on | All MACs, MA plans, ALJs and the Medicare Appeals Council | That MAC; MA plans where criteria are fully established; not binding on ALJs, who give it deference | That MAC's claims processing | That payer's contracted providers and members | The plan's members and network |
| Process to change | Formal NCD request, public comment, 6 to 9 month decision timeline | Written reconsideration request with evidence; proposed LCD, 45-day comment, 45-day notice | Article reconsideration request to the MAC | Payer's own policy committee; provider feedback channels | Plan's process; complaints to CMS |
| How to challenge a denial | Appeal on facts (coverage criteria met); NCD itself challengeable at the Departmental Appeals Board | Appeal on facts; LCD itself challengeable under 42 CFR Part 426 | Appeal on facts, coding or documentation | Payer appeal, then external review under state or federal law | Plan reconsideration, then the independent review entity |
How to check coverage before billing: the five-minute search
The Medicare Coverage Database at cms.gov is the one place every NCD, LCD and article is published, and learning to search it is the highest-return skill in this article. The screen offers a search by document ID, by keyword, by CPT or HCPCS code and by state or contractor. This is the routine we teach billers and clinical staff.
- Search by the CPT or HCPCS code and your state. Enter the code (for example 82306), select your state, and run the search. The results list any NCD, LCD and article that mentions the code, grouped by document type. If an NCD appears, it governs; read it first.
- Open the Billing and Coding Article, not just the LCD. Scroll to the "ICD-10-CM Codes that Support Medical Necessity" section. Codes are usually in groups, and the paragraph above each group explains which CPT codes the group applies to. Check that the patient's documented diagnosis, coded to its highest specificity, appears in the right group. Then read "ICD-10-CM Codes that DO NOT Support Medical Necessity" if present.
- Read the LCD's "Coverage Indications, Limitations and/or Medical Necessity" section for the clinical conditions: who qualifies, what has to have been tried first, and what the note must contain. This is where frequency limits ("no more than once every 12 months unless...") and documentation requirements live.
- Check the dates. Every document shows an effective date and a revision history. Policies are retired and replaced; a denial on a date of service may be governed by a version of the article that is no longer current. The database keeps retired versions, and you may need one for an appeal.
- Record what you found. A one-line note in the charge or the order ("A5xxxx group 2 covers E55.9 for 82306; frequency annual") takes ten seconds and saves the appeal. Practices that build these notes into their order sets and charge entry screens see CO-50 denials fall quickly in our experience.
For commercial payers, the routine is the same but the location differs: log into the payer portal, find "Medical policies" or "Clinical policy bulletins", search by code or topic, and save the policy with its effective date to the patient's account or a shared folder. For Medicare Advantage, check the Medicare LCD first; if it covers the service, the plan must too, and if the plan's own criteria add a step, that is the argument for the appeal.
Worked examples with real codes
Example 1: vitamin D testing, CPT 82306
Most MAC jurisdictions have an LCD and article on vitamin D assay testing that cover 82306 for a defined list of conditions (deficiency being treated, chronic kidney disease, malabsorption, osteoporosis and others) and specifically exclude routine screening. In our opening scene the test was ordered during an annual visit with Z00.00 as the diagnosis. Z00.00 is a general examination code and does not appear in any covered group, so the claim denied CO-50. Where the patient had a documented diagnosis of vitamin D deficiency under treatment, E55.9, the test was covered, subject to the article's frequency limit. The lesson is that the order must carry the clinical reason for the test, documented in the note; it is never acceptable to pick a covered code from the article to make the claim pay, which is false coding. Where the physician wants the test for screening and no covered indication exists, the patient is told before the draw and signs an Advance Beneficiary Notice.
Example 2: the Advance Beneficiary Notice and its four modifiers
The ABN, form CMS-R-131, is the mechanism that shifts financial responsibility to a Medicare patient for a service Medicare is expected to deny as not reasonable and necessary. It must be given before the service, in enough time for the patient to decide, with the service and the estimated cost filled in and a reason Medicare may not pay, and the patient chooses an option and signs. The claim then carries a modifier that tells the MAC what happened.
| Modifier | Meaning | When we use it | Result |
|---|---|---|---|
| GA | Waiver of liability statement (ABN) issued as required by payer policy | Service expected to be denied as not reasonable and necessary; valid ABN on file | Denial as patient responsibility (PR), patient may be billed |
| GZ | Item or service expected to be denied as not reasonable and necessary; no ABN | We realised after the fact that an ABN was needed and did not get one | Denial as provider liability (CO); patient cannot be billed |
| GY | Item or service statutorily excluded or not a Medicare benefit | Routine physical examination, most dental, hearing aids; services Medicare never covers | Denial, patient responsibility; ABN not required (a voluntary one may be given) |
| GX | Notice of liability issued, voluntary under payer policy | Voluntary ABN given for a statutorily excluded service, usually with GY | Denial, patient responsibility |
The distinction that trips practices is GY versus GA. A screening service Medicare never covers (a routine annual physical billed as 99397, say) is a statutory exclusion, not a medical necessity question: use GY, and consider whether the visit should have been a covered annual wellness visit, G0439, instead. A vitamin D test for screening is a medical necessity denial under an LCD: ABN and GA. Honestly, the GZ line on a remittance is the one we read as a confession, because it means somebody knew the service would deny and the practice is eating the cost.
Example 3: outpatient therapy and the KX modifier
Medicare no longer has a hard cap on outpatient physical, occupational and speech therapy, but it does have an annual dollar threshold above which every claim must carry the KX modifier to attest that the services remain medically necessary and the documentation supports them, and a higher threshold that triggers targeted medical review. Both amounts change every year; the current figures are in the annual physician fee schedule final rule and on the CMS therapy services page. The medical necessity test is in the therapy LCDs: a plan of care, measurable goals, progress notes at the required intervals, and services that require the skills of a therapist. Claims above the threshold without KX deny; claims with KX and no supporting documentation are an audit finding. The operational control is a running total of therapy allowed amounts per patient per year in the practice management system, with an alert as the threshold approaches.
Example 4: an NCD that governs everywhere
NCD 190.23 on lipid testing is one of the laboratory NCDs that includes its own code lists, and it illustrates how an NCD overrides local variation. It describes when lipid panels (80061) and their components are reasonable and necessary, including the frequency at which monitoring of a patient on lipid-lowering therapy is covered, and lists covered and non-covered ICD-10-CM codes nationally. A MAC cannot write an LCD that narrows it. For the practice, the consequence is that lipid testing rules are the same in every state, and a biller who learns them once can apply them to every Medicare patient; the MAC's article may add billing instructions but not change the coverage.
The mistakes we see
- Coding to the article instead of to the chart. Picking a covered diagnosis so the claim pays is a false claim. Coverage rules tell you what will be paid; the note tells you what to code. When they disagree, the ABN, not the code, is the answer.
- Reading the LCD and skipping the article. Since the code lists moved, the LCD alone will not tell you which diagnoses are covered. Open both.
- Using another MAC's policy. A practice that moved from a Novitas state to a Noridian state, or bills for providers in two jurisdictions, must check both. The MCD state filter exists for this reason.
- Ignoring revision dates. Articles change several times a year, often when ICD-10-CM updates take effect in October. A standing order set built on a policy version from three years ago will produce denials nobody understands.
- Assuming commercial payers follow Medicare. Many do not, in either direction. A prior authorization requirement in a commercial policy is also a medical necessity rule; our prior authorization lookup is a place to start, and the payer portal is the authority.
- Accepting MA plan denials that cite internal criteria. Where an NCD or LCD fully establishes coverage, the MA plan may not add steps. Quote 42 CFR 422.101(b)(6) and the LCD in the reconsideration request.
- Treating frequency denials as medical necessity denials. A service covered once a year billed twice denies for frequency; the fix is checking the date of the last service, not writing an appeal about the patient's condition.
- Appealing with the note alone. An appeal of a coverage denial should cite the policy by number and effective date, quote the covered indication, and show where the note meets it. Our denial management team starts every CO-50 appeal from the policy, not the chart, and the denial code lookup explains what each adjustment code is asking for.
Questions we hear
What is the difference between an LCD and an NCD?
An NCD is issued by CMS and applies to all Medicare contractors and plans nationwide; an LCD is issued by a single Medicare Administrative Contractor and applies only in the states that MAC serves, and only where no NCD settles the question. If an NCD exists for a service, it governs; LCDs can add detail where an NCD is silent or allows contractor discretion, but cannot contradict it. In practice NCDs are few and cover big-ticket or contentious services, while LCDs and their articles cover the everyday tests, injections and therapies that generate most medical necessity denials.
Where do I find the covered ICD-10 codes for a CPT code?
In the Billing and Coding Article that accompanies the LCD, under "ICD-10-CM Codes that Support Medical Necessity", found by searching the Medicare Coverage Database by CPT or HCPCS code and your state. For the handful of laboratory NCDs, the code lists are in the NCD itself. For commercial payers, in the payer's medical policy on its provider portal.
Do commercial payers have to follow Medicare LCDs and NCDs?
No. Commercial payers write their own medical policies and are free to be more or less restrictive than Medicare, and many of them are different in both directions. Medicare Advantage plans are the exception: federal regulation requires them to follow Medicare's coverage criteria where those criteria are fully established, and allows internal criteria only to fill gaps, with the criteria publicly posted and evidence-based.
When do I need an ABN?
When a Medicare patient is about to receive a service that Medicare usually covers but that you expect it to deny in this case as not reasonable and necessary, such as a test ordered for a diagnosis the LCD does not list or a service beyond the covered frequency. The ABN must be given before the service, be specific and signed, and the claim then carries GA. You do not need an ABN for services Medicare never covers (use GY, with a voluntary ABN if you like), and you cannot use a blanket ABN for every patient or every service; routine ABNs are invalid.
Can we appeal an LCD itself?
Yes, in two ways. A reconsideration request asks the MAC to change the policy and must be in writing with supporting evidence; the MAC follows the Chapter 13 process to respond. A formal LCD challenge under 42 CFR Part 426 is available to a beneficiary who needs the service and is denied, heard by an administrative law judge. Most practices never need either; what they need is to read the current article before ordering and to appeal individual claims on the facts.
How often do these policies change?
Constantly, in small ways. Articles are updated at least annually when ICD-10-CM codes change each October and often with quarterly HCPCS updates; LCDs are revised when evidence or an NCD changes; NCDs change rarely. Subscribe to your MAC's LCD and article update notices, assign one person to review them, and keep the policy references in your order sets current. A standing quarterly review of your top 30 codes against their current policies is the control we recommend, and it is part of the coding review we run for practices.
Sources and references
- Medicare Coverage Database Search, CMS: search NCDs, LCDs and Billing and Coding Articles by document ID, keyword, CPT or HCPCS code and state.
- Medicare Coverage Determination Process, CMS: how NCDs and LCDs are made, the reasonable and necessary standard, and the NCD decision timelines.
- Local Coverage Determination Process and Timeline, CMS: the step-by-step LCD process, including the 45-day comment and notice periods and how to request an LCD or reconsideration.
- Medicare National Coverage Determinations (NCD) Manual, Publication 100-03, CMS: the full text of every NCD, organised by section number.
- Medicare Program Integrity Manual, Publication 100-08, CMS: Chapter 13 sets out the LCD process and the definition of reasonable and necessary that contractors apply.
- FFS ABN, CMS: the current Advance Beneficiary Notice of Noncoverage form CMS-R-131, its instructions and the manual chapter that governs its use.
- 42 CFR 422.101 - Requirements relating to basic benefits, Legal Information Institute: paragraph (b)(6) on when Medicare Advantage plans must follow NCDs and LCDs and when they may use internal coverage criteria.
