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What Medicare means by "reasonable and necessary"

Nearly every medical-necessity denial traces back to one sentence in the Medicare statute. This page quotes that sentence, shows how CMS turns it into a test, explains the two kinds of coverage rules written under it, and then explains why, for common lab tests, the rule is specific enough that a website can tell you whether a diagnosis satisfies it.

The sentence in the statute

Section 1862(a)(1)(A) of the Social Security Act, at 42 U.S.C. 1395y(a)(1)(A), reads: "Notwithstanding any other provision of this subchapter, no payment may be made under part A or part B for any expenses incurred for items or services- (1)(A) which, except for items and services described in a succeeding subparagraph, additional preventive services (as described in section 1395x(ddd)(1) of this title), or multi-cancer early detection screening tests (as defined in section 1395x(nnn) of this title), are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member,"

Set aside the carve-outs named in the sentence, and the rule is: no payment for what is "not reasonable and necessary for the diagnosis or treatment of illness or injury." The regulation restates it as an exclusion, at 42 CFR 411.15(k): "Any services that are not reasonable and necessary for one of the following purposes: (1) For the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member."

Notice what the sentence says and does not say. It is about the diagnosis or treatment of an illness. It does not say "useful," or "recommended by your doctor," or "good to know." A test ordered with no illness, symptom, or treatment behind it is what the sentence leaves out, and CMS tells providers that "Every service you bill must indicate the specific sign, symptom, or patient complaint that makes the service reasonable and necessary."

How CMS turns those words into a test

The statute does not define "reasonable and necessary." CMS's Program Integrity Manual gives its contractors the working test, in the section on writing local coverage rules. Contractors are to consider a service reasonable and necessary "if the contractor determines that the service is:

• "Safe and effective;"
• "Not experimental or investigational (exception: routine costs of qualifying clinical trial services with dates of service on or after September 19, 2000 which meet the requirements of the Clinical Trials NCD are considered reasonable and necessary); and"
• "Appropriate, including the duration and frequency that is considered appropriate for the item or service, in terms of whether it is: Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the patient's condition or to improve the function of a malformed body member; Furnished in a setting appropriate to the patient's medical needs and condition; Ordered and furnished by qualified personnel; One that meets, but does not exceed, the patient's medical need; and At least as beneficial as an existing and available medically appropriate alternative."

Two phrases in the third criterion do most of the work on a lab claim: "for the diagnosis or treatment of the patient's condition," which is why the diagnosis on the order matters, and "the duration and frequency that is considered appropriate," which is why a test can be covered for your condition and still be denied as too frequent.

NCDs and LCDs: who writes the rules

CMS: "Medicare coverage is limited to items and services that are reasonable and necessary for the diagnosis or treatment of an illness or injury (and within the scope of a Medicare benefit category). National coverage determinations (NCDs) are made through an evidence-based process, with opportunities for public participation. ... In the absence of a national coverage policy, an item or service may be covered at the discretion of the Medicare contractors based on a local coverage determination (LCD)."

An NCD, in the words of CMS's coverage database: "NCDs are national policy granting, limiting or excluding Medicare coverage for a specific medical item or service. These are developed and published by CMS and apply to all states."

An LCD, from the same database: "A Local Coverage Determination (LCD) is a decision made by a Medicare Administrative Contractor (MAC) on whether a particular service or item is reasonable and necessary, and therefore covered by Medicare within the specific jurisdiction that the MAC oversees. MACs are Medicare contractors that develop LCDs and process Medicare claims. MACs develop an LCD when there is no national coverage determination (NCD) or when there is a need to further define an NCD for the specific jurisdiction." The statute's own definition, which CMS quotes, calls it "a determination by a fiscal intermediary or a carrier under part A or part B, as applicable, respecting whether or not a particular item or service is covered on an intermediary- or carrier-wide basis under such parts, in accordance with section 1862(a)(1)(A)."

Which one governs most care? CMS: "The vast majority of coverage is provided on a local level and developed by clinicians at the contractors that pay Medicare claims. However, in certain cases, Medicare deems it appropriate to develop a National Coverage Determination (NCD) for an item or service to be applied on a national basis for all Medicare beneficiaries meeting the criteria for coverage."

How many NCDs there are

CMS does not publish a running total, so ClaraCover counted. On September 27, 2026, the data feed behind the coverage database's NCD report listed 345 NCD entries. That count includes entries whose titles end in "RETIRED," so the number of rules in force is smaller. By chapter, the largest groups were cardiovascular (49 entries), pathology and laboratory (33), and radiology (30). Of the 345, the database flags 23 as laboratory NCDs.

Most NCDs are narrative. They describe a condition and the evidence, and they do not tell a claims system which codes to pay. The coverage database says so directly: "NCDs do not contain claims processing information like diagnosis or procedure codes nor do they give instructions to the provider on how to bill Medicare for the service or item. For this supplementary claims processing information we rely on other CMS publications, namely Change Requests (CR) Transmittals and inclusions in the Medicare Fee-For-Service Claims Processing Manual (CPM)." For LCDs, the codes live in a companion document: the database explains that "Billing and Coding articles" include "the diagnosis codes for which the service is covered, or for which the service is not considered reasonable and necessary and therefore not covered," and that "For the most part, codes are no longer included in the LCD (policy)."

The 23 laboratory NCDs, and why they are different

The exception is a block of rules for common lab tests, sections 190.12 through 190.34 of the NCD Manual. CMS's notice to providers for the January 2026 update, MM14226, tells the history in three sentences: "The laboratory negotiated rulemaking committee developed the NCDs for clinical diagnostic laboratory services in 2001. CMS developed the nationally uniform software and incorporated it in the Medicare shared systems so that MACs process laboratory claims for the 23 NCDs in the Medicare NCD Manual, Chapter 1, Part 3, sections 190.12–190.34 uniformly throughout the nation."

And the list is kept current: "We update the laboratory edit module quarterly, as necessary, to reflect ministerial coding updates and substantive changes to NCDs. Changes result from coding analysis decisions developed under code maintenance procedures in the negotiated NCDs and ICD-10-CM biannual code updates." The January 2026 update added diagnosis codes to rules ranging from "NCD 190.12 – Urine Culture, Bacterial" to "NCD 190.34 – Fecal Occult Blood Test." The January 2027 update, MM14614, released September 16, 2026, "adds and deletes ICD-10-CM codes" for several rules, including "NCD 190.31 – Prostate Specific Antigen," and repeats the same description of the "23 NCDs in the Medicare NCD Manual, Chapter 1, Part 3, sections 190.12–190.34."

The 23 are: urine culture; HIV testing (two rules, diagnosis and prognosis); blood counts; partial thromboplastin time; prothrombin time; serum iron studies; collagen crosslinks; blood glucose; glycated hemoglobin; thyroid testing; lipid testing; digoxin; alpha-fetoprotein; carcinoembryonic antigen; human chorionic gonadotropin; the tumor antigens CA 125, CA 15-3/CA 27.29, and CA 19-9; prostate specific antigen; gamma glutamyl transferase; the hepatitis panel; and the fecal occult blood test.

This is why ClaraCover can give a yes-or-no answer for these tests and not for most other services. For a blood count or a thyroid panel, the rule is a single national document plus a single national list of diagnosis codes, applied by the same software in every state. Either the diagnosis code on the order is on that list or it is not. For most other services, the answer depends on which contractor pays your claims, which LCD and billing article it has written, and a narrative standard that a reviewer applies to your records. That is not a lookup; it is a judgment.

One caution. A test being covered "for your condition" is only half the rule. The frequency half still applies, and the ABN instructions list "Medicare does not pay for this test as often as this (denied as too frequent)" as one of the commonly used reasons for non-coverage. Our chart of how often Medicare pays covers the frequency side.

What the denial looks like

On your Medicare Summary Notice, a medical-necessity denial is a "NO" in the "Service Approved?" column and a note underneath. On CMS's sample Part B notice, the note reads: "This service was denied. The information provided does not support the need for this service or item."

On the provider's side, the same denial arrives with a claim adjustment reason code. Code 50, in the official code list maintained by X12, reads: "These are non-covered services because this is not deemed a 'medical necessity' by the payer." If the lab or office says the claim "came back with a 50," that is what they mean. Where an Advance Beneficiary Notice was on file, the Claims Processing Manual says the remittance also carries the remark "Signed Advance Beneficiary Notice Obtained (Remittance Advice Remark Code N124)."

"The information provided" is the diagnosis and anything else on the claim. CMS tells providers: "Every service you bill must indicate the specific sign, symptom, or patient complaint that makes the service reasonable and necessary." So the first question after a lab denial is what diagnosis went in. The blood work coverage page shows what the rule wanted for each test, and how to appeal a Medicare denial covers whether you owe the money and how to file.

What to ask the ordering office

This is ClaraCover's checklist, built from the rules above. These are questions for the office that ordered the test.

1. "Which diagnosis is on the order, and does it match the rule?" Ask for the diagnosis code that went on the claim. Then look the test up on our blood work page and see whether that code is one the rule covers.
2. "Is this test covered by a national rule?" If it is one of the 23 above, the answer is a code list, not a judgment call. If it is not, ask which LCD or billing article applies.
3. "How often does the rule allow it, and when was my last one?" Frequency is the other half of "appropriate."
4. "Was I given an ABN, and which option did I sign?" That decides who can be billed if Medicare says no.
5. "If the diagnosis was wrong or incomplete, can the claim be corrected?" A corrected claim and an appeal are different paths. The office should know which one fits.

Sources

• U.S. Code (House, prelim edition): 42 U.S.C. 1395y(a)(1)(A), Social Security Act section 1862(a)(1)(A)
• eCFR: 42 CFR 411.15(k), particular services excluded from coverage
• CMS: Medicare Program Integrity Manual, chapter 13, section 13.5.4, Reasonable and Necessary Provisions in LCDs
• CMS: Medicare Coverage Determination Process
• CMS: Local Coverage Determinations
• CMS: Medicare Coverage, General Information
• CMS: Medicare Coverage Database, search page (LCD and Billing and Coding article help text)
• CMS: Medicare Coverage Database, National Coverage Determinations report
• CMS: Medicare Coverage Database data feed for the NCD report (the count of 345 entries and 23 laboratory NCDs, September 27, 2026)
• CMS: Medicare Coverage Database, help and resources
• CMS: Lab NCDs, ICD-10 code lists and the November 23, 2001 Federal Register notices
• CMS: MLN Matters MM14226, Laboratory National Coverage Determination Edit Software: January 2026 Update
• CMS: MLN Matters MM14614, Laboratory National Coverage Determination Edit Software: January 2027 Update (released September 16, 2026)
• CMS: Sample Part B Medicare Summary Notice
• X12: Claim Adjustment Reason Codes (code 50)
• CMS: Medicare Claims Processing Manual, chapter 30, Financial Liability Protections
• CMS: ABN Form Instructions
• CMS: MLN006266, Medicare Advance Written Notices of Non-coverage (May 2025)

Checked September 27, 2026. This page explains published Medicare rules. It is not medical, legal, or insurance advice, does not say whether any test is right for you, and cannot tell you whether your own claim will be paid; your doctor's office and Medicare can. The count of NCDs is ClaraCover's own count of the coverage database on the date above, not a figure CMS publishes. ClaraCover has no relationship with any provider, plan, or contractor.