MEDICAL NECESSITY AND DEFINED COVERAGE BENEFITS IN THE OREGON-HEALTH-PLAN

The policy debate in Oregon has primarily focused on the Prioritized L ist of Services. However, little information is available on how defin ed coverage benefits and managed care affect the role of medical neces sity in determining care for Medicaid patients. This issue is importan t because medical necessity determinations are currently used by many states to limit extraneous health care costs but require resource-inte nsive oversight, are open to wide variance, and frequently prompt liti gation challenging interpretations of what is necessary and what is no t. The qualitative study described here addressed whether medical nece ssity remains a salient and useful concept in the Oregon Health Plan. Our results indicate that defined coverage benefits, as described by t he funded portion of the Prioritized List of Services, supplant medica l necessity determinations for coverage, while managed care incentives Limit the need for medical necessity determinations at the provider l evel. Clinical choices are, for the most part, guided by providers' ju dgment within the financial constraints of capitation and by targeted use management techniques. The combination of capitated care and Orego n's defined coverage benefits package has marginalized the use of medi cal necessity, albeit with consequences for state oversight of Medicai d services.