Medical Necessity and Defined Coverage Benefits in the Oregon Health Plan

The qualitative study described in this article addressed whether medical necessity remains a salient and useful concept in the Oregon Health Plan. Results indicate that defined coverage benefits, as described by the funded portion of the Prioritized List of Services, supplant medical necessity determinations for coverage, while managed care incentives limit the need for medical necessity determinations at the provider level. Clinical choices are, for the most part, guided by providers' judgment within the financial constraints of capitation and by targeted use management techniques. The combination of capitated care and Oregon's defined coverage benefits package has marginalized the use of medical necessity, albeit with consequences for state oversight of Medicaid services.