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The rules say that plans must pay for a medical service or item if regular Medicare would pay for it in this case. You can find this rule at 42 Code of Federal Regulations (CFR) Section 422.101.

Medicare will consider Total Knee Arthroplasty (TKA) medically reasonable and necessary when three or more of the following criteria are met:

1. Advanced joint disease demonstrated by radiographic supported evidence or magnetic resonance imaging (MRI), e.g., fracture or deterioration, distortion of joint surfaces, subchondral cysts, subchondral sclerosis, periarticular osteophytes, joint subluxation, joint space narrowing, avascular necrosis;
2. History of unsuccessful appropriate conservative therapy that is clearly documented in the pre-procedure medical record. Non-surgical medical management is usually implemented for 3 months or more to assess effectiveness. Conservative treatment as clinically appropriate for the patient's current episode of care typically includes one or more of the following: anti-inflammatory medications; analgesics; flexibility and muscle strengthening exercises with supervised physical therapy.
3. Pain with functional disability due to arthritis or trauma to the knee joint; activities of daily living (ADLs) are diminished despite compliance with plan of care including activity restrictions as is reasonable, assistive device use, weight reduction as appropriate or therapeutic injections into the knee as appropriate;
4. Distinct structural abnormalities such as:
o Distal femur fracture;
o Proximal tibia fracture;
o Malignancy of the distal femur, proximal tibia, knee joint or adjacent soft tissues;
o Avascular or other form of osteonecrosis of the knee;
o Rheumatologic changes precluding or inconsistent with rehabilitation
5. Failed previous joint replacement/arthroplasty necessitating revision as indicated by any of the following:
o Loosening, fracture, or mechanical failure of one or more components;
o Technical or functional failure of previous knee surgery, e.g. unicompartmental knee replacement;
o Previous osteotomy or partial arthroplasty;
o Infection;
o Periprosthetic fracture or bone loss of distal femur, proximal tibia or patella; Implant or knee malalignment;
o Bearing surface wear leading to symptomatic synovitis;
o Tibiofemoral or extensor mechanism instability; or
o Knee stiffness, arthrofibrosis or other destructive conditions that render the knee impaired to the extent to preclude employment or functional activities.

You can find more information at Local Coverage Determination (LCD): Lower Extremity Major Joint Replacement (Hip and Knee) (L36007).

Inpatient care rather than outpatient care is required only if the beneficiary's medical condition, safety, or health would be significantly and directly threatened if care was provided in a less intensive setting. Without accompanying medical conditions, factors that would only cause the beneficiary inconvenience in terms of time and money needed to care for the beneficiary at home or for travel to a physician's office, or that may cause the beneficiary to worry, do not justify a continued hospital stay. You can find this rule at the Medicare Program Integrity Manual Ch. 6, Section 6.5.2.

If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.

The Plan contract says that the Plan covers items and services in accordance with Medicare rules.