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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. 
 
The rules state that neuropsychological testing is considered medically necessary for the following indications: 
 
- When there are deficits on standard mental status testing or clinical interview, and a neuropsychological 
assessment is needed to establish the presence of abnormalities or distinguish them from other disease 
processes; or 
- When neuropsychological data could provide clarification of clinical, laboratory, and neuroimaging data to 
assist in establishing a clinical diagnosis in neurological or systemic conditions known to affect central nervous 
system (CNS) functioning; or 
- When there is a need to quantify cognitive or behavioral deficits related to CNS impairment, and the 
information will be useful in determining a prognosis or treatment planning by determining the rate of disease 
progression; or 
- When there is a need for a pre-surgical or treatment-related cognitive evaluation to inform whether one might 
safely proceed with a medical or surgical procedure that may affect brain function or significantly alter a 
patients functional status; or 
- When there is a need to assess the potential impact of adverse effects of therapeutic substances that may cause 
cognitive impairment, and this information is utilized in treatment planning; or 
- When there is a need to assess progression, recovery, and response to changing treatments, in patients with 
CNS disorders, in order to determine the most effective plan of care; or 
- When there is a need for objective measurement of patients' subjective complaints about memory, attention, 
or other cognitive dysfunction, which directly impacts medical management by differentiating psychogenic 
from neurogenic syndromes, and in some cases will result in initial detection of neurological disorders or 
systemic diseases affecting the brain; or 
- When there is a need for treatment planning purposes of determining functional abilities/impairments in 
individuals with known or suspected CNS disorders; or 
- When there is a need to determine whether a patient can comprehend and participate effectively in complex 
treatment regimens and to determine functional capacity for health care decision-making, independent living, 
etcetera; or 
- When there is a need to design, administer, and/or assess outcomes of cognitive rehabilitation procedures, 
often in collaboration with other specialists such as speech pathologists, occupational therapists, physiatrists, and rehabilitation psychologists; or 
- When there is a need for treatment planning of identification and assessment of neurocognitive sequelae of 
disease; or 
- Assessment of neurocognitive functions for the formulation of rehabilitation and/or management strategies for 
certain individuals with neuropsychiatric disorders; or 
- When there is a need to diagnose cognitive or functional deficits in children and adolescents based on an 
inability to develop expected knowledge, skills or abilities as required to adapt to new or changing cognitive, 
social, emotional, or physical demands. 
 
The content of neuropsychological testing procedures differs from that of psychological testing in that 
neuropsychological testing consists primarily of individually administered ability tests that comprehensively 
sample cognitive and performance domains that are known to be sensitive to the functional integrity of the 
brain. 
 
Psychological testing codes include the administration, interpretation, and scoring of the medically accepted 
tests for the evaluation of intellectual strengths, psychopathology, psychodynamics, mental health risks, insight, 
motivation, and other factors influencing treatment and prognosis. 
 
Psychological tests are used to address a variety of questions about peoples functioning, diagnostic 
classification, co-morbidity, and choice of treatment approach. For example, personality tests and inventories 
evaluate the thoughts, emotions, attitudes, and behavioral traits that contribute to an individuals interpersonal 
functioning. The results of these tests determine an individual's personality strengths and weaknesses and may 
identify certain disturbances in personality or psychopathology. One type of personality test is the projective 
personality assessment, which asks a subject to interpret some ambiguous stimuli, such as a series of inkblots. 
The subject's responses can provide insight into his or her thought processes and personality traits. 
 
Examples of problems that might require psychological testing include: 
 
1. Assessment of mental functioning for individuals with suspected or known mental disorders for purposes of 
differential diagnosis and/or treatment planning. 
2. Assessment of patient strengths and disabilities for use in treatment planning or management when signs or 
symptoms of a mental disorder are present. 
3. Assessment of patient capacity for decision-making when impairment is suspected that would affect patient 
care or management. 
4. Assessment of mental function in certain chronic pain patients when indicated after psychological screening 
prior to surgical pain management intervention (e.g., implantable neurostimulator). 
5. Assessment of mental function in a chronic pain patient with suspected somatization disorder. 
 
When a psychiatric condition or the presence of dementia has already been diagnosed, there is value to the 
testing only if the information derived from the testing would be expected to have significant impact on the 
understanding and treatment of the patient. Examples include a significant change in the patients condition, the 
need to evaluate a patients capacity to function in a given situation or environment, and/or the need to 
specifically tailor therapeutic and/or compensatory techniques to particular aspects of the patients pattern of 
strengths and disabilities. 
 
Psychological and Neuropsychological testing is not considered reasonable and necessary when: 
 
- the patient is not neurologically and cognitively able to participate in a meaningful way in the testing process; 
- administered for educational or vocational purposes that do not establish medical management; 
- performed when abnormalities of brain or emotional function are not suspected; 
- used for self-administered or self-scored inventories or screening tests of cognitive function; 
- Repeated when not required for medical decision-making. Examples of medical decision making include: whether to start or continue a particular rehabilitative or pharmacologic therapy; 
- Administered when the patient has a substance abuse background, and any of the following apply: the patient 
has ongoing substance abuse such that test results would be inaccurate, or the patient is currently intoxicated. 
 
Testing conducted when no mental illness/disability is suspected would be considered screening and would not 
be covered. Non-specific behaviors that do not suggest the possibility of mental illness or disability are not an 
acceptable indication for testing. 
 
Evaluations of the mental status that can be performed within the psychiatric diagnostic evaluation should not 
be classified separately as psychological or neuropsychological testing since they are typically part of a more 
general psychiatric/psychological clinical exam or interview. 
 
Psychological/neuropsychological testing to evaluate adjustment reactions or dysphoria associated with 
placement in a nursing home does not constitute medical necessity for testing. Testing of every patient upon 
entry to a nursing home would be considered a routine service and would not be covered. However, some 
individuals enter a nursing home at a time of physical and cognitive decline and may require 
psychological/neuropsychological testing to arrive at a diagnosis and plan of care. Decisions to test individuals 
who have recently entered a nursing home need to be made judiciously, on a case-by-case basis. 
 
Each psychological/neuropsychological test administered must be individually medically necessary. A standard 
battery of tests is only medically necessary if each individual test in the battery is medically necessary. 
 
You can find this information in the Local Coverage Determination (LCD): Psychological and 
Neuropsychological Tests (L34520). 
 
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.