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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 
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 (e.g., deep 
brain stimulation, resection of brain tumors or arteriovenous malformations, epilepsy surgery) 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 (e.g., radiation, chemotherapy, antiepileptic medications), 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 (e.g., dementia vs. depression), 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 (e.g., capacity for independent living or movement 
from a family home into an institutional setting); 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, etc.; 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 (e.g., abstraction, memory and learning, attention, language, problem solving, sensorimotor functions, 
constructional praxis, etc.). 
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. 
 
 Limitations 
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 (paper-and-
pencil or computerized), e.g., AIMS, Folstein Mini-Mental Status Examination; 
 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 (e.g., a list 
of questions concerning symptoms of depression or organic brain syndrome, corresponding to brief 
questionnaires or screening measures such as the Folstein Mini Mental Status Examination or the Beck 
Depression Scale, or use of other mental status exams in isolation) 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. 
The psychological/neuropsychological testing codes should not be reported by the treating physician for only 
reading the testing report or explaining the results to the patient or family. Payment for these services is 
included in the payment for other services rendered to the patient, such as evaluation and management services. 
Psychological and neuropsychological testing codes should be reported by the performing provider (i.e., 
clinical psychologist, neuropsychologist, or physician) who administered the test. 
Changes in mental illness may require psychological testing to determine new diagnoses or the need for 
changes in therapeutic measures. Repeat testing not required for diagnosis or continued treatment would be 
considered medically unnecessary. Nonspecific behaviors that do not indicate the presence of, or change in, a 
mental illness would not be an acceptable indication for testing. Psychological or psychiatric evaluations that 
can be accomplished through the clinical interview alone (e.g., response to medication) would not require 
psychological testing, and such testing might be considered as medically unnecessary.  
For the formal evaluation of aphasia using a psychometric instrument such as the Boston Diagnostic Aphasia 
Examination, testing is typically performed once during treatment, and the medical necessity for such testing should be documented. Repeat testing should only be done if there is a significant change in the patients 
aphasic condition.  
Supporting documentation in the medical record must be present to justify the medical necessity and hours 
tested per patient per evaluation. If the testing time exceeds eight (8) hours, medical necessity for the extended 
testing should be documented in the report.  
Routine re-evaluation of chronically disabled patients that is not required for a diagnosis or continued treatment 
is not medically necessary.  
You can find this rule at the Medicare Local Coverage Determination (LCD) L34520: Psychological and 
Neuropsychological Tests. 
 
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.