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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 say that a lower limb prosthesis is covered when the beneficiary: 
 
    1. Will reach or maintain a defined functional state within a reasonable period of time; and 
 
    2. Is motivated to ambulate. 
 
FUNCTIONAL LEVELS: 
 
A determination of the medical necessity for certain components/additions to the prosthesis is based on the 
beneficiarys potential functional abilities. Potential functional ability is based on the reasonable expectations 
of the prosthetist, and treating practitioner, considering factors including, but not limited to: 
 
    1. The beneficiarys past history (including prior prosthetic use if applicable); and 
 
    2. The beneficiarys current condition including the status of the residual limb and the nature of other 
medical problems; and 
 
    3. The beneficiarys desire to ambulate. 
 
Clinical assessments of beneficiary rehabilitation potential must be based on the following classification levels: 
 
Level 0: Does not have the ability or potential to ambulate or transfer safely with or without assistance and a 
prosthesis does not enhance their quality of life or mobility. 
Level 1: Has the ability or potential to use a prosthesis for transfers or ambulation on level surfaces at fixed 
cadence. Typical of the limited and unlimited household ambulator. 
Level 2: Has the ability or potential for ambulation with the ability to traverse low level environmental barriers 
such as curbs, stairs or uneven surfaces. Typical of the limited community ambulator. 
Level 3: Has the ability or potential for ambulation with variable cadence. Typical of the community ambulator 
who has the ability to traverse most environmental barriers and may have vocational, therapeutic, or exercise activity that demands prosthetic utilization beyond simple locomotion. 
Level 4: Has the ability or potential for prosthetic ambulation that exceeds basic ambulation skills, exhibiting 
high impact, stress, or energy levels. Typical of the prosthetic demands of the child, active adult, or athlete. 
 
The records must document the beneficiarys current functional capabilities and his/her expected functional 
potential, including an explanation for the difference, if that is the case. It is recognized, within the functional 
classification hierarchy, that bilateral amputees often cannot be strictly bound by functional level 
classifications. A determination of the type of knee for the prosthesis will be made by the treating practitioner 
and/or the prosthetist based upon the functional needs of the beneficiary. Basic lower extremity prostheses 
include a single axis, constant friction knee. Other prosthetic knees are considered for coverage based upon 
functional classification. A fluid, pneumatic, or electronic/microprocessor knee (L5610, L5613, L5614, L5722, 
L5724, L5726, L5728, L5780, L5814, L5822, L5824, L5826, L5828, L5830, L5840, L5848, L5856, L5857, 
L5858) is covered for beneficiaries whose functional level is 3 or above. You can find this information in 
Medicare's Local Coverage Determination (LCD): Lower Limb Prostheses (L33787). 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.