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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 home oxygen therapy is reasonable and necessary only if all of the following conditions are 
met: 
 
    The treating practitioner has determined that the beneficiary has a severe lung disease or hypoxia-related 
symptoms that might be expected to improve with oxygen therapy, and 
    The beneficiary's blood gas study meets the criteria stated below, and 
    The qualifying blood gas study was performed by a treating practitioner or by a qualified provider or 
supplier of laboratory services, and 
    The qualifying blood gas study was obtained under the following conditions: 
        If the qualifying blood gas study is performed during an inpatient hospital stay, the reported test must be 
the one obtained closest to, but no earlier than 2 days prior to the hospital discharge date, or 
        If the qualifying blood gas study is not performed during an inpatient hospital stay, the reported test must 
be performed while the beneficiary is in a chronic stable state  i.e., not during a period of acute illness or an 
exacerbation of their underlying disease, and 
    Alternative treatment measures have been tried or considered and deemed clinically ineffective. 
 
In this policy, the term blood gas study refers to either an oximetry test or an arterial blood gas test. 
 
Group I criteria include any of the following: 
 
    An arterial PO2 at or below 55 mm Hg or an arterial oxygen saturation at or below 88 percent taken at rest 
(awake), or 
    An arterial PO2 at or below 55 mm Hg, or an arterial oxygen saturation at or below 88 percent, for at least 5 
minutes taken during sleep for a beneficiary who demonstrates an arterial PO2 at or above 56 mm Hg or an 
arterial oxygen saturation at or above 89 percent while awake, or 
    A decrease in arterial PO2 more than 10 mm Hg, or a decrease in arterial oxygen saturation more than 5 
percent from baseline saturation, for at least 5 minutes taken during sleep associated with symptoms (e.g., 
impairment of cognitive processes and [nocturnal restlessness or insomnia]) or signs (e.g., cor pulmonale, "P" 
pulmonale on EKG, documented pulmonary hypertension and erythrocytosis) reasonably attributable to 
hypoxemia, or 
    An arterial PO2 at or below 55 mm Hg or an arterial oxygen saturation at or below 88 percent, taken during 
exercise for a beneficiary who demonstrates an arterial PO2 at or above 56 mm Hg or an arterial oxygen 
saturation at or above 89 percent during the day while at rest. In this case, oxygen is provided for during exercise if it is documented that the use of oxygen improves the hypoxemia that was demonstrated during 
exercise when the beneficiary was breathing room air. 
 
Initial coverage for beneficiaries meeting Group I criteria is limited to 12 months or the treating practitioner-
specified length of need, whichever is shorter. (Refer to the Certification section for information on 
recertification.) 
 
You can find this information in the Local Coverage Determination (LCD) Oxygen and Oxygen Equipment 
L33797. 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.