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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 psychological testing includes the administration, interpretation, and scoring of the tests and 
other medically accepted tests for evaluation of intellectual strengths, psychopathology, psychodynamics, 
mental health risks, insight, motivation, and other factors influencing treatment and prognosis. 
 
Comments: These tests do not represent psychotherapeutic modalities but are diagnostic aids. Use of such tests 
when mental illness is not suspected would be a screening procedure not covered by Medicare. Each test 
performed must be medically necessary. Therefore, standardized batteries of tests are not acceptable unless 
each test in the battery is medically necessary. 
 
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. Adjustment reactions or 
dysphoria associated with moving to a nursing facility do not constitute medical necessity for psychological 
testing. 
 
Description: Neuro-Cognitive, Mental Status, Speech Testing: 
 
Testing which is intended to diagnose and characterize the neurocognitive effects of medical disorders that 
impinge directly or indirectly on the brain. Examples of problems that might lead to neuropsychological testing 
are: 
1. Detection of neurologic diseases based on quantitative assessment of neurocognitive abilities (e.g., mild 
head injury, anoxic injuries, AIDS dementia) 
2. Differential diagnosis between psychogenic and neurogenic syndromes 
3. Delineation of the neurocognitive effects of central nervous system disorders 
4. Neurocognitive monitoring of recovery or progression of central nervous system disorders; or 5. Assessment of neurocognitive functions for the formulation of rehabilitation and/or management 
strategies among individuals with neuropsychiatric disorders. 
 
Comments: 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.). These procedures are objective and quantitative in nature 
and require the patient to directly demonstrate his/her level of competence in a particular cognitive domain. 
Neuropsychological testing does not rely on self-report questionnaires such as the Minnesota Multiphasic 
Personality Inventory 2 (MMPI-2), rating scales such as the Hamilton Depression Rating Scale, or projective 
techniques such as the Rorschach or Thematic Apperception Test (TAT) when questions of how brain damage 
or degenerative disease processes (e.g. right hemisphere CVA) may be affecting emotional expression or how 
significant emotional distress or mood impairment might be affecting cognitive function (e.g. question of 
presence of "pseudodementia") arise. 
 
Typically, psychological testing will require from four (4) to six (6) hours to perform, including administration, 
scoring and interpretation. Supporting documentation in the medical record must be present to justify greater 
than 8 hours per patient per evaluation. If the testing is done over several days, the testing time should be 
combined and reported all on the last date of service. If the testing time exceeds eight (8) hours, medical 
necessity for extended time should be documented. Medical records may be requested. 
 
Limitations: 
 
Severe and profound intellectual disabilities are never covered for psychotherapy services or psychoanalysis. In 
such cases, rehabilitative, evaluation and management (E/M) codes should be reported. 
 
Patients with dementia represent a very vulnerable population in which co-morbid psychiatric conditions are 
common. However, for such a patient to benefit from psychotherapy services requires that their dementia be 
mild (e.g., Mini Mental Status Examination score above 15) and that they retain their capacity to recall the 
therapeutic encounter from one session, individual or group, to another. This capacity to meaningfully benefit 
from psychotherapy must be documented in the medical record. Psychotherapy services are not covered when 
documentation indicates that dementia has produced a severe enough cognitive defect to prevent psychotherapy 
from being effective. 
 
Any diagnostic or psychotherapeutic procedure rendered by a practitioner not practicing within the scope of 
his/her licensure or other State authorization will be denied. 
 
Psychiatric services billed under the hospital outpatient benefit must be provided in distinct outpatient settings. 
Outpatient hospital services provided in conjunction with inpatient services, or under the auspices of an 
excluded inpatient unit, residential treatment center, residential facility, or skilled nursing facility, are not in 
compliance with Medicare regulations and payment will be denied. Payment may be made for psychiatric 
services in these settings by individual providers billing Part B. 
 
The following services do not represent reasonable and necessary outpatient psychiatric services: 
 day care programs, which provide primarily social, recreational, or diversional activities, custodial or 
respite care; 
 programs attempting to enhance emotional wellness, e.g., day care programs; 
 services to a skilled nursing facility resident that should be expected to be provided by the nursing 
facility staff;  vocational training when services are related solely to specific employment opportunities, work skills, 
or work settings; 
 biofeedback training for psychosomatic conditions; 
 recovery meetings such as Alcoholics Anonymous, 12 Step, Al Anon, Narcotics Anonymous, due to 
their free availability in the community; 
 telephone calls to patients, collateral resources and agencies; 
 evaluation of records, reports, tests, and other data; 
 explanation of results to family, employers, or others; 
 preparation of reports for agencies, courts, schools, or insurance companies, etc. for medicolegal or 
informational purposes; 
 screening procedures provided routinely to patients without regard to the signs and symptoms of the 
patients mental illness. 
The following services are excluded from the scope of outpatient hospital psychiatric services: 
 services to hospital inpatients; 
 meals, transportation; 
 supervision or administration of self-administered medications and supplying medications for home 
use. 
Evaluations of the mental status that can be performed within the clinical interview, such as a list of questions 
concerning symptoms of depression or organic brain syndrome, corresponding to brief questionnaires such as 
the Folstein Mini Mental Status Examination or the Beck Depression Scale, should not be billed as 
psychological testing, but are considered included in the clinical interview. 
 
Adjustment reactions or dysphoria associated with moving to a nursing facility do not constitute medical 
necessity for psychological testing. However, if a more serious mood disorder (e.g., major depression) is 
suspected upon admission to a nursing facility, psychological or neuropsychological testing may be indicated 
for differential diagnostic purposes and to develop appropriate treatment planning. 
 
Routine testing of nursing home patients is considered screening and is not covered. 
 
Each psychological 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 rule at the Medicare Local Coverage Determination (LCD) L33632: Psychiatry and 
Psychology Services. 
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.