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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 the duration of a course of psychotherapy must be individualized for each patient. Prolonged 
treatment may be subject to medical necessity review. The provider must document the medical necessity for 
prolonged treatment. 
 
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. 
 
You can find this information in Medicare's Local Coverage Determination (LCD): Psychiatry and Psychology 
Services (L33632). 
 
If you want to read these Medicare rules, you can go to this website www.medicareappeal.com.