Govt Payment Programs(Ch. 8, 2/25/15)

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Payment of Healthcare

• Patient pays for care themselves (“self-pay”)• Private insurance pays for care.

– Employer provides insurance or health care benefits.

– Patient purchases health insurance.• Govt pays for care.

– Medicare– Medicaid– SCHIP– Veterans Administration (“VA”)– Other grants, programs, etc.

Medicare, Medicaid and CHIP

• In 2012:– Medicare, Medicaid and CHIP spent $1 trillion

($1,000,000,000,000).– 36% of the USA’s total health care expenditures.

• Participation imposes many requirements and potential liability.

The BIG Gorilla in

Healthcare!MEDICARE

PROVIDERS

Medicare and Medicaid

Health & Human Services (“HHS”)

Centers for Medicare and Medicaid Services (“CMS”)

Medicare(Federal)

Medicaid(Federal + State)

Medicare

• Enacted in 1965 due to large number of uninsured.

Medicare

• Generally available to – Persons who are age 65 and older if they

or their spouses paid Social Security taxes for 10 years.

– Persons with certain disabilities.– Persons with end-stage renal disease

(“ESRD”)

Medicare

• Part A: Hospital Insurance

• Part B: Supplemental Medical Insurance

• Part C: Medicare Advantage

• Part D: Prescription Drug Benefit

Beneficiaries must pay

premium to obtain.

Beneficiaries do not pay premium

“Traditional Medicare”

or “Fee-for-Service”

Provided Through Private

Plans that Contract with CMS

Medicare Part A

• Covers– Inpatient hospital services for up to 90 days.– Skilled nursing facility for 100 days following

inpatient hospital stay.– Home health care following hospital stay.– Hospice.– Inpatient psychiatric care for up to 190 days.

Medicare Part A• Provided automatically to eligible

beneficiaries; no premium required.• Persons who do not qualify may purchase

Part A for a premium if they also purchase Part B.

• Beneficiary must pay to providers any applicable cost-sharing amounts:– Deductible– Coinsurance or copays if applicable

• Medicare pays to providers the balance for Medicare-approved costs.

Medicare Part A• Funded by:

– Payroll taxes• 1.45% from employees• 1.45% from employers• Higher-income tax payers pay additional amount

– Interest from Trust Fund– Taxes on Social Security benefits– Other miscellaneous sourcesNo premiums from beneficiaries.

• Administered through the Hospital Insurance (“HI”)Trust Fund.

Medicare Part A• Payments to providers

– Reasonable-cost basis.• Providers paid according to the service provided,

usually according to a Medicare fee schedule.• Certain hospitals (e.g., CAHs) are still paid on a

cost-basis.– Prospective payment system (“PPS”)

• Most hospitals are paid a flat amount based on diagnosis-related group (“DRG”).

• If cost of care is greater than the DRG payment, hospital suffers the loss.

Medicare Part B

• Covers medically necessary:– Physicians’ services (e.g., inpatient hospital services, office visits, yearly

wellness visit, etc.).– Services by Medicare-approved practitioners who are not physicians (e.g.,

PAs, NPs, CRNAs, psychologists, etc.)– Durable medical equipment (“DME”) and supplies (e.g., wheelchair,

oxygen, etc.).– Outpatient hospital services– Outpatient mental health services.– Clinical laboratory tests (e.g., blood tests, some screening tests, etc.).– Diagnostic tests (e.g., x-rays, MRIs, CT scans, etc.).– Outpatient occupational, physical, and speech therapy.– Home health care not covered by Part A.– Many preventative services (e.g., mammograms, prostate cancer

screening, colorectal cancer screening, flu shots, etc.)– Ambulance services

Medicare Part B• Persons eligible for Part A may enroll in Part B on

voluntary basis by payment of a monthly premium.• Eligible beneficiaries must pay:

– Part B premium• $100 to $350 per month depending on income level.

– Cost-sharing amounts as applicable to the specific covered item.• Deductible• Coinsurance or copays (e.g., 20% of Medicare-

approved rate)• Medicare pays its share of Medicare-approved costs

(e.g., 80% of the Medicare-approved rate)

Medicare Part B

• Funded by:–Beneficiary premiums.

• May be adjusted according to needs.–Federal general revenues.

• Administered through the Supplementary Medical Insurance (“SMI”) Trust Fund.

Medicare Part B• Physicians paid the lower of:

– The submitted charge, or– Medicare fee schedule based on the relative value

score (“RVS”) associated with specific service.• Physician fee schedule is supposed to be

reduced each year by a Sustainable Growth Rate (“SGR”) system.– Every year, legislature overrides the SGR reduction.

• Services are assigned a current procedural terminology (“CPT”) code.– In process of moving to new set of codes, CPT-10.

Medicare Part B• Physicians may choose whether to participate in

Medicare.– Participating (“Par”) physicians = participation agreement

• Accepts Medicare-approved rate (plus applicable copays and deductibles) as payment in full (“takes assignment”).

• Bills and is paid directly by Medicare.• Cannot balance bill patient.

– Non-participating (“non-Par”) physicians = no agreement; determine whether to take assignment on a case-by-case basis.

• If accept assignment, limited to 95% of the Medicare-approved rate; bills and collects from Medicare.

• If do not accept assignment, limited to 115% of the Medicare-approved rate (115% x 95%); bills and collects from patient.

– Opt-out entirely.• File affidavit and contract privately with patients.• May not bill Medicare for two years.

PAYMENT ARRANGEMENT

TOTAL PAYMENT RATE PAYMENT AMOUNT FROM MEDICARE PAYMENT AMOUNT

FROM PATIENT

PAR physician 100% Medicare fee schedule = $100

$80 (80%) MAC direct to physician

$20 (20%) paid by patient or supplemental insurance (e.g., Medigap)

Non-PAR/ assigned claim 95% Medicare fee schedule = $95

$76 (80%) MAC direct to physician

$19 (20%) paid by patient or supplemental insurance (e.g., Medigap)

Non-PAR/ unassigned claim

Limiting charge/109.25% Medicare fee schedule = $109.25

$0

$76 (80%) paid by MAC to patient+ $19 (20%) paid by patient or supplemental insurance+ $14.25 balance bill paid by patient

Example: A service for which Medicare fee schedule amount is $100

Medicare Part B

• Certain other providers are required to accept assignment.– Physician’s Assistant– Nurse Practitioner– Certified Registered Nurse Anesthetist– Clinical Nurse Specialist– Nurse Midwife– Clinical Social Worker– Clinical Psychologist

• They do not require provider agreement.

Medicare Part C

• Formerly known as “Medicare + Choice”• As alternative to Medicare Part A or B, eligible

beneficiaries may choose to enroll in Part C private health plans (“Medicare Advantage Plans” or “MA Plans”). – Premiums or cost-sharing for MA Plans may be cheaper.– MA Plans may impose additional restrictions, e.g., requiring

enrollees to see certain providers.• Coverage

– All plans must cover, at a minimum, all Part A and Part B services.

– Plans may cover additional items (e.g., vision and hearing)– Plans may offer reduced cost sharing or premiums for certain

items.

Medicare Part C• Eligible beneficiary pays:

– Premium to enroll in plan.– Cost-sharing amounts applicable to the

covered item.• Deductible• Coinsurance or copays

• Medicare pays plans a capitated amount based on the number of Medicare-eligible beneficiaries enrolled in the plan.

Medicare Part C

• Funded by:–Enrollee premiums.– Medicare pays Medicare Advantage

plans to provide benefits.• Administered through the HI and SI

Trust Funds.

Medicare Part D

• Eligible beneficiaries may join:– Part D plan approved by Medicare, or – Part C Medicare Advantage plan that

offers a prescription drug benefit.• Coverage

– Approved plan must offer at least a “standard” drug benefit approved by Medicare.

– Plan may provide additional benefits.

Medicare Part D• Eligible beneficiaries pay:

– Premium to enroll in plan.• Depends on plan, but averages $32 per month.

– Cost-sharing amounts.• Deductible• Coinsurance or copays

– “Doughnut hole” in minimum Part D plans.

Plan Pays Plan Pays

$3000 $4700

Beneficiary Pays

Medicare Part D• Funded by:

–Beneficiary premiums.–General revenues.–State payments for eligible beneficiaries

who would otherwise qualify for Medicaid.

• Administered through a separate account in the SMI Trust Funds.

• Medicare pays plans a certain amount per enrolled beneficiary.

Medicare Supplemental (“Medigap”) Insurance

• Medicare contains gaps in coverage, e.g.,– Long term care.– Dental.– Health care outside the United States.– Chiropractic care.– Hearing aids and eyeglasses.– Elective, unnecessary services.

• May purchase private “Medigap” insurance to cover:– Gaps in Medicare coverage.– Patient portion of Medicare deductibles, coinsurance, etc.

• Medigap insurance cannot pay Medicare Advantage deductibles and copayments.

Medicare Claims Processing• For Medicare Parts A and B, CMS contracts with

private companies (“Medicare Administrative Contractors” or “MACs”) to process claims. – MAC for Idaho is Noridian.

• For Medicare Part C and D, Medicare Advantage Plans and Part D Plans handle their own claims processing.

Medicare

• Providers who receive Medicare money must comply with numerous statutory, regulatory, and contractual provisions.– Regulations– Medicare Manuals– MAC Local Coverage Determinations (“LCDs”)

• Failure to comply may result in:– Denial of payment.– Repayment of amounts improperly paid.– Civil and criminal fines and penalties.– Exclusion from Medicare program.

• May adversely affect ability to get a job in healthcare.

Medicare: The Future?

• HI Trust Fund is expected to become insolvent within 10 years.• Cost of Medicare Parts B and D continue to

increase, resulting in increased premiums to beneficiaries.

• Congress repeatedly delays the cuts in the physician fee schedule required by the SGR system.

• ACA requires lower payment rates for other providers, but that likely will not be viable.

Medicare: the Future?

• Federal govt is trying to change structures to preserve long-term viability.– Pay for Performance (“P4P”) programs– Medicare Shared Savings Program

(“MSSP”)• Private entities may form Accountable Care

Organizations (“ACOs”).• If ACOs achieve cost and quality goals, they

receive a percentage of savings to Medicare program.

– Demonstration projects

Medicaid

Assignment—None!

Questions?