I know, I know, you’re not 65 yet, and don’t plan to be for a long time. But if you’re a physician in the United States treating adult patients, chances are, you bill Medicare for your services, either a little or a lot. Unless you’re opted out of the system, altogether- like Direct Primary Care. So, understanding Medicare is vital. Here’s a bird’s eye view of the system.
Centers for Medicare and Medicaid
The agency of the Federal Government tasked with administering Medicare and Medicaid is called the Centers for Medicare and Medicaid or CMS. CMS is part of the Department of Health and Human Services (HHS). CMS works in partnership with the different states to provide Medicaid services.
History of Medicare
The Medicare program came into being in 1965, under President Lyndon Johnson, as a a national healthcare program. Before then, many retirees had no access to healthcare insurance.
It started off only with Parts A and B. Parts C and D were added later. In the beginning, only persons 65 and older were eligible. Now, there are certain other conditions, such as disabilities and chronic conditions (end stage kidney disease famously being one of them) that will qualify an individual for Medicare benefits.
Original Medicare
At the start, Medicare had hospital coverage, which was called Medicare Part A. And medical coverage, for outpatient visits, which was, called Part B. They are still called by the same names.
Beneficiaries usually do not pay a premium for Part A but they do pay an annual premium of Part B. Most enrollees pay their Part B premiums through their Social Security payments. Premiums often go up year to year. 2022 saw a large hike in premiums, from $148.50/mo in 2021 to $170.10/mo in 2022. Interestingly, it fell to $164.90 in 2023, as a relief measure in light of severe inflation.
Medicare Supplemental Plans
Part A and B plans pay most (80%), but not all of the costs of care. If a patient has only original Medicare, they are responsible for paying 20% of the cost of care out of pocket.
America’s great at selling insurance. So, of course, there’s insurance for that too. These are called Medicare supplemental plans or Medigap plans. They are offered by private insurers to cover the part that’s not covered by original Medicare.
For example, if you see a patient in the office and bill 99214 for their follow up visit, in my neck of the woods, Medicare pays 80%, or, $102.38 of the total allowable which is $127.97. If the patient does not have any other coverage, they are responsible for the remaining $25.59. If they have a supplemental plan, it picks up all or some of that 20% co-insurance.
Some Medigap plans also pay copays and deductibles. For example, Medicare Part B’s annual deductible for 2022 is $233. New Medigap plans are not allowed to cover this deductible but patients who already had a Medigap plan type C or F, prior to 2020- or were eligible for Medicare prior to 2020- can have their deductible covered by their supplemental plans.
So, at the beginning of the year, you may need to collect any applicable deductible directly from patients. Now, by the letter of the law, Medicare recommends collecting deductible or co-insurance only after the claim has been processed and paid, rather than upfront (since it may be hard to predict how much patient is actually responsible for). But we know the challenges of trying to collect from patients after services have already been provided. Any overcorrection is considered Medicare program abuse and the overcollected portion of your payment may go straight to the patient. [It is recommended you say in your claim how much you’ve already collected… that’s how Medicare knows. I’m not sure anyone actually does this. I’d love to hear if that’s your standard of practice.]
Of course, patients pay a separate premium for these plans. They are only offered by private insurers, not the government, and costs vary. But these plans are federally regulated and must meet certain requirements. For instance, all of them must cover Part A costs not covered by Medicare.
There are 10 types of Medigap plans, named by letters: Plan A, B (not to be confused with Medicare Part A and B), C, D, F, G, K, L, M and N. Of these, Plan F has the most extensive coverage, but, as mentioned above, is no longer offered to new Medicare enrollees.
Keep in mind:
- Only Plans C and F cover Part B deductible
- All of them cover Part B coinsurance/copayment, except that Plan K pays only 50%, Plan L only 75% and Plan N has $20 copays for some types of office visits. Knowing this information helps you collect patient responsibility the right way.
Medicaid as supplemental Plan
Some patients have Medicaid as their secondary or supplemental plan. In such cases, you need to remember 2 things:
- You may not charge them any patient responsibility for covered services: no copay or co-insurance
- Medicaid also pays less than Medicare rates. What this implies is that you will likely only recoup 80% of allowable charges for these encounters: the part Medicare pays. Medicaid will not generally pay the remaining 20%.
Going Down the Alphabet
Medicare Parts A and B cover hospital and medical costs. What you’re left without is coverage for prescription drugs, dental and vision coverage. At one time, it may have been possible to cover these costs out of pocket. But with the rising cost of medications, Medicare beneficiaries have had to look for options.
And other options have emerged.
First came part D plans. These are standalone plans from private Insurance companies meant to provide prescription drug coverage. The drugs covered and the patient responsibility associated with them differs from plan to plan.
Then came Medicare Advantage plans, or Part C plans. This requires its own subsection.
Medicare Advantage Plans
Medicare Advantage Plans (MA Plans) are an alternative to Original Medicare. They are NOT supplementary to Original Medicare.
The costs with Original Medicare add up. Part B premiums and deductible, Part D premiums/deductibles/copays, and either supplemental insurance premiums or 20% co-insurances- add up to quite a bit.
To reduce these costs, patients may opt to go with a Medicare-approved private insurance plan that takes care of all of it: hospitalizations and outpatient visits and usually prescription drug coverage as well.
These plans are called Medicare Advantage Plans. If one enrolls in a MA Plan, it automatically opts them out of Original Medicare.
These plans works similarly to regular health insurance for under-65’s. So, they may be HMO plans or PPO plans. There is also an equivalent of HSA Plans, called MSA (Medical Savings Account) Plans. There are Special Needs Plans (SNPs) that cater to patients with particular disease conditions or characteristics.
Some of them have narrow networks. Some of them have out-of-network benefits. Most of them are geographically-restricted.
You need to contract with with the private insurer offering the plan- and specifically with their Medicare Advantage “lines of business”, in order to get in network.
A comprehensive overview of Medicare Advantage Plans is really hard since they are many and varied.
Things to remember:
- These plans often have a small copay, ranging from $5-$20 or so. Do an eligibility verification prior to the first visit, find out what the expected patient responsibility is and collect it upfront.
- Some of these plans are HMOs: be sure to obtain a “referral”/prior authorization before you see the patient.
Medicare Part D Plans
While you will not directly bill Medicare Part D, it will impact the patient, and therefore, you- since their drug coverage will depend on their Part D plan.
These are stand-alone plans for prescription drug coverage that patients on Original Medicare are eligible to participate in. Patients on Medicare Advantage Plans will actually lose their coverage if they get on a Part D plan.
Part D plans are also offered by private insurers and therefore vary in their characteristics. They have their own formularies, premiums, copays, co-insurances and deductible, varying from plan to plan.
And then they have the infamous Coverage Gap, better known as the “donut hole”. Basically, a patient can get their medications paid by the plan upto a certain amount per year. For 2022, the amount was $4430. Once a patient has met this amount for the year (and that includes deductibles, copays and coinsurance- but not premiums), they are in the coverage gap.
While within the donut hole, patients are required to pay up to 25% of the negotiated price of a drug, depending on the plan. You can imagine that this can get pretty expensive for many of the really high cost newer medications these days.
Once a patient has spent $7050 (for 2022) towards their covered medications, they are out of the coverage gap and are now said to be in “catastrophic coverage”- where they need to pay only a small copay or co-insurance for covered drugs again.
I hope this brief overview was helpful. It took me a little bit to wrap my head around these basics when I first started my practice. I think all physicians, whether employed or in practice, should know the basics of insurance coverage. It may not influence your practice patterns but completely outsourcing all business knowledge usually proved costly. Plus, the basics are fairly simple. And you’re a physician. If anyone can learn, you can.