This article is intended to
help you better understand how Medicare pays for physician services and how Medicare
determines how much it will pay for those services. It also explains what you may do if
you disagree with the amount Medicare pays towards your bill, and what to do if you have
reason to believe you were overcharged or you suspect that Medicare was improperly billed
by a health care provider. You will also find an explanation of the law that limits the
amount a physician can charge a Medicare beneficiary for covered services. But first, here
are some basic facts about Medicare.
The Two Parts of Medicare
Medicare has two parts -- Hospital Insurance (Part A) and Supplementary Medical
Insurance (Part B). Part A helps pay for inpatient hospital care and certain follow-up
care, such as care in a skilled nursing facility. Part B helps pay for physician services
and many other medical services and items.
Unless you state that you don't want it, you generally are automatically enrolled in
Part B when you are enrolled in Part A. When you are enrolled in Part B, you will be
required to pay a monthly premium. The premium, which is subject to change each year, was
$46.10 per month in 1995. Although you do not have to purchase Part B, it is an excellent
buy because the Federal Government pays about 75 percent of the program costs.
Your Medicare card shows the coverage you have [Hospital Insurance (Part A), Medical
Insurance (Part B), or both] and the date your protection started. If you only have one
part of Medicare, you can obtain information from any Social Security Administration
office about getting the other part.
Part A and Part B have their own unique systems for paying claims (bills) for covered
services and supplies provided to Medicare beneficiaries. Medicare claims and payments are
handled by insurance organizations under contract to the Federal Government. The
organizations that handle claims from hospitals, skilled nursing facilities, home health
agencies, renal dialysis facilities and hospices are called "intermediaries."
You almost never have to get involved in the Part A claims process.
Other insurance organizations handle Medicare Part B claims. They are called
"carriers." There are times when you might want information about the charges
appearing on a Part B claim, or about the status of your claim, and you will want to
contact the carrier. The names and addresses of the carriers and the areas they serve are
listed in the back of The Medicare Handbook, which may be obtained from any
Social Security Administration office or by calling 1-800-638-6833.
Medicare Part B Benefits
Part B helps pay for medically necessary physician services, including surgical
services, no matter where you receive them--at home, in the doctor's office, in a clinic
or hospital. It also covers related medical services and supplies, medically necessary
outpatient hospital services, X-rays and laboratory tests. Coverage is also provided for
limited ambulance services, and the in-home use of durable medical equipment, such as
wheelchairs, walkers and hospital beds.
Additionally, Part B covers physical therapy, occupational therapy, and speech
pathology services in a doctor' s office, in an outpatient setting, or in your home.
Mental health services are covered along with blood, mammograms and Pap smears. And if you
quality for home health care but do not have Medicare Part A, then Part B pays for all
covered home health visits.
While Part B generally does not cover outpatient prescription drugs, it does cover some
oral anti-cancer drugs, certain drugs for hospice enrollees, and non-self administrable
drugs provided as part of physician's services. Certain drugs furnished during the first
year after an organ transplantation and epoetin for home dialysis patients are also
covered. Medicare also helps pay for antigens, and flu, pneumococcal, and hepatitis B
vaccines. Coverage is also provided for blood after you meet the 3-pint annual deductible.
Medicare's Approved Amount
Medicare's system for paying physicians is based on fee schedule. The fee schedule
assigns a dollar value to each physician service based on work, the cost of running a
practice, and the cost of malpractice insurance. The fees that appear on the schedule are
the Medicare approved amounts for services covered by Part B. Under the Part B payment
system, each time you go to a physician for covered service, the amount Medicare will
recognize for that service will be the lesser of the physician's actual charge or the fee
Charges You Pay
When you use your Part B benefits, you are responsible for paying the first $100 each
calendar year for services and supplies covered by Medicare. This is called the Part B
annual deductible. The $100 must be based on the Medicare-approved amounts, not the actual
charges billed by your physician if those charges exceed the Medicare-approved amounts.
After you have met the $100 deductible, Medicare starts paying a share of your medical
expenses. Part B generally pays 80 percent of the Medicare-approved amount for all covered
services you receive for the rest of the year. You are responsible for the other 20
percent, which is called co-insurance. You also are responsible for all permissible
charges in excess of the Medicare-approved amount, and for all charges for services and
supplies not covered by Medicare.
Assigned and Unassigned Claims
Each time you use the services of a physician, the physician submits your Medicare
claim to the carrier either on an "assigned" or "unassigned" basis.
When a claim is assigned, it means that he physician has agreed to accept the
Medicare-approved amount as payment in full. The physician bills you for 20 percent of the
approved amount plus any unmet portion of the Part B $100 deductible. On assigned claims,
Medicare pays its share directly to the physician.
When a claim is unassigned, it means that the physician has not agreed to accept the
Medicare approved amount as full payment and can charge more than the Medicare-approved
amount, but not more than the limiting charge (see Limits on Physician Charges). The
physician bills you for the full amount and files your claim with the carrier. Medicare
than reimburses you its share of the charges. Because you cannot always tell in advance
whether the Medicare-approved amount and the actual charge for covered services and
supplies will be the same, ask your physicians and medical suppliers whether they accept
assignment of Medicare claims.
Participating Physicians & Suppliers
While some physicians and medical suppliers accept assignment on a case-by-case basis
or not at all, others sign Medicare participation agreements that require them to accept
assignments on all Medicare claims. These physicians and suppliers are called
participating physicians and suppliers and their names and addresses are listed in the
Medicare Participating Physician/Supplier Directory for your area. The directory is
distributed to senior citizen organizations, all Social Security Administration and
Railroad Retirement Broad offices, all hospitals and all State and area offices of the
Administration on Aging. The directory may also be obtained free of charge from the
insurance carrier that processes Medicare Part B claims in your area, or you can call the
carrier to find out which doctors and suppliers are Medicare participants.
There are occasions when healthcare providers do not participate in Medicare claims.
For instance, all physicians and qualified laboratories must accept assignment from
clinical diagnostic laboratory tests covered by Medicare. Physicians and certain other
practitioners and suppliers must take assignment on all claims for services furnished to
Medicare beneficiaries who are eligible for medical assistance through their state
Medicaid program, including beneficiaries enrolled in the Qualified Medicare Beneficiary
Limits On Physician Charges
While physicians who do not accept assignment of a Medicare claim can charge more than
physicians who do, there is a limit to the amount they can charge for services covered by
Medicare. They are permitted to charge you only 15 percent more than the Medicare-approved
amount, and you must pay that extra amount. This is called the "limiting charge"
and you do not have to pay more than this amount.
To determine the limiting charge for a particular service, contact the Medicare carrier
for your area. Limiting charge information also appears on the Explanation of Medicare
Part B Benefits (EOMB) form generally sent to you by the carrier after you receive a
Medicare-covered service. If your physician has exceeded the charge limit, contact the
physician and ask for a reduction in the charge, or a refund if you have paid the bill. If
you cannot resolve the issue with the physicians, call your Medicare carrier. Medicare
carriers are required to screen physician bills for overcharged and notify the physician
and the patient within 30 days of any overcharge. The physician is then required to refund
the overcharge within 30 days or credit your account for it. Physicians who knowingly,
willfully and repeatedly charge more than the legal limit are subject to sanctions.
Medicare law further requires physicians who do not take assignment for elective
surgery to give you a written estimate of your costs before the surgery if the total
charge will be $500 or more. If you are not given a written estimate, you are entitled to
a refund of any amount you paid in excess of the Medicare-approved amount for the surgery.
Some states have also enacted charge limit laws. Currently, Connecticut, Massachusetts,
Minnesota, New York, Ohio, Pennsylvania, Rhode Island and Vermont have such laws. If you
live in one of these states, or if you want to find out whether your state has a law
limiting physician charges, contact your state insurance department counseling program or
office on aging.
Here's a comparison of your share of the cost for the same service
provided by a participating physician and by a nonparticipating physician who did not
If you went to a participating physician for a service for which the fee schedule
amount was $100, the physician would accept that amount in full. Medicare would pay $80
and you would be responsible for $20, assuming you had already met the Part B $100 annual
For the same service furnished by a nonparticipating physician, the fee schedule amount
would be $95 (Nonparticipating physicians are reimbursed at 95 percent of the fee schedule
amount for participating physicians). Medicare would pay $76, or 80 percent, leaving you
with a balance of $19 to cover the remaining 20 percent of the fee schedule amount.
However, since nonparticipating physicians who do not accept assignment can legally charge
15 percent more that the fee schedule amount, another $14.25 could be added to the bill,
bringing your out-of-pocket cost to $33.25, assuming you had already met the Part B
deductible. You would not have to pay any charges over $33.25.
Medically Unnecessary Services
You should also be aware that any physician who provides you with services that he or
she knows or believes Medicare will determine to be medically unnecessary and thus will
not pay for is required to notify you in writing before performing the service. If written
notice is not given, and you did not know that Medicare would not pay, you cannot be held
liable to pay. However, if you did receive written notice and signed an agreement to pay
for the service yourself, you will be held liable to pay.
Medicare Payment Notice
Regardless of whether your physicians or medical suppliers accept assignment of a
claim, they are required by law to submit the claim for you within a year after providing
a service. The claim is submitted to the carrier that serves the area where the covered
service or supply was provided, not necessarily the carrier for your area. If for some
reason the claim is not filed as required, you can still send it to the carrier as long as
you do so before the close of the calendar year following the year in which the service
was furnished. If the service was furnished in the last quarter of the year, you have
until the close of the second year following the year in which the services were furnished
to submit the claim.
After your physician or supplier submits your Part B claim, the Medicare carrier will
usually send you an Explanation of Medicare Part B Benefits statement. It details the
action taken on the claim. For physician services, the notice shows what services were
covered, what charges were approved, how much was credited toward your $100 annual
deductible and the amount Medicare paid. For other Part B services, the notice shows
similar information. If you believe payment was made for service or supply you didn't
receive, or the payment is otherwise questionable, you should call or write the carrier
that handled your claim.
Your Right To Appeal
You have a right to challenge Medicare payment decisions with which you disagree. Your
Explanation of Medicare Part B Benefits form indicates why your claim was denied or not
paid in full, and it also tells you exactly what appeal steps you can take. If you decide
to file an appeal, ask your physician or medical provider for any additional information
related to the claim that might be helpful to you in challenging the payment decision.
A request for review along with any additional information must be filed with the
carrier within six months of the date payment was denied. After the request is filed, the
carrier will review the payment decision and provide you with a written explanation of the
review determination. If you again disagree and the amount remaining in question is $100
or more, you have six months from the date of the review determination to request a
hearing before a carrier hearing officer. If you disagree with the carrier hearing
officer's decision and the amount remaining in question is $500 or more, you have 60 days
from the date you receive the decision to request a hearing before a Administrative law
Judge. Cases involving $1000 or more can eventually be appealed to a Federal court.
Managed Care Plans
The preceding sections explain how Medicare Part B works if you receive your benefits
through the traditional fee-for-services (pay-as-you-go) delivery system. As a Medicare
beneficiary, you also have the option of receiving physician and other health care
services though managed care plans that have contracts with Medicare, such as health
maintenance organizations (HMOs) and competitive medical plans (CMPs).
In a managed care plan, a network of health care providers (physicians, hospitals,
skilled nursing facilities, etc.) generally offers medical services to plan members on a
prepaid basis. Services usually must be obtained from the professionals and facilities
that are part of the plan. If you enroll in a plan that has a contract with Medicare, a
Medicare claim will seldom need to be submitted on your behalf. Medicare pays the plan a
set amount that the plan provides you with medical care. Additionally, instead of paying
Medicare's deductible and coinsurance as you would under fee-for-service care, manage care
plans generally charge enrollees a monthly premium and nominal co-payments as you use the
Most plans serving Medicare beneficiaries are required to offer all Medicare hospital
and medical benefits available in the plan's service area. Some plans also provide
benefits beyond what Medicare pay for, such as preventive care, prescription drugs, dental
care, hearing aids and eyeglasses. For more information about managed care plans request a
copy of the leaflet Medicare and Managed Care Plans from any Social Security
Administration office or by calling 1-800-638-6833.
When Other Insurance Pays Before Medicare
Some people who have Medicare also have group health or other types of coverage that
may make Medicare a secondary payer on their health care claims. Medicare is sometimes the
secondary payer for individuals who are:
- Age 65 or older, with employment status, (or whose spouse has employment status) with
coverage under a group health plan.
- Under age 65, disabled but with employment status, (or whose family member has
employment status) with coverage under a large group health plan.
- Have permanent kidney failure, and are covered under a group health plan through current
or former employment or through the current or former employment of a parent or spouse.
Medicare is generally the secondary payer to automobile or non-automobile liability or
no fault insurance; to Workers' Compensation; and to Black Lung benefits. If one of these
insurers does pay first on your bills, be sure to tell your doctor and other health
professionals so your bills can be sent to the correct payer first and delays can be
avoided. Medicare, as the secondary payer, may pay some or all of the charges for services
covered by Medicare that are not fully paid by the primary payer.
Insurance That Supplements Medicare
While Medicare pays a large portion of your medical costs, it does not fully pay for
all covered services, and there are various services which Medicare does not cover at all.
For this reason, may private insurance companies offer health insurance to supplement
Medicare. This insurance, called "Medigap, " provides coverage to fill some of
the gaps in Medicare and, in some cases, to pay for services and supplies not covered by
Medicare. For more information about supplemental insurance, request a copy of the
publication titled Guide to Health Insurance for People With Medicare from any
Social Security Administration office or by calling 1-800-638-6833.