Editing Medicare (United States) (section)

==Payment for services==
Medicare contracts with regional insurance companies to process over one billion fee-for-service claims per year. In 2008, Medicare accounted for 13% ($386 billion) of the [[United States federal budget|federal budget]]. In 2016 it was projected to account for close to 15% ($683 billion) of the total expenditures. For the decade 2010–2019 Medicare was projected to cost 6.4 trillion dollars.<ref>[http://www.gpoaccess.gov/USbudget/fy10/pdf/summary.pdf "Budget of the United States Government: Fiscal Year 2010 – Updated Summary Tables"], {{webarchive|url=https://web.archive.org/web/20111010084418/http://www.gpoaccess.gov/USbudget/fy10/pdf/summary.pdf|date=October 10, 2011}}.</ref>

===Reimbursement for Part A services===
For institutional care, such as hospital and nursing home care, Medicare uses [[prospective payment system]]s. In a prospective payment system, the health care institution receives a set amount of money for each episode of care provided to a patient, regardless of the actual amount of care. The actual allotment of funds is based on a list of [[diagnosis-related group]]s (DRG). The actual amount depends on the primary diagnosis that is actually made at the hospital. There are some issues surrounding Medicare's use of DRGs because if the patient uses less care, the hospital gets to keep the remainder. This, in theory, should balance the costs for the hospital. However, if the patient uses more care, then the hospital has to cover its own losses. This results in the issue of "upcoding", when a physician makes a more severe diagnosis to hedge against accidental costs.<ref>{{cite journal | author = Silverman E, Skinner J | year = 2004 | title = Medicare upcoding and hospital ownership | journal = Journal of Health Economics | volume = 23 | issue = 2| pages = 369–89 | doi=10.1016/j.jhealeco.2003.09.007| pmid = 15019762 }}</ref>

===Reimbursement for Part B services===
Payment for physician services under Medicare has evolved since the program was created in 1965. Initially, Medicare compensated physicians based on the physician's charges, and allowed physicians to bill Medicare beneficiaries the amount in excess of Medicare's reimbursement. In 1975, annual increases in physician fees were limited by the [[Medicare Economic Index]] (MEI). The MEI was designed to measure changes in costs of physician's time and operating expenses, adjusted for changes in physician productivity. From 1984 to 1991, the yearly change in fees was determined by legislation. This was done because physician fees were rising faster than projected.

The Omnibus Budget Reconciliation Act of 1989 made several changes to physician payments under Medicare. Firstly, it introduced the Medicare Fee Schedule, which took effect in 1992. Secondly, it limited the amount Medicare non-providers could balance bill Medicare beneficiaries. Thirdly, it introduced the Medicare Volume Performance Standards (MVPS) as a way to control costs.<ref>Lauren A. McCormick, Russel T. Burge. [https://archive.today/20120630033016/http://findarticles.com/p/articles/mi_m0795/is_n2_v16/ai_16863013 Diffusion of Medicare's RBRVS and related physician payment policies – resource-based relative value scale – Medicare Payment Systems: Moving Toward the Future] ''Health Care Financing Review''. Winter 1994.</ref>

On January 1, 1992, Medicare introduced the Medicare Fee Schedule (MFS), a list of about 7,000 services that can be billed for. Each service is priced within the [[Resource-Based Relative Value Scale]] (RBRVS) with three [[Relative Value Units]] (RVUs) values largely determining the price. The three RVUs for a procedure are each geographically weighted and the weighted RVU value is multiplied by a global Conversion Factor (CF), yielding a price in dollars. The RVUs themselves are largely decided by a private group of 29 (mostly [[Medical specialist|specialist]]) physicians—the [[American Medical Association]]'s [[Specialty Society Relative Value Scale Update Committee]] (RUC).<ref>{{cite news |title=The Little-Known Decision-Makers for Medicare Physicians Fees |first=Uwe |last=Reinhardt |newspaper=[[The New York Times]] |date=December 10, 2010 |url=https://economix.blogs.nytimes.com/2010/12/10/the-little-known-decision-makers-for-medicare-physicans-fees/ |access-date=July 6, 2011|author-link=Uwe Reinhardt }}</ref>

From 1992 to 1997, adjustments to physician payments were adjusted using the MEI and the MVPS, which essentially tried to compensate for the increasing volume of services provided by physicians by decreasing their reimbursement per service.

In 1998, Congress replaced the VPS with the [[Medicare Sustainable Growth Rate|Sustainable Growth Rate]] (SGR). This was done because of highly variable payment rates under the MVPS. The SGR attempts to control spending by setting yearly and cumulative spending targets. If actual spending for a given year exceeds the spending target for that year, reimbursement rates are adjusted downward by decreasing the Conversion Factor (CF) for RBRVS RVUs.

In 2002, payment rates were cut by 4.8%. In 2003, payment rates were scheduled to be reduced by 4.4%. However, Congress boosted the cumulative SGR target in the Consolidated Appropriation Resolution of 2003 (P.L. 108–7), allowing payments for physician services to rise 1.6%. In 2004 and 2005, payment rates were again scheduled to be reduced. The Medicare Modernization Act (P.L. 108–173) increased payments by 1.5% for those two years.

In 2006, the SGR mechanism was scheduled to decrease physician payments by 4.4%. (This number results from a 7% decrease in physician payments times a 2.8% inflation adjustment increase.) Congress overrode this decrease in the Deficit Reduction Act (P.L. 109–362), and held physician payments in 2006 at their 2005 levels. Similarly, another congressional act held 2007 payments at their 2006 levels, and HR 6331 held 2008 physician payments to their 2007 levels, and provided for a 1.1% increase in physician payments in 2009. Without further continuing congressional intervention, the SGR is expected to decrease physician payments from 25% to 35% over the next several years.

MFS has been criticized for not paying doctors enough because of the low conversion factor. By adjustments to the MFS conversion factor, it is possible to make global adjustments in payments to all doctors.<ref>[https://www.cbo.gov/sites/default/files/109th-congress-2005-2006/reports/07-25-sgr.pdf Medicare's Physician Payment Rates and the Sustainable Growth Rate]. (PDF) ''CBO TESTIMONY Statement of [[Donald B. Marron Jr.]], Acting Director''. July 25, 2006.</ref>

The SGR was the subject of possible reform legislation again in 2014. On March 14, 2014, the [[United States House of Representatives]] passed the [[SGR Repeal and Medicare Provider Payment Modernization Act of 2014 (H.R. 4015; 113th Congress)]], a bill that would have replaced the (SGR) formula with new systems for establishing those payment rates.<ref name=cbo4015>{{cite web|title=H.R. 4015 |date=February 27, 2014|url=http://www.cbo.gov/publication/45149|publisher=Congressional Budget Office|access-date=March 11, 2014}}</ref> However, the bill would pay for these changes by delaying the [[Affordable Care Act]]'s individual mandate requirement, a proposal that was very unpopular with Democrats.<ref name=ViebeckHill>{{cite news|last=Viebeck|first=Elise|title=Obama threatens to veto GOP 'doc fix' bill|url=https://thehill.com/blogs/healthwatch/medicare/200620-obama-threatens-to-veto-gop-healthcare-bill/|access-date=March 13, 2014|newspaper=The Hill|date=March 12, 2014}}</ref> The SGR was expected to cause Medicare reimbursement cuts of 24 percent on April 1, 2014, if a solution to reform or delay the SGR was not found.<ref name=GOPreadies26>{{cite news|last=Kasperowicz|first=Pete|title=House GOP readies year-long 'doc fix'|url=https://thehill.com/blogs/floor-action/healthcare/201770-gop-tees-up-year-long-doc-fix-patch/|access-date=March 27, 2014|newspaper=The Hill|date=March 26, 2014}}</ref> This led to another bill, the [[Protecting Access to Medicare Act of 2014 (H.R. 4302; 113th Congress)]], which would delay those cuts until March 2015.<ref name="GOPreadies26"/> This bill was also controversial. The [[American Medical Association]] and other medical groups opposed it, asking Congress to provide a permanent solution instead of just another delay.<ref name=HouseApproves27>{{cite news|last=Kasperowicz|first=Pete|title=House approves 'doc fix' in voice vote|url=https://thehill.com/blogs/floor-action/votes/201932-house-approves-doc-fix-in-voice-vote/|access-date=March 27, 2014|newspaper=The Hill|date=March 27, 2014}}</ref>

The SGR process was replaced by new rules as of the passage of MACRA in 2015.

====Provider participation====
There are two ways for providers to be reimbursed in Medicare. "Participating" providers accept "assignment", which means that they accept Medicare's approved rate for their services as payment (typically 80% from Medicare and 20% from the beneficiary). Some non-participating doctors do not take assignment, but they also treat Medicare enrollees and are authorized to balance bills no more than a small fixed amount above Medicare's approved rate. A minority of doctors are "private contractors" from a Medicare perspective, which means they opt out of Medicare and refuse to accept Medicare payments altogether. These doctors are required to inform patients that they will be liable for the full cost of their services out-of-pocket, often in advance of treatment.<ref>American Medical Association, [http://www.ama-assn.org/ama1/pub/upload/mm/399/medicarepayment08.pdf Medicare Payment Options for Physicians] {{Webarchive|url=https://web.archive.org/web/20150630235834/http://www.ama-assn.org/ama1/pub/upload/mm/399/medicarepayment08.pdf |date=June 30, 2015 }}</ref>

While the majority of providers accept Medicare assignments, (97 percent for some specialties),<ref>Kaiser Family Foundation 2010 Chartbook, [http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742 "Figure 2.15"], {{Webarchive|url=https://web.archive.org/web/20130405060011/http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742|date=April 5, 2013}}.</ref> and most physicians still accept at least some new Medicare patients, that number is in decline.<ref>Kaiser Family Foundation 2010 Chartbook, [http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742 "Figure 2.16], {{Webarchive|url=https://web.archive.org/web/20130405060011/http://facts.kff.org/chart.aspx?cb=58&sctn=163&ch=1742|date=April 5, 2013}}.</ref> While 80% of physicians in the Texas Medical Association accepted new Medicare patients in 2000, only 60% were doing so by 2012.<ref>{{cite web|url=https://www.forbes.com/sites/nextavenue/2013/06/11/what-to-do-if-your-doctor-wont-take-medicare/|title=What To Do If Your Doctor Won't Take Medicare|first=Caroline|last=Mayer|website=forbes.com}}</ref> A study published in 2012 concluded that the Centers for Medicare and Medicaid Services (CMS) relies on the recommendations of an American Medical Association advisory panel. The study led by Miriam J. Laugesen, of [[Columbia Mailman School of Public Health]], and colleagues at UCLA and the University of Illinois, shows that for services provided between 1994 and 2010, CMS agreed with 87.4% of the recommendations of the committee, known as RUC or the Relative Value Update Committee.<ref>{{cite news |title=Study Finds that the AMA Committee Recommendations on Doctor Fees Are Followed Nine Times out of Ten |author=Laugesen, Miriam |newspaper=The [[National Law Review]] |date=May 10, 2012 |url=http://www.natlawreview.com/article/study-finds-ama-committee-recommendations-doctor-fees-are-followed-nine-times-out-te/ |access-date=June 6, 2012}}</ref>

====Office medication reimbursement====
[[Chemotherapy]] and other medications dispensed in a physician's office are reimbursed according to the Average Sales Price (ASP),<ref>{{Cite web |url=http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=3303 |title=Archived copy |access-date=April 11, 2015 |archive-url=http://webarchive.loc.gov/all/20150411130719/http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=3303 |archive-date=April 11, 2015 |url-status=dead }}</ref> a number computed by taking the total dollar sales of a drug as the numerator and the number of units sold nationwide as the denominator.<ref>{{Cite web |url=http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=4758 |title=Archived copy |access-date=April 11, 2015 |archive-url=http://webarchive.loc.gov/all/20150411130725/http://questions.cms.hhs.gov/cgi-bin/cmshhs.cfg/php/enduser/std_adp.php?p_faqid=4758 |archive-date=April 11, 2015 |url-status=dead }}</ref> The current reimbursement formula is known as "ASP+6" since it reimburses physicians at 106% of the ASP of drugs. Pharmaceutical company discounts and rebates are included in the calculation of ASP, and tend to reduce it. In addition, Medicare pays 80% of ASP+6, which is the equivalent of 84.8% of the actual average cost of the drug. Some patients have supplemental insurance or can afford the co-pay. Large numbers do not. This leaves the payment to physicians for most of the drugs in an "underwater" state. ASP+6 superseded Average Wholesale Price in 2005,<ref>{{Cite news|last=Pollack|first=Andrew|date=2005-07-19|title=Law Impedes Flow of Immunity in a Vial |language=en-US|work=The New York Times|url=https://www.nytimes.com/2005/07/19/health/policy/law-impedes-flow-of-immunity-in-a-vial.html|access-date=2023-01-06|issn=0362-4331}}</ref> after a 2003 front-page ''[[New York Times]]'' article drew attention to the inaccuracies of Average Wholesale Price calculations.<ref>{{Cite news |last=Pear |first=Robert |author-link=Robert Pear |date=2003-08-06 |title=Cancer Drugs Face Funds Cut In a Bush Plan |language=en-US |work=The New York Times |url=https://www.nytimes.com/2003/08/06/us/cancer-drugs-face-funds-cut-in-a-bush-plan.html |access-date=2023-01-06 |issn=0362-4331}}</ref>

This procedure is scheduled to change dramatically in 2017 under a CMS proposal that will likely be finalized in October 2016.

====Medicare 10 percent incentive payments====
"Physicians in geographic Health Professional Shortage Areas (HPSAs) and Physician Scarcity Areas (PSAs) can receive incentive payments from Medicare. Payments are made on a quarterly basis, rather than claim-by-claim, and are handled by each area's Medicare carrier."<ref>{{cite web |url=https://www.ruralhealthinfo.org/funding/214 |title=Medicare Incentive Payments in Health Professional Shortage Areas |website=Ruralhealthinfo.org |access-date=February 15, 2018}}</ref><ref>{{cite web|url=http://www.cms.gov/HPSAPSAPhysicianBonuses/ |title=Overview HPSA/PSA (Physician Bonuses) |website=Cms.gov |access-date=February 19, 2011}}</ref>