Saturday, June 13, 2015

IBM Medicare OneExchange Original Medicare Out of Pocket Costs

I decided to try to decipher a bill I received yesterday from a provider.  It is almost impossible figure out how something is billed, why Medicare paid what they paid and what is due from the patient. It took me a couple of hours but I finally understand the bill.  I went back and forth between my MSN statements, my medigap EOB statements and the provider bill (which was particularly unintelligible).
The complicated Medicare billing is brought to us by CONGRESS!  They set the fee structure and they regularly fool with it.  Remember the ugly spate of legislative activity in 2013 that resulted in sequestration?  That resulted in a 2% reduction in provider payments. However, it did not change the patient coinsurance payment.  The easiest way to explain this is by way of example.  Suppose the Medicare approved doctor fee for a service is $100.  Prior to 2013, Medicare part B would have paid the doctor 80% of the fee or $80 and the patient would pay 20% of the fee or $20 (assuming the doctor accepts assignment).  HOWEVER, because of the 2% reduction from sequestration, now Medicare pays the doctor 2% less (on the $80) or $78.40.  MEANWHILE, the patient still owes the doctor $20.  So, when you get a bill from the doctor that shows how much Medicare approved, how much Medicare paid and how much you owe thank your congressional representatives for making it almost impossible to understand.
I know I keep harping on how congress niggles with Medicare but it is so important to all of us to know how this Medicare piggy bank keeps being raided.  I just read something about how the TTA (Obama's fast track trade) bill tried to imbed another cut to Medicare providers buried in the bill to pay for the cost to implement it.  There was going to be another 0.25% cut to providers.  Happily, the house voted to remove that provision. But it was only after the medical community raised a stink.  In an earlier post, I mentioned that resident doctors are paid salaries out of the Medicare budget.  Everyone benefits from the services of these beginning doctors.  Meanwhile, legislators scream about the high cost of Medicare.
Back to the topic of the blog - patient out of pocket costs in original Medicare.  Congress structured a payment process that varies between coinsurance and copayments.  Once again, it couldn't be more confusing.  What's the difference?  One is a percentage (coinsurance) and the other is a fixed amount (copayments).  Most of the time copayments are used for outpatient hospital related services and coinsurance is used for doctor related services.  Again, an example is the easiest way to explain it.  Suppose you have a cast on your arm.  If you go to the hospital as an outpatient to have the cast removed, you will pay a copayment.  So, if the hospital fee is $150 to take the cast off, your copayment might be $40.  The amount of copayment depends on the city where the hospital resides.  If you go to a doctor, it's an office visit so the service fee is likely to be less.  Let's say it's $100.  Your payment would be a coinsurance of 20% or $20.
Generally speaking, it is more expensive to have a service rendered by a hospital than by a doctor. But not always. The obvious case of WAY MORE EXPENSIVE is using the emergency room for services.
Medicare has a wonderful publication that describes original Medicare costs.  It came from the site:

It's also important to remember original Medicare has no cap on out of pocket costs.  The only way to get an annual cap on out of pocket costs is to either buy a medigap plan or buy a Medicare Advantage plan.  This year I have been using a medigap K plan to have a cap on out of pocket costs.

If you are using a Medicare Advantage plan none of the rules described in the above publication apply.  Medicare Advantage plans are required to cover the same services as Medicare and are required to stay within Medicare's fee schedule. However, they can restrict who provides the services, pay providers less than the Medicare approved fee, and/or shift more of the fee burden onto patients.  Demand to see their cost sharing breakout for all procedures.  They are famous for having low copayments for primary care doctor and freely disclose those payments in marketing literature.  But when you step into the land of a specialist or an emergency they often shift to coinsurance payments and/or very large copayments (such as for ambulance services).  They can also change cost sharing from year to year so each year ask for the cost sharing terms. The government caps Medicare Advantage policy holder out of pocket costs to about $5000/year (which is the cap in my K plan).


  1. Gosh, I have a couple of years to go before eligible for Medicare and big shock is bridging a younger wife to Medicare with outrageous costs via IBM Health Plans available. EPO coverage over $1600 a month for myself (IBM Retiree) and Wife...I guess we bear the costs of failed Obamacare, but may have to put my wife on a a plan other than IBM

    1. It's not the ACA - it's IBM not caring much about retirees anymore. The days of robust IBM GHI at a good price evaporated in the early 2000s. The ACA heath exchange might have a better deal for both of you until you get to Medicare. That is assuming Medicare isn't totally routed by Congress such that doctors won't even take the insurance anymore. Conservatives have been nickel and diming Medicare fees for about 20 years.