Payment for health care in the United States involves several mechanisms, including self-pay by the consumers, insurance companies, and government agencies. The federal government is the single largest payer through Medicare, Medicaid, and the Department of Veterans Affairs (Sherman, 2012). This chapter presents a brief description of Medicare and Medicaid. To view the structure of Medicare/Medicaid in relationship to the rest of the government branches for establishing and implementing policy, see the figures in Appendices W to X.
Medicare is a federally provided health insurance program that is administered by the US Department of Health and Human Services through the Centers for Medicare & Medicaid Services (CMS). Medicare provides coverage for the following individuals (CMS, n.d.-a, n.d.-b):
Some people are automatically enrolled and get Medicare Part A and Part B when they turn 65 years of age, while there are others who must sign up for Part A and/or Part B as described later (CMS, n.d.-c). Automatic enrollment occurs if one of the following applies:
Other individuals must sign up for Part A and Part B if:
Part A helps with inpatient hospital care, hospice, some home health care, as well as a skilled nursing facility (SNF; CMS, n.d.-d). Most people do not pay for this coverage because they have paid for it through Medicare payroll taxes while working. It is often referred to as “premium free.” Those people who do not qualify for “premium free” coverage may elect to purchase coverage if they meet specific criteria (CMS, n.d.-d).
Part B usually covers 80% of medically necessary doctor services, outpatient services, durable medical equipment, and some home health care. Some preventive services are also included (CMS, n.d.-b). There is a monthly premium required for the Medicare Part B coverage.
Part C insurance is provided by private-run insurance companies approved by Medicare. This type of plan will provide all of Part A coverage and Part B coverage (CMS, n.d.-e). Additionally, these plans may provide additional coverage not available through Part A or B such as vision, hearing, and dental coverage. Most advantage plans also include Medicare prescription drug coverage. With these types of plan, Medicare pays the provider a fixed monthly amount for every member. While these plans must follow Medicare rules regarding coverage, they may charge different out-of-pocket costs and have different rules for coverage, such as a referral might be needed (CMS, n.d.-e).
Part D is available to everyone who qualifies for Medicare (CMS, n.d.-f). It helps cover the cost of prescriptions, helps lower prescription costs, and/or helps maintain prescription costs in the future. To obtain this coverage, individuals must join a plan run by an insurance company or other company approved by Medicare. Each plan varies in cost and in the drugs that are covered, and there is a premium for each plan (CMS, n.d.-f).
Medicare does not cover long-term care (CMS, n.d.-g). Most long-term care is considered custodial and can be provided in various settings such as private homes, assisted living facilities, or nursing homes. Medicare will pay for medically necessary care in an SNF when rehabilitation or skilled nursing care is required. SNF coverage is provided for up to 100 days, when there has been a preceding qualifying hospital stay of 3 days or more and there is a continued need for skilled care (CMS, n.d.-h).
Criteria for Medicare coverage of home health care include the following (CMS, 2010):
Reimbursement for home care is based on the prospective payment system (PPS). Under the PPS, agencies are paid a predetermined base payment (CMS, n.d.-i). This amount can be adjusted based upon the following:
Reimbursement for each patient is made based upon a 60-day episode of care. One-half of the estimated base payment for the full 60 days is paid to the organization as soon as the fiscal intermediary (FI) receives the initial claim. The remaining half of the payment will be sent at the close of the 60-day episode unless there is an applicable adjustment to that amount. This split percentage payment approach provides a reasonable and balanced cash flow for HHAs. Another 60-day episode can be initiated for longer-stay patients.
Agencies assess the patient's condition and needs for skilled nursing care, therapy, medical social services, and/or home health aide service at the beginning of the episode of care. A nurse or therapist uses the Outcome and Assessment Information Set (OASIS) instrument to assess and document the patient's condition. All expected therapy needs are used to determine the case-mix adjustment to a standard payment rate. This case-mix adjustment is the amount of money an HHA is paid to provide care to the individual for 60 days. For every 60 days that a patient remains on service with the HHA, a new assessment must be completed (CMS, n.d.-i).
Under the PPS, an HHA must bill for all home health services including the following (CMS, n.d.-i):
The Medicare Modernization Act of 2003 (MMA) enabled the CMS to make significant changes to the Medicare fee-for-service program's administrative structure (CMS, n.d.-j). These changes provide for contracting that is dynamic, competitive, and performance-based.
Under section 911 of the MMA (CMS, n.d.-j), Congress requires that the CMS replace the current FI and carrier contracts with competitively procured contracts that conform to the Federal Acquisition Regulation with new entities called Medicare administrative contractors (MACs). This operational integration centralizes information once held separately, creating a platform for advances in the delivery of comprehensive care to Medicare beneficiaries.
The new MACs will perform claims processing and related functions for the Medicare program, but they will do so more efficiently. Central to the implementation of the contracting reform is the creation of new jurisdictions to be administered by the MACs. The new MAC jurisdictions have been designed to balance the allocation of workloads, promote competition, account for integration of claims processing activities, and mitigate the risk to the Medicare program during the transition to the new contractors (CMS, n.d.-k).
The MACs will serve as the providers' primary point of contact for enrollment; training on Medicare coverage and billing requirements; and the receipt, processing, and payment of Medicare fee-for-service claims within their respective jurisdictions. In their capacity as the face of Medicare to the providers, practitioners, and suppliers, MACs will need to maintain a staff of experts knowledgeable in all aspects of the fee-for-service program.
The investment for the implementation of Medicare contracting reform helps ensure that the program remains an important and secure health plan for beneficiaries and generates significant trust fund and administrative savings over time. The following improvements to services for beneficiaries and providers can be expected (CMS, n.d.-k):
Improved beneficiary services.
Improved provider services.
In addition to MACs that process claims for Part A and Part B for Medicare, there are specialty MACs that process claims for durable medical equipment (DME), home health, and hospice. There are 4 MACs that process claims for DME while the CMS is in the process of integrating home health and hospice into one of the A/B MACs. There are 4 DME MAC jurisdictions (CMS, n.d.-l):
Section 302 of the MMA established requirements for a Competitive Bidding Program for certain DME, prosthetics/orthotics, and supplies (DMEPOS; CMS, n.d.-m). Under the program, suppliers compete to become Medicare contract suppliers. This is done by submitting bids to furnish certain items in competitive bidding areas. The CMS awards contracts to enough suppliers to meet the beneficiary demand for the bid items. This results in lower payment amounts that replace the Medicare DMEPOS fee schedule amounts for the bid items in these areas. All contract suppliers must comply with Medicare enrollment rules. They must be licensed and accredited and meet certain financial standards. The goal of the program is to set appropriate payment amounts for DMEPOS items while ensuring continued access to quality items and services. This program is thought to result in the following benefits:
Under the MMA, the DMEPOS competitive bidding program was to be phased in during 2007. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) temporarily delayed the program, but it was eventually instituted in 2009 (CMS, n.d.-m). On January 1, 2011, the CMS launched the first phase of Medicare's competitive bidding program in 9 different areas of the country for 9 product categories. The MIPPA required the competition for round 2 to occur in 2011 in 70 additional metropolitan statistical areas (MSAs) and authorized competition for national mail order items and services after 2010. The Affordable Care Act of 2010 expands the number of round 2 MSAs from 70 to 91 areas and mandates that all areas of the country are subject to either DMEPOS competitive bidding or payment rate adjustments using competitively bid rates by 2016 (CMS, n.d.-m).
In essence, Medicare has suppliers enter competitive bids for predetermined supplies and equipment. The prices must be lower than current purchase prices. After the bidding is complete, Medicare analyzes the bids and selects the suppliers with which it will do business.
The pricing, data analysis, and coding (PDAC) performs the following activities for CMS (Noridian Administrative Services, n.d.-a):
Coding verification allows manufacturers/distributors to request a coding decision on a DMEPOS item. It is the responsibility of the PDAC to review DMEPOS products available for Medicare beneficiaries to determine the appropriate HCPCS code for Medicare billing.
Medicaid is a joint state and federal health insurance program for low-income individuals. States establish and administer their own Medicaid programs and determine the type, amount, duration, and scope of services within broad federal guidelines. States are required to cover certain “mandatory benefits” and can choose to provide other “optional benefits” through the Medicaid program (CMS, n.d.-n). Services in a specific area can be viewed at the Web site: http://www.medicaid.gov. Medicaid provides health coverage to pregnant women, seniors and individuals with disabilities, and nonelderly, low-income parents or caretaker relatives (CMS, n.d.-o).
Eligibility levels for parents or caretaker relatives vary across the country, and there is currently no federal requirement that states provide coverage to nonpregnant adults without dependent children. Many states have optional programs called “medically needy programs” (CMS, n.d.-p). They cover individuals with significant health needs whose income is too high to otherwise qualify for Medicaid under other eligibility groups. Individuals can still become eligible by “spending down” the amount of income that is above a particular state's medically needy income standard (CMS, n.d.-p).
Medicaid in the past has been provided using a fee-for-service system. However, more recently, states have implemented a mandatory managed care delivery system of services. In this system, people receive services from the managed care organizations (MCOs) that are contracted with the state. Managed care programs can either be joined voluntarily or more commonly have mandatory enrollment. There are 3 common types of managed care programs (CMS, n.d.-q):
States must comply with the federal regulations that govern managed care delivery systems. These regulations include requirements for a managed care plan to have a quality program and provide appeal and grievance rights, reasonable access to providers, and the right to change managed care plans.
The Wound, Ostomy and Continence Nurses (WOCN) Society has developed 2 fact sheets about reimbursement that are available on the Web site (http://www.wocn.org) for members in the Public Policy section. The fact sheet, Reimbursement of Advanced Practice Registered Nurse Services, provides information about reimbursement opportunities and challenges for the advanced practice RN (APRN; WOCN Society, 2011a). In addition, the fact sheet, Understanding Medicare Part B Incident to Billing, provides some insight into cases where a nonadvanced practice/WOC nurse might bill in the outpatient setting. “Incident to” is a billing mechanism for Medicare that allows services provided in an outpatient setting to be delivered by auxiliary personnel and billed under the provider's national provider identification (NPI). For example, under the incident to provision, a physician or APRN could develop the plan of care and a non-APRN could provide the care and bill under the provider's NPI (WOCN Society, 2011b).
As previously mentioned in Chapter 10, it is unknown how the new health care law will impact the eligibility and coverage by Medicare and Medicaid services in the future. WOC nurses, as all health care providers, must continue to monitor these changes to identify opportunities or threats that arise to their services.
Centers for Medicare & Medicaid Services. (n.d.-a). What is Medicare? Retrieved November 2012 from http://www.medicare.gov/sign-up-change-plans/decide-how-to-get-medicare/whats-medicare/what-is-medicare.html
Centers for Medicare & Medicaid Services. (n.d.-b). How original Medicare works. Retrieved November 2012 from http://www.medicare.gov/sign-up-change-plans/decide-how-to-get-medicare/original-medicare/how-original-medicare-works.html
Centers for Medicare & Medicaid Services. (n.d.-c). How to get Part A & Part B. Retrieved November 2012 from http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/part-b.aspx
Centers for Medicare & Medicaid Services. (n.d.-d). Part A costs. Retrieved November 2012 from http://www.medicare.gov/your-medicare-costs/part-a-costs/part-a-costs.html
Centers for Medicare & Medicaid Services. (n.d.-e). Medicare advantage plans. Retrieved November 2012 from http://www.medicare.gov/sign-up-change-plans/medicare-health-plans/medicare-advantage-plans/medicare-advantage-plans.html
Centers for Medicare & Medicaid Services. (n.d.-f). Drug coverage (Part D). Retrieved November 2012 from http://www.medicare.gov/part-d/index.html
Centers for Medicare & Medicaid Services. (n.d.-g). What's not covered by Part A & Part B? Retrieved November 2012 from http://www.medicare.gov/what-medicare-covers/not-covered/item-and-services-not-covered-by-part-a-and-b.html
Centers for Medicare & Medicaid Services. (n.d.-h). Skilled nursing facility (SNF) care. Retrieved November 2012 from http://www.medicare.gov/coverage/skilled-nursing-facility-care.html
Centers for Medicare & Medicaid Services. (n.d.-i). Home health PPS. Retrieved November 2012 from https://www.cms.gov/HomeHealthPPS
Centers for Medicare & Medicaid Services. (n.d.-j). Medicare contracting reform. Retrieved November 2012 from https://www.cms.gov/MedicareContractingReform/04_VisionofFutureFeeforServiceMedicareEnvironment.asp#TopOfPage
Centers for Medicare & Medicaid Services. (n.d.-k). A/B MAC jurisdictions. Retrieved November 2012 from https://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/PartAandPartBMACJurisdictions.html
Centers for Medicare & Medicaid Services. (n.d.-l). Specialty MAC jurisdictions. Retrieved November 2012 from https://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/SpecialtyMACJurisdictions.html
Centers for Medicare & Medicaid Services. (n.d.-m). DMEPOS competitive bidding. Retrieved November 2012 from https://www.cms.gov/DMEPOSCompetitiveBid
Centers for Medicare & Medicaid Services. (n.d.-n). Medicaid benefits. Retrieved November 2012 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Medicaid-Benefits.html
Centers for Medicare & Medicaid. (n.d.-o). Eligibility. Retrieved November 2012 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Eligibility/Eligibility.html
Centers for Medicare & Medicaid Services. (n.d.-p). Non-disabled adults. Retrieved November 2012 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Population/Adults/Non-Disabled-Adults.html
Centers for Medicare & Medicaid Services. (n.d.-q). Managed care. Retrieved November 2012 from http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Delivery-Systems/Managed-Care/Managed-Care.html
Centers for Medicare & Medicaid Services. (2010). Medicare and home health care. Retrieved November 2012 from http://www.medicare.gov/publications/pubs/pdf/10969.pdf
Noridian Administrative Services. (n.d.-a). PDAC. Pricing, data analysis and coding. Retrieved November 2012 from https://www.dmepdac.com
Noridian Administrative Services. (n.d.-b). DME coding system (DMECS) Info. Retrieved from https://www.dmepdac.com/dmecs
Noridian Administrative Services. (n.d.-c). NDC/HCPCS crosswalk. Retrieved November 2012 from https://www.dmepdac.com/crosswalk
Sherman, R. (2012). The business of caring: What every nurse should know about cutting costs. American Nurse Today, 7(11), 32–34.
Wound, Ostomy and Continence Nurses Society. (2011a). Reimbursement of advanced practice registered nurse services: A fact sheet. Retrieved November 2012 from Public Policy: https://wocn.site-ym.com/?page=MyLibrary
Wound, Ostomy and Continence Nurses Society. (2011b). Understanding Medicare Part B incident to billing: A fact sheet. Retrieved November 2012 from Public Policy: https://wocn.site-ym.com/?page=MyLibrary