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Single payer plan

-centralized health care system adopted by some western nations (canada, GB) and FUNDED BY TAXES
-govt. pays for each resident's health care, which is considered a basic social service

socialized medicine

-a type of single-payer system in which the govt owns and operates healthcare facilities and providers (e.g. physicians) receive SALARIES
-the VA healthcare program is a form of socialized medicine

Universal health insurance

-the goal of providing every individual with access to health coverage, regardless of the system implemented to achieve that goal

Group Health insurance

-traditional coverage subsidized by employers and other organizations (labor unions, rural and consumer health cooperatives) whereby part or all of premium costs are paid for and/or discounted group rates are offered to eligible individuals

%'s of Health insurance plans in U.S. (2007)

-68% private
-60% employment based
-28% govt. plans (medicare, medicaid)

-85% of people are covered by some plan and some people are covered by more than one insurance plan

Worker's comp


First health insurance policy

*the Franklin Health Assurance company of Massachusetts was the first commercial insurance company to provide healthcare coverage for injuries not resulting in death


-federal employees' compensation act
-replaced 1908 workers comp legislation
-civilian employees of the federal govt. were provided medical care, survivor's benefits and compensation for lost wages

First Blue Cross policy


Blue shield

-founded in CA
-lumbar and mining camps of pacific NW
-employers wanted to provide medical care for their workers, so they paid monthly fees to medical service bureaus, which were composed of groups of physicians

Hill-Burton Act

*provided federal grants for modernizing hospitals that had become obsolete b/c of lack of capital investment during the great depression and WWII
-in return, facilities were required to provide services free or at reduced rates to patients unable to pay for care

Taft-Hartley Act

Major medical insurance

-amended the national labor relations act of 1932 restoring a more balanced relationship b/w labor and management
--> third-party administrators (TPAs) which administer healthcare plans and process claims, thus serving as a system of checks and balances for labor and managment

-1950 - provided coverage for catastrophic or prolonged illness and injuries. Most of these programs incorporate LARGE DEDUCTIBLES and lifetime maximum amounts


-the amount for which the patient is financially responsible before an insurance policy provides payment

lifetime maximum amount

-the maximum benefits payable to a health plan participant


*provides healthcare to Americans over the age of 65


-a cost-sharing program b/w the federal and state govts. to provide healthcare services to low-income Americans

CHAMPUS (Civilian Health and Medical Program -- Uniformed Services)

-designed as a benefit for dependents of personnel serving in the armed forces and uniformed branches of the Public health service and the national oceanic and atmospheric administration
-Now called TRICARE

HMO act of 1973

-Health Maintenance Organization Assistance Act of 1973
-authorized federal grants and loans to private organizations that wished to develop health maintenance organizations (HMOs), which are responsible for providing healthcare services to subscribers in a given geographic area for a fixed fee


-CMS requires providers to use this to submit medicare claims

E/M codes

-evaluation and management - which describes patient encounters with providers for the purpose of evaluation and management of general health status


-Resource-Based Relative Value Scale system
-payment system that reimburses physicians' practice expenses based on relative values for 3 components of each physician's service: physician, work, practice expense, and malpractice insurance expense

-fee schedule - list of predetermined payments based a fee assigned to each CPT code


-Health insurance Portability and Accountability Act of 1996 (HIPAA)
-mandates regulations that govern privacy, security, and electronic transactions standards for healthcare information
-primary intent is to provide better access to health insurance, limit fraud and abuse, and reduce administrative costs

The primary purpose of the patient record ____

secondary purposes ______

-to provide for continuity of care
-record includes patient demographic (identification) data, documentation to support diagnosis and justify tx provided, and the RESULTS of the tx provided

-evaluating the quality of patient care
-providing data for research
-providing info to 3rd party payers for reimbursement
-serving medico-legal interests of the patient, facility and providers of care

medical necessity

-the patient's diagnosis must also justify diagnostic and/or therapeutic procedures or services provided
*requires providers to document services or supplies that are:
-proper and needed for the diagnosis or tx of a medical condition
-provided for the diagnosis, direct care, and tx of a medical condition
-consistent with standards of good medical practice in the local area
-not mainly for the convenience of the physician or healthcare facility

problem-oriented record (POR)

-systematic method of documentation w/ 4 components

1) Database - chief complaint, present conditions and diagnoses, social data, past medical and social hx, review of systems, physical examination, baseline laboratory data

2) Problem list - table of contents (numbered list of patient's problems

3) Initial plan
-Diagnostic/management plans (plans to learn more about the pts condition and the management of conditions
-therapeutic plans (specific medications, goals, procedures, therapies)
-Patient education plans - plans to educate the patient about conditions for which he or she is being treated

4) Progress notes

Electronic health record (EHR)

-facilitates RECORD LINKAGE, which allows patient info to be created at different locations according to a unique patient ID number
-more global focus (i.e. automates and streamlines a provider's workflow, ensuring that all clinical information is communicated, supports collection of data for uses other than clinical care

electronic medical record (EMR)

-more narrow focus
-the patient record created for a SINGLE medical practice using a computer, keyboard, a mouse, optical pen device, voice recognition system, scanner, and/or touch screen

Total practice management software (TPMS)

-used to generate the EMR
-registering patients
-scheduling appointments
-generating insurance claims and patient statements
-processing payments from patient and third party payers
-producing administrative and clinical reports

Personal health record (PHR)

-web-based application
-allows individuals to maintain and manage their health info (and that of other for whom they are authorized, such as family members) in a private, secure, and confidential manner

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)

-enacted a PPS (prospective payment system) - which issues a PREDETERMINED payment for services

Chapter 12 Commercial Insurance


Commercial health insurance

-covers the medical expenses of individuals (e.g. private health insurance) and groups (e.g. employer group health insurance)

Individual health insurance policies are regulated by individual states and include the following:

1) Fee-for-service (or indemnity) insurance
-traditional health insurance that covers a portion of services, such as inpatient hospitalizations or physician visits, with the patient paying the remaining costs

2) High-risk-pools ("last resort" health insurance for individuals who cannot obtain coverage due to a serious medical condition; certain eligibility requirements apply, such as refusal by at least one or two insurance companies

3) Managed Care

4) Association health insurance - offered to members of a professional association and marketed to small business owners as a way to provide coverage to employees; however, these plans are not subject to the same regulations as group health insurance plans and, therefore, are more risky

Employer-based group health insurance

-covers all employees, regardless of health status, and cannot be cancelled if an employee becomes ill
-limits exclusions for pre-exisiting conditions (can only exclude for 12-18 months)
-Is portable
-offers COBRA continuation of coverage (employee must be offered COBRA continuation coverage that lasts for 18-36 months, depending on the employee's situation
-has employer limited plan options (e.g. prescription drug plan that covers a certain list of medications, called a formulary)

automobile Insurance

- a contract b/w an individual and an insurance company whereby the individual pays a premium and, in exchange, the insurance company agrees to pay for specific car-related financial losses during the term of policy
-covers medial expenses associated with automobile accidents (PIP Personal Injury protection ) - usually cover up to a certain limit
**The automobile insurance company's MEDICAL ADJUSTER reviews healthcare bills submitted to the insurance company to determine coverage (may cover ambulatory expenses, medical supplies, lab services, ER care, physical therapy, etc)

Disability insurance

-reimbursement for income lost as a result of a temporary or permanent illness or injury
*when pts. are treated for disability diagnoses and other medical problems, separate patient records must be maintained
-also a good idea to organize the financial records separately for these patients
-Disability insurance generally does not pay for healthcare services, but provides the disabled person with financial assistance

-unable to do regular or customary work for a certain number of days (depends on policy)
-Was employed when disabled
-under care of physician during initial disability; must remain under care to continue to receive benefits
-has disability insurance coverage itself
-processes a claim within 'x' number of days (policy specific)
-Has the licensed provider complete the disability medical certification document(s)

Can be found ineligible for disability benefits if:
-are claiming or receiving unemployment insurance
-became disabled while committing a crime that resulted in a felony conviction
-are receiving workers' compensation benefits at a weekly rate equal to or greater than the disability rate
-are in jail, prison or a recovery home b/c of a convicted crime
-fail to have an independent medical exam when requested to do so

Base period

-usually covers 12 months and is divided into 4 consecutive quarters beginning day disability begins
-includes taxed wages paid ~6-18 months before the disability claim begins
-does not include wages being paid at the time the disability began

*A final payement notice is sent when records show that an individual has been paid through the doctor's ESTIMATED DATE OF RECOVERY
-if an individual is still disabled, then the doctor must submit appropriate documentation so that the case can be reviewed
-need new claim every time become disabled

Liability insurance

- a policy that covers losses to a third party caused by the insured, by an object owned by the insured, or on premises owned by the insured
-employer is the insured and responsible for payment, and the patient's health insurance plan is billed as a secondary (and reimburses only the remaining costs of health care NOT covered by the insured)

-there cannot be any third party negligence
-in cases where negligence did occur, the liability payer determines that the incident is not covered by the negligent party's liability contract

-to file a claim with a liability payer,a regular patient billing statement is often used rather than an insurance claim


-the contractual right of a third-party payer to recover healthcare expenses from a liable party (e.g. patient is injured on the job)
-third-party payers implement a "pay and chase" method to aggressively pursue the recovery and coordination of payment for healthcare expenses from liability payers; they review diagnosis codes on claims to det. whether a liability payer should be considered primary

Birthday rule

-the policyholder whose birth month and day occurs earlier in the calendar year holds the primary policy when each parent subscribes to a different health insurance plan

Blues cross / Blue Shield

-Know the various plans

Blue cross origin

-1929 when Baylor University Hospital in Dallas, Texas, approached teachers in the dallas school with a plan that would guarantee up to 21 days of hospitilization/year for subscribers and each other dependents, in exchange for $6 annual premium

-by 1948 the need for additional national coordination --> Blue Cross Association was created


-located in Chicago
-merging of blue cross/blue shield in 1986

1) establishes standards for new plans and programs
2) Assists local plans w/ enrollment activities, national advertising, public education, professional relations, and statistical and research activities
3) Serves as the primary contractor for processing medicare hospital, hospice, and home healthcare claims
4) coordinates nationwide BCBS plans

BCBS distinctive features

1) they maintain negotiated contracts with providers of care. In exchange for such contracts, BCBS agrees to perform the following services
-make prompt, direct payment of claims
-maintain regional professional reps to assist participating providers with claim problems
-provide educational seminars, workshops, billing manuals, and newsletters to keep participating providers up to date on BCBS insurance procedures

2) BCBS plans, in exchange for tax relief for their nonprofit status, are forbidden by state law from canceling coverage for an individual b/c he or she is in poor health or BCBS payments to providers have far exceeded the average. Policies issued by the nonprofit entity can be cancelled, or an individual unenrolled, only:
-When premiums are NOT PAID
-If the plan can prove that fraudulent statements were made on the application for coverage

3) BCBC plans must obtain approval from their respective state insurance commissioners for any rate increases and/or benefit changes that affect BCBS members within the state. The for profit commercial plans have more freedom to increase rates and modify general benefits without state approval (but get taxed)

4) BCBS plans must allow conversion from group to individual coverage and guarantee the transferability of membership from one local plan to another when a change in residency moves a policyholder into an area served by a different BCBS corporation

Participating provider (PAR)

- a healthcare provider who enters into a contract with a BCBS corporation and agrees to:
1) submit insurance claims for all BCBS subscribers
2) provide access to the provider relations dept., which assists the PAR provider in resolving claims or payment problems
3) Write off (make a fee adjustment for) the difference or balance b/w the amount charged by the provider and the approved fee established by the insurer
4) Bill patients for only the deductible and copay/coinsurance amounts that are based on BCBS-allowed fees and the full charged fee for any uncovered service

In return, BCBS corporations agree to:
-make direct payments to PARs
-conduct regular training sessions for PAR billing staff
-provide free billing manuals and PAR newsletters
-maintain a provider rep. dept. to assist with billing/payment problems
-Publish the name, address, and specialty of all PARs in a directory distributed to BCBS subscribers and PARs

Preferred Providers

-PARs can also contract to participate in the plan's preferred provider network (PPN), a program that requires providers to adhere to managed care provisions
-in this contractual agreement, the PPN provider agrees to accept the PPN allowed rate (~10% lower than the PAR allowed rate)
-the provider further agrees to abide by all cost-containment, utilization, and quality assurance provisions of the PPN program
**In return: the "Blues" agree to notify PPN providers in writing of new employer groups and hospitals that have entered into PPN contracts and to maintain a PPN directory

Nonparticipating Providers (nonPARs)

-they expect to be paid the full fee charged for services rendered
*In these cases, the patient may be asked to pay the provider in full and then be reimbursed by BCBS the allowed fee for each service, minus the patient's deductible and copayment obligations
-even when the provider agrees to file the claim for the patient, the insurance company sends the payment for the claim directly to the patient and not to the provider

Fee-for-Service (Traditional coverage)

-selected by:
1) individuals who do not have access to a group plan
2) many small business employers

-2 types of coverage within one policy:

1) Basic coverage- hospitalizations, Diagnostic lab services, X-rays, Surgical fees, Assistant surgeon fees, Obstetric care, Intensive care, newborn care, chemotherapy for cancer

2) Major medical (MM) benefits - office visits, outpatient nonsurgical treatment, physical and occupational therapy, purchase of durable medical equipment (DME), Mental health visits, allergy testing and injections, prescription drugs, private duty nursing (when medically necessary), dental care required as a result of a covered accidental injury
-these are usually subject to patient deductible and copayment requirements

*Some contracts include one or more RIDERS - special clauses stipulating additional coverage over and above the standard contract (common RIDERS include special accidental injury and medical emergency care coverage

1) Special accidental injury rider - covers 100% of NONSURGICAL care sought and rendered w/in 24-72 hours of the accidental injury

2) Medical emergency rider - covers immediate tx sought and received for sudden, severe, and unexpected condtions that if not treated would place the patient's health in permanent jeopardy or cause permanent impairment or dysfunction of an organ or body part

BCBS Indemnity Coverage

-offers CHOICE and FLEXIBILITY to subscribers who want to receive full range of benefits along with the freedom to use any licensed healthcare provider
-coverage includes HOSPITAL ONLY or COMPREHENSIVE HOSPITAL and medical coverage
-subscribers share the cost of benefits through coinsurance options, do not have to select a primary care provider, and do not need a referral to see a provider

BCBS Managed Care Plans

-managed care is a healthcare delivery system that provides health care and controls costs THROUGH A NETWORK of physicians, hospitals, and other healthcare providers

-these plans include the coordinated home health and hospice care program, exclusive provider organizations, health maintenance organizations (HMO), outpatient pretreatment authorization plans, point-of-service plans, preferred provider organizations, and second surgical opinions

*Exclusive provider organization (EPO) - similar to a health maintenance organization that provides healthcare services through a network of doctors, hospitals, and other healthcare providers, except that members are NOT REQUIRED TO SELECT a primary care provider, and they do not need a referral to see a specialist. HOWEVER, they must obtain services from EPO providers only or the patient is responsible for charges

*HMO - fixed fee for services

*Outpatient pretreatment authorization plan (OPAP) - requires preauthorization of outpatient physical, occupational, and speech therapy services
-in addition OPAP requires periodic tx/progress plans to be filed
-also known as prospective authorization or precertification

*POS (point-of-service plan) - allows subscribers to choose, at the time medical services are needed, whether they will go to a provider w/in the plan's network or outside the network
-subscribers choose a primary care provider (PCP) from the payer's PCP list (PCP is gatekeeper)
-when the subscriber goes outside the network to seek care, out of pocket expenses and copayments generally increase
-provide a full range of inpatient and outpatient services

*PPO (preferred provider organizations)
-offers discounted healthcare services to subscribers who use designated healthcare providers (who contract with PPO) but also provides coverage for services rendered by healthcare providers who are not part of the PPO network
-Sometimes described as as a subscriber-driven program, and BCBS substitutes the terms subscriber (or member) for POLICYHOLDER - the subscriber (member) is responsible for remaining within the network of PPO providers and must request referrals to PPO specialists whenever possible
-subscriber must also adhere to the managed care requirements of the PPO policy, such as obtaining required second surgical opinions and/or hospital admission review
-failure to adhere to these requirements will result in denial of the surgical claim or reduced payment to the provider. Patient is responsible for the difference or balance b/w the reduced payment and the normal PPO allowed rate

* Second Surgical opinion (SSO) - a requirement necessary when a patient is considering elective, nonemergency surgical care
-if a second opinion is not obtained prior to surgery, the patient's out-of-pocket expenses may be greatly increased

Federal Employee Program

-an employer-sponsored health benefits program established by an Act of Congress in 1959
-FEP is underwritten and administered by participating insurance plans that are called LOCAL PLANS (e.g. Blue Cross and Blue Shield plans - they are just one of many who reimburse healthcare services)
-claims are submitted to local plans that serve the location where the patient was seen (called a SERVICE LOCATION) regardless of the member's FEP plan affiliation

-FEP cards contain the phrase "Government-Wide Service Benefit Plan" under the BCBS trademark
-they have ID numbers that begin with the letter "R" followed by 8 numeric digits
-All Id cards contain the name of the govt. employee
-dependent's names do not appear on the card

* 3 digit enrollment code options (4)
1) 101 - individual, high option Plan
2) 102 - Family, High option Plan
3) 104 - Individual Standard (Low) Option Plan
4) 105 - Family Standard (Low) Option Plan

-considered a fee-for-service plan and has generally operated as a PPO plan - patient is responsible for ensuring that pre-certification is obtained for all hospitalizations except routine maternity care, home health and hospice care, and emergency hospitilization w/in 48 hours

Medicare Supplemental Plans

-BCBS offers several federally designed and regulated Medicare Supplemental Plans
-they augment the medicare program by paying for medicare deductibles and copayments
-better known as Medigap Plans (usually identified by the word Medigap on the patient's plan ID card)

Healthcare Anywhere

-allows members of the independently owned and operated BCBS plans to have access to healthcare benefits throughout the United States and around the world, depending on their home plan benefits

**The BlueCard program enables such members obtaining healthcare services while traveling or living in another BCBS plan's service area to receive the benefits of their home Plan contract and to access local provider networks

**The Away From Home Care Program allows the participating BCBS Plan members who are temporarily residing outside of their home HMO service area for at least 90 days to temporarily enroll with a local HMO

**BlueWorldwide Expat - provides global medical coverage for active employees and their dependents who spend more than 6 months outside the U.S.

Deadline for filling claims

-customarily one year from the date of service, unless otherwise specified in the subscriber's or provider's contracts

Forms Used

Most BCBS payers currently accept the CMS-1500 claim

Inpatient and Outpatient coverage

-may vary according to the plan. Many plans require second surgical opinions and prior authorization (Prior authorization is a requirement that your physician obtain approval from your health plan to prescribe a specific medication for you. Without this prior approval, your health plan may not provide coverage, or pay for, your medication.)


The deductible will vary according to the BCBS plan. Consult the BCBS bill- ing manual or eligibility status computerized phone bank for specific patient requirements. Patients enrolled in PPO plans may have no applicable deduct- ibles for certain preventive medicine services.


Patient copayment/coinsurance requirements vary according to the patient plan. The most common coinsurance amounts are 20 percent or 25 percent, although they may be as high as 50 percent for mental health services on some policies.

Allowable Fee Determination

Patient copayment/coinsurance requirements vary according to the patient plan. The most common coinsurance amounts are 20 percent or 25 percent, although they may be as high as 50 percent for mental health services on some policies.

NonPARs may collect the full fee from the patient. BCBS payments are then sent directly to the patient.

Assignment of Benefits

All claims filed by participating providers qualify for an assignment of benefits to the provider. This means that payment is made directly to the provider by BCBS.

Special Handling

1. Make it a habit and priority to retain a current photocopy of the front and back of all patient ID cards in the patient's file.
2. Claims for BlueCard patients with more than one insurance policy must be billed directly to the plan from which the program originated. Use the CMS-1500 claim.
3. NonPARs must bill the patient's plan for all non-national account patients with BlueCards.
4. Rebill claims not paid within 30 days.
5. Some mental health claims are forwarded to a third-party administra- tor (TPA), a company that provides administrative services to healthcare plans and specializes in mental health case management. Check the back of the ID card and billing manual for special instructions.


Medicare, the largest single medical benefits program in the United States, is a federal program authorized by Congress and administered by the Centers for Medicare and Medicaid Services (CMS, formerly HCFA). CMS is responsible for the operation of the Medicare program and for selecting Medicare administrative contractors (MACs) to process Medicare fee-for-service Part A, Part B, and durable medicine equipment (DME) claims. Medicare is a two-part program:
● Medicare Part A reimburses institutional providers for inpatient, hospice, and some home health services. ● Medicare Part B reimburses institutional providers for outpatient services and physicians for inpatient and
office services.

Medical Hospital Insurance (Medicare Part A)

pays for inpatient hospital critical care access; skilled nursing facility stays; hospice care; and some home health care. (Submit UB-04 [CMS-1450] claim for services.)

Medicare Medical Insurance (Medicare Part B)

pays for doctors' services; outpatient hospital care; durable medical equipment; and some medical services that are not covered by Part A. (Submit CMS-1500 claim for services.)

Medicare Advantage (Medicare Part C)

formerly called Medicare+Choice, includes managed care and private fee-for-service plans that provided contracted care to Medicare patients. Medicare Advantage is an alternative to the original Medicare plan reimbursed under Medicare Part A. (Submit CMS-1500 or UB-04, depending on type of services provided.)

Medicare Prescription Drug Plans (Medicare Part D)

add prescription drug coverage to the Original Medicare Plan, some Medicare Cost Plans, some Medicare Private Fee-for-Service Plans and Medicare Medical Savings Account Plans. (Medicare beneficiaries present a Medicare prescription drug discount card to pharmacies.)


Medicare beneficiaries can also obtain supplemental insurance, called Medigap, which helps cover costs not reimbursed by the original Medicare plan. Depending on the region of the country, more than one Medicare health plan may be available to enrollees.

General Medicare Eligibility

1. Individuals or their spouses to have worked at least 10 years in Medicare-covered employment.
2. Individuals to be the minimum of 65 years old.
3. Individuals to be citizens or permanent residents of the United States.

*Individuals can also qualify for coverage if they are younger than 65 and have a disability or End-Stage Renal Disease. The Social Security Administration (SSA) (an agency of the federal government) bases its definition of disability on an individual's ability to work; an individual can be considered disabled if unable to do work as before and if it is determined that adjustments cannot be made to do other work because of a medical condition(s). In addition, the disability must last or be expected to last a year or to result in death. There is no premium for Part A if individuals meet one of these conditions; however, they do pay for Part B coverage. The Part B monthly premium changes annu- ally and is deducted from Social Security, Railroad Retirement, or Civil Service Retirement checks.

Medicare Part A coverage is available to individuals age 65 and over who:

● Are already receiving retirement benefits from Social Security or the Railroad
Retirement Board (RRB).
● Are eligible to receive Social Security or Railroad benefits but have not yet filed for them.
● Had Medicare-covered government employment.

Medicare Part A coverage is available to individuals under age 65 who

● Received Social Security or RRB disability benefits for 24 months. ● End-Stage Renal Disease and meet certain requirements.

Electronic data interchange (EDI)

EDI is the most efficient and cost-effective way to make eligibility information available because provider agreements ensure privacy safeguards.

Provider Telephone inquiries for Medicare Eligibility

Eligibility information is also available over the telephone, subject to con- ditions intended to ensure the protection of the beneficiary's privacy rights. The eligibility information that can be released by telephone is limited to that information available via EDI.
The provider's name and identification number must be verified and the following information obtained about each beneficiary:
● Last name and first initial ● Date of birth ● HICN (health insurance claim number) ● Gender

Automatic Enrollment

Individuals not yet age 65 who already receive Social Security, Railroad Retirement Board, or disability benefits are automatically enrolled in Part A and Part B effective the month of their 65th birthday. About three months before the 65th birthday, or the 24th month of disability, individuals are sent an initial enrollment package that contains information about Medicare, a questionnaire, and a Medicare card. If the individual wants both Medicare Part A (hospital insurance) and Part B (supplemental medical insurance), he or she just signs the Medicare card and keeps it in a safe place.

Individuals who do not want Part B coverage (because there is a monthly premium associated with it) must follow the instructions that accompany the Medicare card; these instructions direct the individual to mark an "X" in the refusal box on the back of the Medicare card form, sign the form, and return it with the Medicare card to the address indicated. The individual is then sent a new Medicare card showing coverage for Part A only.

Medicare Part A coverage is available to individuals age 65 and over who:

● Are already receiving retirement benefits from Social Security or the Railroad
Retirement Board (RRB).
● Are eligible to receive Social Security or Railroad benefits but have not yet filed for them.
● Had Medicare-covered government employment.

Initial enrollment period

Individuals who do not receive Social Security, Railroad Retirement Board, or disability benefits must apply for Medicare Part A and Part B by contacting the Social Security Administration (or Railroad Retirement Board) approximately three months before the month in which they turn 65 or the 24th month of disability. Upon applying for Medicare Part A and Part B, a seven-month initial enrollment period (IEP) begins that provides an opportunity for the individual to enroll in Medicare Part A and/or Part B.

**Those who wait until they actually turn 65 to apply for Medicare will cause a delay in the start of Part B coverage, because they will have to wait until the next general enrollment period (GEP), which is held January 1 through March 31 of each year; Part B coverage starts on July 1 of that year. The Part B premium is also increased by 10 percent for each 12-month period during which an individual was eligible for Part B coverage but did not participate.

Under certain circumstances, individuals can delay Part B enrollment with- out having to pay higher premiums.

● Individuals age 65 or older who are working, or whose spouse is working, and who have group health insurance through the employer or union.
● Disabled individuals who are working and who have group health insurance or who have group health insurance coverage from a working family member.

**if Part B enrollment is delayed for one of these reasons, individuals can enroll anytime during the special enrollment period (SEP), a set time when they can sign up for Medicare Part B, if they did not enroll in Part B during the initial enrollment period.

**For individuals who enroll in Medicare Part B while cov- ered by a group health plan or during the first full month after group health plan coverage ends, coverage starts on the first day of the month of enrollment. Individuals can also delay the start date for Medicare Part B coverage until the first day of any of the subsequent three months. If the individual enrolls during any of the seven remaining months of the special enrollment period, coverage begins the month after enrollment. If an individual does not enroll during the special enrollment period, they must wait until the next general enrollment period (January 1 through March 31 of each year), and they may be required to pay a higher Medicare Part B premium.

Qualified Medicare beneficiary program (QMBP)

(helps individuals whose assets are not low enough to qualify them for Medicaid by requiring states to pay their Medicare Part A and B premiums, deductibles, and coinsurance amounts)

Specified low-income Medicare beneficiary (SLMB)

(helps low-income individuals by requiring states to pay their Medicare Part B premiums)

Qualified individual (QI)

(helps low-income individuals by requiring states to pay their Medicare Part B premiums)

Qualified disabled working individual (QDWI)

(helps individuals who received Social Security and Medicare because of disability, but who lost their Social Security benefits and free Medicare Part A because they returned to work and their earn- ings exceed the limit allowed, by requiring states to pay their Medicare Part A premiums)

Asset limits for all programs are the same

Personal assets (e.g., cash, money in the bank, stocks, bonds, and so on) cannot exceed $4,000 for an indi- vidual or $6,000 for married couples. Exclusions include a home, household goods and personal belongings, one car, a life insurance policy up to a cash value of $1,500 per person, a prepaid burial plan (unlimited if irrevocable; up to $1,500 if revocable), a burial plot, and retroactive Social Security or SSI benefits (for six months after qualification in a Medicare savings program

Medicare Part A

Medicare Part A (Medicare Hospital Insurance) helps cover inpatient care in acute care hospitals, critical access hospitals, and skilled nursing facilities. It also covers hospice care and some home healthcare services.


Medicare pays only a portion of a patient's acute care and critical access hos- pital (CAH) inpatient hospitalization expenses, and the patient's out-of-pocket expenses are calculated on a benefit-period basis. A benefit period begins with the first day of hospitalization and ends when the patient has been out of the hospital for 60 consecutive days. (Some Medicare literature uses the term spell of illness, formerly called "spell of sickness," in place of "benefit period.") After 90 continuous days of hospitalization, the patient may elect to use some or all of the allotted lifetime reserve days, or pay the full daily charges for hospital- ization. Lifetime reserve days (60 days) may be used only once during a patient's lifetime and are usually reserved for use during the patient's final, terminal hospital stay.

**The 2010 Part A deductibles per benefit period are:
Days 1-60 ($1,100 total) Days 61-90 ($275/day) Days 91-150 (Patient pays total charges, or elects to use lifetime reserve days at $550/day)
150+ continuous days (Patient pays total charges)

A person who has been out of the hospital for a period of 60 consecutive days will enter a new benefit period if rehospitalized, and the expenses for the first 90 days under this new benefit period are the same as stated earlier. Persons confined to a psychiatric hospital are allowed 190 lifetime reserve days instead of the 60 days allotted for a stay in an acute care hospital.

Skilled Nursing Facility

Individuals who become inpatients at a skilled nursing facility after a three- day-minimum acute hospital stay, and who meet Medicare's qualified diagnosis and comprehensive treatment plan requirements, pay 2010 rates of:

Days 1-20 - Nothing
Days 21-100 - $137.50/day
Days 101+ - Full Daily Rate

Home Health Services

Individuals receiving physician-prescribed, Medicare-covered home health ser- vices have no deductible or coinsurance responsibilities for services provided. Patients must be confined to the home, but they do not have to be hospitalized in an acute care hospital before qualifying for home health benefits. The patient is responsible for a 20 percent deductible of the approved amount for durable medical equipment.

Medicare Part B also covers some home health ser- vices if the patient is not covered by Medicare Part A.

Hospice Care

All terminally ill patients qualify for hospice care. Hospice is an autonomous, centrally administered program of coordinated inpatient and outpatient pallia- tive (relief of symptoms) services for terminally ill patients and their families. This program is for patients for whom the provider can do nothing further to stop the progression of disease; the patient is treated only to relieve pain or other discomfort. In addition to medical care, a physician-directed interdisci- plinary team provides psychological, sociological, and spiritual care. Medicare limits hospice care to four benefit periods, which include:

● ● ●
Two periods of 90 days each, One 30-day period, A final "lifetime" extension of unlimited duration

Hospice Patient is responsible for:

-5 percent of the cost of each prescription for symptom management or pain relief, but not more than $5 for any prescription.
-5 percent of the Medicare payment amount for inpatient respite care for up to five consecutive days at a time.

Patients who withdraw from the hospice program during the final benefit period are considered to have exhausted their hospice benefits. A patient who is receiving hospice benefits is not eligible for Medicare Part B services except for those services that are totally unrelated to the terminal illness. When a patient chooses Medicare hospice benefits, all other Medicare benefits stop, with the exception of physician services or treatment for conditions not related to the patient's terminal diagnosis.

Medicare Part B

Medicare Part B (Medicare Medical Insurance) helps cover physician services, outpatient hospital care, and other services not covered by Medicare Part A, including physical and occupational therapy and some home health care for patients who do not have Medicare Part A.

Medicare enrollees whose incomes are more than $85,000 (individual) or $170,000 (couple) pay higher Part B premiums than people with lower incomes.

In hospital outpatient settings, the coinsurance amount is based on a national median amount per ambulatory pay- ment classification (APC), which could be higher than 20 percent. Hospitals have the option of charging patients either the
20 percent or the higher national median coinsurance amount. Regardless, Medicare will reim- burse hospitals the difference between the Medicare-approved amount and the national coin- surance of 20 percent. However, if the hospital collects the higher median coinsurance amount from the patient, Medicare
will reduce its reimbursement accordingly.

Since 1992, Medicare has reimbursed provider services according to a _____

phy- sician fee schedule (also called the Resource-Based Relative Value Scale, RBRVS), which also limits amounts nonparticipating providers (nonPARs) can charge beneficiaries. Reimbursement under the fee schedule is based on relative value units (RVUs) that consider resources used in providing a service (physician work, practice expense, and malpractice expense).

Medicare Part C

-Medicare Part C includes managed care plans, such as Medicare health mainte- nance organizations (HMOs).

Medicare Advantage Plans (Medicare Part C, formerly called Medicare+Choice as established by the Balanced Budget Act of 1997) are health plan options that are approved by Medicare but managed by private companies. These plans provide all Medicare Part A (hospital) and Medicare Part B (medical) coverage and must cover medically-necessary services. There is no need to purchase a Medigap policy. Medicare Advantage Plans may:
● Require referrals to see specialists. ● Offer lower premiums or copayments and deductibles than the Original Medicare
● Have networks, which means patients may have to see doctors who belong to the plan or go to certain hospitals to get covered services.
● Offer extra benefits, such as prescription drug coverage. ● Coordinate patient care, using networks and referrals, which can help with overall
care management and result in cost savings.

Medicare enrollees have the option of enrolling in one of the following plans:
● Medicare health maintenance organization (HMO) ● Medicare medical savings account (MSA) plan ● Medicare special needs plan ● Preferred provider organization (PPO)
● Private fee-for-service (PFFS) plan

Medicare medical savings account (MSA)

A Medicare Medical Savings Account (MSA) is used by an enrollee to pay healthcare bills, while Medicare pays the cost of a special healthcare policy that has a high deductible (not to exceed $6,000). Medicare also annually deposits into an account the difference between the policy costs and what Medicare pays for an average enrollee in the patient's region. The money deposited annually by Medicare into an MSA is managed by a Medicare-approved insurance com- pany or other qualified company. It is not taxed if the enrollee uses it to pay qualified healthcare expenses. It may earn interest or dividends, and any funds left in the account at the end of a calendar year are carried over to the next year. The enrollee pays healthcare expenses using money from the MSA account until the high deductible has been met. (If the MSA is exhausted before the high deductible has been met, the enrollee pays out of pocket until the deductible has been met.) Once the deductible has been met, the insurance policy pays healthcare expenses.

**MSA enrollees are required to pay the monthly Medicare Part B premium.

Private fee-for-service (PFFS)

plans are offered by private insurance com- panies and are available in some regions of the country. Medicare pays a pre-established amount of money each month to the insurance company, which decides how much it will pay for services. Such plans reimburse providers on a fee-for-service basis and are authorized to charge enrollees up to 115 percent of the plan's payment schedule.

Medicare special needs plans

cover all Medicare Part A and Part B health care for individuals who can benefit the most from special care for chronic illnesses, care management of multiple diseases, and focused care management. Such plans may limit membership to individuals who:
● Are eligible for both Medicare and Medicaid (Medi-Medi coverage). ● Have certain chronic or disabling conditions. ● Reside in certain institutions (e.g., nursing facility).

Medicare Part D

Medicare Prescription Drug Plans (Medicare Part D) offer prescription drug cov- erage to all Medicare beneficiaries that may help lower prescription drug costs and help protect against higher costs in the future. Medicare Part D is optional, and individuals who join a Medicare drug plan pay a monthly premium. (Individuals who decide not to enroll in a Medicare prescription drug plan when first eligible may be required to pay a penalty if they choose to join later.)
Medicare prescription drug plans are administered by insurance companies and other private companies approved by Medicare. There are two ways to obtain Medicare prescription drug coverage:
1. Join a Medicare Prescription Drug Plan that adds coverage to the origi- nal Medicare plan, some Medicare private fee-for-service plans, some Medicare cost plans, and Medicare medical savings account plans. This plan requires subscribers to pay a monthly premium and an annual deductible.
2. Join a Medicare Advantage Plan (e.g., HMO) that includes prescrip- tion drug coverage as part of the plan. Monthly premiums and annual deductibles will vary, depending on the plan. In addition, all Medicare health care (including prescription drug coverage) is pro- vided by such plans.

Medicare Cost Plan

A Medicare Cost Plan is a type of HMO that works in much the same way and has some of the same rules as a Medicare Advantage Plan. In a Medicare Cost Plan, if the individual receives health care from a non-network provider, the Original Medicare Plan covers the services. The individual pays Medicare Part A and Part B coinsurance and deductibles.

demonstration/pilot program

a special project that tests improvements in Medicare coverage, payment, and quality of care. Some follow Medicare Advantage Plan rules, but others do not. Demonstrations usually apply to a specific group of people and/or are offered only in specific areas. They also include pilot programs for individuals with multiple chronic illnesses designed to reduce health risks, improve quality of life, and provide healthcare savings.

Programs of All-Inclusive Care for the Elderly (PACE)

combine medical, social, and long-term care services for frail people who live and receive health care in the community. PACE is a joint Medicare and Medicaid option in some states. To be eligible, an individual must be:
● 55 years old, or older. ● A resident of the service area covered by the PACE program. ● Able to live safely in the community. ● Certified as eligible for nursing home care by the appropriate state agency.
The goal of PACE is to help people stay independent and live in their commu- nity as long as possible, while receiving the high quality care they need.

Medigap (or Medicare Supplementary Insurance, MSI)

offered by commercial health insurance companies and some BCBS companies. It is designed to supplement Medicare benefits by paying for services that Medicare does not cover. Although Medicare covers many healthcare costs, enrollees must still pay Medicare's deductibles and coinsurance amounts. In addition, there are many healthcare services that Medicare does not cover. A Medigap policy provides reimburse- ment for out-of-pocket costs not covered by Medicare, in addition to those that are the beneficiary's share of healthcare costs. There are 12 Medigap poli- cies (Table 14-3), each offering a different combination of benefits. (Premium amounts are determined by payers.)

Medicare SELECT

a type of Medigap insurance that requires enrollees to use a network of providers (doctors and hospitals) in order to receive full benefits. Because of this requirement, Medicare SELECT policies may have lower premi- ums. However, if an out-of-network provider is used, Medicare SELECT gener- ally will not pay benefits for nonemergency services. Medicare, however, will still pay its share of approved charges. Currently, Medicare SELECT is available only in limited geographic areas of the country.

Participating Provider (PAR)

Medicare has established a participating provider (PAR) agreement in which the provider contracts to accept assignment on all claims submitted to Medicare. By 2000, more than 85 percent of all physicians, practitioners, and suppliers in the United States were PARs. Congress mandated special incentives to increase the number of healthcare providers signing PAR agreements with Medicare, including:
● Direct payment of all claims.
● A 5 percent higher fee schedule than for nonparticipating providers.
● Bonuses provided to Medicare administrative contractors (MACs) for recruit- ment and enrollment of PARs.
● Publication of an annual, regional PAR directory (MedPARD) made available to all Medicare patients.
● A special message printed on all unassigned Medicare Summary Notice (MSN) forms mailed to patients, reminding them of the reduction in out-of-pocket expenses if they use PARs and stating how much they would save with PARs.
● Hospital referrals for outpatient care that provide the patient with the name and full address of at least one PAR provider each time the hospital provides a referral for care.
● Faster processing of assigned claims.

Regardless of the type of Medicare Part B services billed, PARs have "one-stop" billing for beneficiaries who have Medigap coverage and who assign both Medicare and Medigap payments to PARs. After Medicare has made payment, the claim will automatically be sent to the Medigap insurer for payment of all coinsurance and deductible amounts due under the Medigap policy. The Medigap insurer must pay the PAR directly.


Medicare nonparticipating providers (nonPARs) may elect to accept assignment on a claim-by-claim basis, but several restrictions must be adhered to:
● NonPARs must file all Medicare claims.
● Fees are restricted to not more than the "limiting charge" on nonassigned claims.
● Balance billing of the patient by a nonPAR is forbidden.
● Collections are restricted to only the deductible and coinsurance due at the time of service on an assigned claim.
● Patients must sign a Surgical Disclosure Notice for all nonassigned surgical fees over $500.
● NonPARs must accept assignment on clinical laboratory charges.

Limiting Charge

Nonparticipating physicians who do not accept assignment on Medicare claims are subject to a limit (established by federal law) on what can be charged to ben- eficiaries for covered services. The Medicare-allowed fee for nonPARs is 5 per- cent below the PAR fee schedule, but the nonPAR physician may charge a maximum of 15 percent above the nonPAR approved rate (or 10 percent above the PAR fee schedule). The limiting charge is the maximum fee a nonPAR may charge for a covered service. It applies regardless of who is responsible for pay- ment and whether Medicare is primary or secondary.

*HIPAA alert - With the passage of the Health Insurance Portability and Accountability Act (HIPAA) of 1996, Congress increased the potential fine from $2,000 to $10,000 if a nonPAR does not heed Medicare administrative contractor (MAC) warnings to desist from fla- grant abuse of the limiting charge rules.

Accepting Assignment on a claim

A nonparticipating provider who agrees to accept assignment on a claim will be reimbursed the Medicare-allowed fee. The nonPAR may also collect any unpaid deductible and the 20 percent coinsurance determined from the Medicare Physician Fee Schedule (MPFS). If the nonPAR collects the entire charge at the time of the patient's visit, the assigned status of the claim is voided and the nonPAR limiting fee is then in effect. The nonPAR may also be subject to a fine or may be in violation of MPFS requirements.
The nonPAR cannot revoke the agreement for an assigned claim unless it is by mutual written consent of the provider and the beneficiary. Even then, such an agreement must be communicated to the MAC before the MAC has determined the allowed amount. Providers who repeatedly violate the assign- ment agreement could be charged and found guilty of a misdemeanor, which is punishable by a fine, imprisonment, or both. In addition, a criminal violation may result in suspension from Medicare participation.
The following practitioners who submit claims for services must accept assignment:
● Anesthesiologist assistants ● Certified nurse midwives ● Certified registered nurse anesthetists ● Clinical nurse specialists ● Clinical psychologists ● Clinical social workers ● Mass immunization roster billers ● Nurse practitioners ● Physician assistants ● Registered dietitians
Providers who submit claims for the following services must accept assignment:
● ambulance services ● Ambulatory surgical center services ● Clinical diagnostic laboratory services ● Home dialysis supplies and equipment ● Medications ● Physician lab services ● Physician services to Medicare/Medicaid (Medi-Medi) crossover patients

Waiver and medicare billing contracts

Medicare law specifically states that nonPARs are subject to sanctions, includ- ing fines and exclusions from the Medicare program, if they require patients to sign agreements stating that the patient waives the right to have the nonPAR provider file the patient's Medicare claims or that the patient agrees to pay charges for services that are in excess of the nonPAR charge limits.

Privacy Act

In addition to the other restrictions, the Privacy Act of 1974 forbids the Medicare administrative contractor (MAC) from disclosing the status of any unassigned claim beyond the following:
● Date the claim was received by the MAC ● Date the claim was paid, denied, or suspended ● General reason the claim was suspended
The nonPAR provider will not be told payment amounts or approved charge information.

Surgical Disclosure Notice

Providers must notify beneficiaries in writing of projected out-of-pocket expenses for elective surgery and noncovered procedures when the charge for surgery is $500 or more. This notification is required of both surgeons and assistant sur- geons. For Medicare purposes, elective surgery is defined as a surgery that:
● Can be scheduled in advance; ● Is not an emergency; and ● If delayed, would not result in death or permanent impairment of health.
The Omnibus Budget Reconciliation Act (OBRA) of 1986 requires the following information to be provided in writing to the patient:
● Estimated actual charge for surgery ● Estimated Medicare payment ● Excess of the provider's actual charge as compared with the approved charge ● Applicable coinsurance amount ● Beneficiary's out-of-pocket expenses
NonPARs must document the receipt and acknowledgment of this information by having the beneficiary or the beneficiary's representative sign and date a Surgical Disclosure Notice (Figure 14-1). A copy of the signed and dated notice must be maintained and provided upon request from the MAC. If the nonPAR fails to properly notify the beneficiary prior to performing surgery, any money collected from the beneficiary that exceeds the Medicare-approved amount must be refunded. Failure to make the appropriate refund could result in civil monetary penalties and/or exclusion from the Medicare program.

Mandatory Claims Submission

Federal law requires that all providers and suppliers submit claims to Medicare if they provide a Medicare-covered service to a patient enrolled in Medicare Part B. This regulation does not apply if the:
● Patient is not enrolled in Part B.
● Patient disenrolled before the service was furnished.
● Patient or the patient's legal representative refuses to sign an authorization for release of medical information.
● Provider opts out of the Medicare program, and those patients enter into private contracts with the provider (see section on Private Contracting).
An exception may occur if a patient refuses to sign an authorization for the release of medical information to Medicare. However, if the patient later opts to sign a Medicare authorization and requests that claims for all prior services be filed with Medicare, the request must be honored.

Private Contracting

Under the Balanced Budget Act of 1997, physicians were provided the option of withdrawing from Medicare and entering into private contracts with their Medicare patients. As of 2003, dentists, optometrists, and podiatrists were added to the list of providers who may opt out of Medicare. This Medicare private contract is an agreement between the Medicare beneficiary and a physician or other practitioner who has "opted out" of Medicare for two years for all covered items and services furnished to Medicare beneficiaries. This means that the physician/practitioner will not bill for any service or supplies provided to any Medicare beneficiary for at least two years.

Under a private contract:
● No Medicare payment will be made for services or procedures provided to a patient.
● The patient is required to pay whatever the physician/practitioner charges, and there is no limit on what the physician/practitioner can charge for Medicare approved services (the limiting charge will not apply).
● Medicare managed care plans will not pay for services rendered under a private contract.
● No claim is to be submitted to Medicare, and Medicare will not pay if a claim is submitted.
● Supplemental insurance (Medigap) will not pay for services or procedures ren- dered.
● Other insurance plans may not pay for services or procedures rendered.
The private contract applies only to services and procedures rendered by the physician or practitioner with whom the patient signed an agreement. Patients cannot be asked to sign a private contract when facing an emergency or urgent health situation. If patients want to pay for services that the original Medicare plan does not cover, the physician does not have to leave Medicare or ask the patient to sign a private contract. The patient is welcome to obtain noncovered services and to pay for those services.
A physician who enters into a Medicare private contract with one patient will be unable to bill Medicare for any patient for a period of two years with the exception of emergency or urgent care provided to a patient who has not signed an agreement with the provider to forgo Medicare benefits. In these cases, the claim for urgent or emergency care must be accompanied by an attachment explaining the following: (1) the nature of the emergency or urgent problem, and (2) a statement affirming that this patient has not signed an agreement with the provider to forgo Medicare. If a provider submits a nonemergency or urgent care claim for any patient before the opt-out agreement becomes effective, the provider must submit claims for all Medicare patients thereafter and abide by the limiting-fee rules. If, however, the patient files the claim, the provider will not be penalized.

Advanced beneficiary Notice

An advance beneficiary notice (ABN) is a written document provided to a Medicare beneficiary by a supplier, physician, or provider prior to service being rendered (Figure 14-2). The ABN indicates that the service is unlikely to be reimbursed by Medicare, specifies why Medicare denial is anticipated, and requests the beneficiary to sign an agreement that guarantees personal payment for services. A beneficiary who signs an ABN agreement will be held responsible for pay- ment of the bill if Medicare denies payment. ABNs should be generated when- ever the supplier or provider believes that a claim for the services is likely to receive a Medicare medical necessity denial (a denial of otherwise covered services that were found to be not "reasonable and necessary").

**The purpose of obtaining the ABN is to ensure payment for a procedure or service that might not be reimbursed under Medicare.

Cost estimates are unnecessary when an ABN is generated, because the purpose of the ABN is to document that the beneficiary has received notice that a service is unlikely to be reimbursed by Medicare. Hospital ABNs are called Hospital-Issued Notices of Noncoverage (HINN) or Notices of Noncoverage (NONC).
Do not have a patient sign an ABN when a service is never covered by Medicare. Instead, have those patients sign a different form, called the Notice of Exclusion of Medicare Benefits (NEMB). The ABN is used when the service is sometimes covered by Medicare, but the provider does not think it will be covered for that patient. It communicates that the patient will be responsible for provider charges if Medicare denies the service. The NEMB clearly states that the service is never covered by Medicare, and that the patient is responsible for paying provider charges. Unlike the ABN, providers are not required to have patients sign an NEMB for a never-covered Medicare service in order to bill the patient; however, use of the form makes it clear to the patient before a service is provided that the patient will have to pay for it.

CAUTION: Do not obtain ABNs on every pro- cedure or service to be rendered to a patient "just in case" Medicare denies the claim. To do so is con- sidered fraudulent.

Experimental and Investigational Procedures

Medicare law allows payment only for services or supplies that are considered reasonable and necessary for the stated diagnosis. Medicare will not cover procedures deemed to be experimental in nature. There are cases in which the provider determines that treatments or services are fully justified and such treatment options are then explained to the patient, who must pay the full cost of the non-covered procedure.
Medicare regulations specify that the provider must refund any payment received from a patient for a service denied by Medicare as investigational, unnecessary, unproved, or experimental, unless the patient agreed in writing prior to receiving the services to personally pay for such services. Figure 14-3 shows a CMS-approved medical necessity statement. An appeal of the denial of payment must be made in writing, and if the appeal is not granted, a refund must be paid to the patient within 30 days. A refund is not required if the provider "could not have known a specific treatment would be ruled unnecessary."

Medicare as Primary Payer

Medicare is considered the primary payer under the following circumstances:
● The employee is eligible for a group health plan but has declined to enroll, or has recently dropped coverage.
● The individual is currently employed, but is not yet eligible for group plan coverage or has exhausted benefits under the plan.
● The health insurance plan is only for self-employed individuals. ● The health insurance plan was purchased as an individual plan and not obtained
through a group.
● The patient is also covered by TRICARE, which provides health benefits to retired members of the uniformed services and spouses/children of active duty, retired, and deceased service members.
● The patient is under age 65, has Medicare because of a disability or ESRD, and is not covered by an employer-sponsored plan.
● The patient is under age 65, has ESRD, and has an employer-sponsored plan but has been eligible for Medicare for more than 30 months.
● The patient has left a company and has elected to continue coverage in the group health plan under federal COBRA rules.
● The patient has both Medicare and Medicaid (Medi-Medi crossover patient).
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires employers with 20 or more employees to allow employees and their dependents to keep their employer-sponsored group health insurance coverage for up to 18 months for any of the following occurrences:
● Death of the employed spouse ● Loss of employment or reduction in work hours ● Divorce
The employee or dependents may have to pay their share as well as the employ- er's share of the premium.

Medicare Conditional Primary Payer Status
Medicare will award an assigned claim conditional primary payer status and process the claim under the following circumstances:
● A plan that is normally considered primary to Medicare issues a denial of pay- ment that is under appeal.
● A patient who is physically or mentally impaired fails to file a claim with the pri- mary payer.
● A workers' compensation claim has been denied, and the case is slowly moving through the appeal process.
● There is no response from a liability payer within 120 days of filing the claim.
Medicare is to be reimbursed immediately if payment is received from the pri- mary payer at a later date.

Medicare as a secondary payer

A clarification of the Medicare Secondary Payer (MSP) rules was published in 1996, stating that Medicare is secondary when the patient is eligible for Medicare and is also covered by one or more of the following plans:
● An employer-sponsored group health plan (EGHP) that has more than 20 covered employees.
● Disability coverage through an employer-sponsored group health plan that has more than 100 covered employees.
● An End-Stage Renal Disease case covered by an employer-sponsored group plan of any size during the first 18 months of the patient's eligibility for Medicare.
● A third-party liability policy, if the Medicare-eligible person is seeking treatment for an injury covered by such a policy (this category includes automobile insur- ance, no-fault insurance, and self-insured liability plans).
● A workers' compensation program; if the claim is contested, the provider should file a Medicare primary claim and include a copy of the workers' compensation notice declaring that the case is "pending a Compensation Board decision."
● Veterans Administration (VA) preauthorized services for a beneficiary who is eligible for both VA benefits and Medicare.
● Federal Black Lung Program that covers currently or formerly employed coal miners.
All primary plans, which are collectively described in the Medicare literature as MSP plans, must be billed first. Medicare is billed only after the remittance advice from the primary plan or plans has been received. (The remittance advice must be attached to the Medicare claim when the claim is submitted.)
Independent and hospital labs are to enter NONE in Block 11 of the CMS- 1500 claim when they bill Medicare for reference lab services when there is no face-to-face encounter with a Medicare patient. This was changed because CMS no longer requires labs to collect Medicare secondary payer information to bill Medicare if they have had no face-to-face encounter with the patient. Entering NONE in Block 11 will prevent claims from being denied as unprocessable. When independent or hospital labs have face-to-face encounters with Medicare patients, they must collect MSP information.
To avoid fines and penalties for routinely billing Medicare as primary when it is the secondary payer, a more detailed Medicare secondary payer question- naire (Figure 14-4) should be provided to all Medicare patients when they register/reregister (update demographic and/or insurance information) with the practice. This form is used to clarify primary and secondary insurance payers.

Providers are required to collect or verify Medicare Secondary Payer (MSP) informa- tion during the initial beneficiary encounter instead of each time the patient is seen. Providers are also encouraged to retain MSP questionnaires for at least ten years, even though five years is the required retention period.

Be sure to submit a claim to Medicare for services paid by a primary payer, even if the primary payer reimbursed the entire amount charged. Failure to submit claims to Medicare could result in patients being denied credit toward their Medicare deductible.

Medicare Summary Notice

The Medicare Summary Notice (MSN) (Figure 14-5) is an easy-to-read, monthly statement that clearly lists health insurance claims information. It replaced the Explanation of Medicare Benefits (EOMB), the Medicare Benefits Notice (Part A), and benefit denial letters.

Billing Notes

Medicare Administrative Contractor (MAC)
The regional MAC for traditional Medicare claims is selected by CMS through a competitive bidding process. Obtain the name and mailing address of the MAC for your region.

Medicare Split/Shared Visit Policy
The Medicare split/shared visit payment policy applies when the physician and a qualified nonphysician provider (NPP) (e.g., nurse practitioner, physi- cian assistant) each personally perform a substantive portion of a medically necessary evaluation and management (E/M) service for the same patient on the same date of service. A substantive portion of an E/M visit involves performing all or some portion of the history, examination or medical decision making (the key components of an E/M service). The physician and qualified NPP must be in the same group practice or be employed by the same employer.

Durable Medical Equipment Claims
Durable medical equipment (DME) claims must be sent to one of four regional Medicare administrative contractors in the country. Check the Medicare man- ual for the one responsible for processing DME claims for your region.

Deadline for Filing Claims
The claim filing deadline for both regular Medicare and Railroad Retirement claims is December 31 of the year following the date on which services were provided, unless the dates of service are between October 1 and December 31; for such claims, the deadline is extended to December 31 of the second year (after the year in which services were provided). (The federal government's budget fiscal year begins October 1, which means that dates of service October 1 through December 31 are processed as part of the next fiscal year.) To expedite claims filing, CMS has directed MACs to apply a 10 percent penalty on any initial claim filed 13 or more months after services were performed.

Forms Used
All paper claims must be submitted on the CMS-1500 claim. A minimum of 45 days should pass before an unpaid paper claim is resubmitted. A Surgical Disclosure Notice is required for all nonassigned surgeries totaling $500 or more. A letter of medical necessity is required if the provider is to collect fees from the patient for procedures deemed by Medicare to be unreasonable, experimental, unproved, or investigational.
Medicare does not differentiate between basic and major medical benefits. Medicare is not the primary payer for accidental injuries covered by any third- party liability program.

Special Handling
All providers are required to file Medicare claims for their patients. Noncompliance with MSP rules and regulations may result in a substantial penalty or fine. For each filing, when Medicare is the secondary payer, a copy of the primary payer's remittance advice must be attached to the Medicare claim.

Medicaid Eligibility

Medicaid policies for eligibility are complex and vary considerably, even among states of similar size and geographic proximity. Thus, a person who is eligible for Medicaid in one state may not be eligible in another state, and the services provided by one state may differ considerably in amount, duration, or scope as compared with services provided in a similar or neighboring state. In addition, state legislatures may change Medicaid eligibility requirements during the year.

Unlike Medicare, which is a nationwide entitlement program, the federal government man- dated national requirements for Medicaid and gave states the flexibility to develop eligibility rules and additional benefits if they assumed responsibility for the program's support.
Medicaid provides medical and health-related services to certain individuals and families with low incomes and limited resources (the "medically indigent"). It is jointly funded by the federal and state governments to assist states in providing adequate medical care to qualified individuals. Within broad federal guidelines, each state:
● ● ● ●
establishes its own eligibility standards. determines the type, amount, duration, and scope of services. sets rates of payment for services. administers its own program.
Thus, Medicaid varies considerably from state to state, and each state has modified its pro- gram over time.

Medicaid does not provide medical assistance for all poor persons, and it is important to realize that low income is only one test for Medicaid eligibility; an individual's resources are also compared to limits established by each state in accordance with federal guidelines. To be eligible for federal funds, states are required to provide Medicaid coverage for certain individuals who receive federally assisted income-maintenance payments and for related groups that do not receive cash payments. In addition to their Medicaid programs, most states implement "state-only" programs to provide medical assistance for specified poor persons who do not qualify for Medicaid. (Federal funds are not provided for state-only programs.) The federal government provides matching funds to state Medicaid programs when certain healthcare services are provided to eligible individuals (e.g., children, disabled, seniors). Each state administers its own Medicaid program, and CMS monitors the programs and establishes requirements for the delivery, funding, and quality of services as well as eligibil- ity criteria.
Medicaid eligibility is limited to individuals who can be classified into three eligibility groups:
● ● ●
Categorically needy Medically needy Special groups

Categorically Needed

State Medicaid programs must be available to the following mandatory Medicaid eligibility groups (or mandatory populations) because the federal government provides matching funds:
● Families who meet states' Temporary assistance for Needy Families (TaNF) eligi- bility requirements in effect on July 16, 1996.
● Pregnant women and children under age 6 whose family income is at or below 133% of the federal poverty level (annual income guidelines established by the federal government).
● Caretakers (relatives or legal guardians who take care of children under age 18, or age 19 if still in high school)
● supplemental security Income (ssI) recipients (or, in certain states, aged, blind, and disabled people who meet more restrictive requirements than those of the ssI program).
● Individuals and couples living in medical institutions who have a monthly income up to 300% of the ssI income.

Medically Needed

States that establish a medically needy Medicaid program expand eligibility to additional qualified persons who may have too much income to qualify under the categorically needy group. (Federal matching funds are available.) This option allows:
● Individuals to "spend down" to Medicaid eligibility by incurring medical and/or remedial care expenses to offset their excess income. Thus, their income is reduced to a level below the maximum allowed by their state's Medicaid plan.
● Families to establish eligibility as medically needy by paying monthly premiums in an amount equal to the difference between family income (reduced by unpaid expenses, if any, incurred for medical care in previous months) and the income eligibility standard.
States that implement a medically needy Medicaid program are required to include pregnant women through a 60-day postpartum period, children under age 18, certain newborns for one year, and certain protected blind persons. States may also choose to provide coverage to other medically needy persons, including aged, blind, and/or disabled persons; caretaker relatives or legal guardians who live with and take care of children and other eligible children up to age 21 who are full-time students.

States are required to extend Medicaid eligibil- ity to all children born after September 30, 1983, who reside in families with incomes at or below the federal poverty level, until they reach age 19. (States may choose to establish an earlier date.)

Special Groups

States are required to assist the following special groups:
● qualified Medicare beneficiaries (qMB) (states pay Medicare premiums, deduct- ibles and coinsurance amounts for individuals whose income is at or below 100 percent of the federal poverty level and whose resources are at or below twice the standard allowed under ssI)
● qualified working disabled individuals (qWDI) (states pay Medicare Part a premi- ums for certain disabled individuals who lose Medicare coverage because of work; these individuals have incomes below 200 percent of the federal poverty level and resources that are no more than twice the standard allowed under ssI)
● qualifying individual (qI) (states pay Medicare Part B premiums for individuals with incomes between 120 percent and 175 percent of the federal poverty level)
● specified low-income Medicare beneficiary (sLMB) (states pay Medicare Part B premiums for individuals with incomes between 100 percent and 120 percent of the federal poverty level)
States may also improve access to employment, training, and placement of people with disabilities who want to work by providing expanded Medicaid eligibility to:
● Working disabled people between ages 16 and 65 who have income and resources greater than that allowed under the ssI program.
● Working individuals who become ineligible for the group described above because their medical conditions improve. (states may require these individuals to share in the cost of their medical care.)
Two additional eligibility groups are related to specific medical conditions, and states may provide coverage under their Medicaid plans:
● Time-limited eligibility for women who have breast or cervical cancer ●• Individuals diagnosed with tuberculosis (TB) who are uninsured.
Women with breast or cervical cancer receive all Medicaid plan services. TB patients receive only services related to the treatment of TB.

State Children's Health Insurance Program

The State Children's Health Insurance Program (SCHIP) was implemented in accordance with the Balanced Budget Act (BBA), which allows states to create or expand existing insurance programs, providing more federal funds to states for the purpose of expanding Medicaid eligibility to include a greater number of currently uninsured children. With certain exceptions, these include low-income children who would not otherwise qualify for Medicaid. SCHIP may also be used to provide medical assistance to children during a presumptive eligibility period for Medicaid. Medicaid coverage can begin as early as the third month prior to application if the person would have been eligible for Medicaid had he or she applied during that time. Medicaid coverage is usually discontinued at the end of the month in which a person no longer meets the criteria for any Medicaid eligi- bility group. The BBA allows states to provide 12 months of continuous Medicaid coverage (without reevaluation) for eligible children under the age of 19.

Programs of All-Inclusive Care for the Elderly (PACE)

Programs of All-inclusive Care for the Elderly (PACE) use a capitated payment system to provide a comprehensive package of community-based services as an alternative to institutional care for persons age 55 or older who require a nursing facility level of care. PACE is part of the Medicare program, but is an optional ser- vice for state Medicaid plans. Thus, PACE programs operate only in states that have selected to include this option. PACE programs enter into contracts with various types of providers, physicians, and other entities to furnish care to participants. This PACE team offers and manages all health, medical, and social services and mobilizes other services as needed to provide preventive, rehabilitative, curative, and supportive care. The care is provided in day health centers, homes, hospitals, and nursing facilities, and its purpose is to help the person maintain indepen- dence, dignity, and quality of life. PACE providers receive payment only through the PACE agreement and must make available all items and services covered under both Medicaid and Medicare, without amount, duration, or scope limitations and without application of any deductibles, copayments, or other cost-sharing. The individuals enrolled in PACE receive benefits solely through the PACE program.

Spousal Impoverishment Protection

The Medicare Catastrophic Coverage Act of 1988 (MCCA) implemented Spousal Impoverishment Protection Legislation in 1989 to prevent married couples from being required to spend down income and other liquid assets (cash and prop- erty) before one of the partners could be declared eligible for Medicaid coverage for nursing facility care. The spouse residing at home is called the community spouse (which has nothing to do with community property). Before monthly income is used to pay nursing facility costs, a minimum monthly maintenance needs allowance (MMMNA) is deducted.
To determine whether the spouse residing in a facility meets the state's resource standard for Medicaid, a protected resource amount (PRA) is sub- tracted from the couple's combined resources. The PRA is the greatest of the:

● ●

spousal share, up to a maximum of $109,560 in 2009.
state spousal resource standard, which a state could set at any amount between $21,912 and 109,560 in 2009.
amount transferred to the community spouse for her or his support as directed by a court order.
amount designated by a state officer to raise the community spouse's protected resources up to the minimum monthly maintenance needs standard.

Confirming Medicaid Eligibility

Any time patients state that they receive Medicaid, they must present a valid Medicaid identification card.
Eligibility, in many cases, will depend on the patient's monthly income. As eli- gibility may fluctuate from one month to the next, most states have a dedicated telephone line for verification of eligibility. Confirmation of eligibility should be obtained for each visit; failure to do so may result in a denial of payment. If resid- ing in one of these states, be sure to access the Medicaid verification line. Some states have a point-of-service device similar to those used by credit card compa- nies. Beneficiaries carry plastic cards containing encoded data strips. When the card is swiped, the printout indicates eligibility or noneligibility data.
Retroactive eligibility is sometimes granted to patients whose income has fallen below the state-set eligibility level and who had high medical expenses prior to filing for Medicaid. When patients notify the practice that they have become retroactively eligible for Medicaid benefits, confirm this information before proceeding. A refund of any payments made by the patient during the retroactive period must be made and Medicaid billed for these services.

Mandatory Services

1) Services for Categorically Needy Eligibility Groups
Medicaid eligibility groups classified as categorically needy are entitled to the following services unless waived under the Medicaid law. (These service entitlements do not apply to the SCHIP programs.)
● Inpatient hospital (excluding inpatient services in institutions for mental disease).
● Outpatient hospital including Federally Qualified Health Centers (FQHCs) and if permitted under state law, rural health clinic (RHC) and other ambulatory services provided by a rural health clinic that are otherwise included under states' plans.
● ●
Other laboratory and x-ray.
Certified pediatric and family nurse practitioners (when licensed to practice under state law).
● Nursing facility services for beneficiaries age 21 and older. ● early and periodic screening, diagnosis, and treatment (ePsdT) for children under
age 21.
● Family planning services and supplies.
● Physicians' services.
● Medical and surgical services of a dentist.
● Home health services for beneficiaries entitled to nursing facility services under the state's Medicaid plan.
● Intermittent or part-time nursing services provided by home health agency or by a registered nurse when there is no home health agency in the area.
● Home health aides.
● Medical supplies and appliances for use in the home.
● Nurse mid-wife services.
● Pregnancy-related services and service for other conditions that might complicate pregnancy.
● sixty (60) days postpartum pregnancy-related services.

Mandatory Services for medically needy eligibility groups

States must provide at least the following services when the medically needy are included under the Medicaid plans:
● Prenatal and delivery services ● Post-partum pregnancy-related services for beneficiaries who are under age 18 and
are entitled to institutional and ambulatory services defined in a state's plan
● Home health services to beneficiaries entitled to receive nursing facility services under the state's Medicaid plan
States may provide different services to different groups of medically needy individuals, such as specified services for beneficiaries under age 21 and/or over age 65 in institutions for mental disease (IMDs); and/or intermediate care facilities for the mentally retarded (ICF/MRs), if included as medically needy. The services provided to a particular group must also be available to everyone within that group (unless the state has obtained a waiver).


Preauthorization is required for certain procedures and services (e.g., inpatient hospi- talizations) as mandated by state and federal law. To be eligible for reimbursement, the provider must submit the appropriate preautho- rization form, such as California's Department of Health Care Services (DHCS) treatment autho- rization request (TAR) and/or ser- vice authorization request (SAR), to the appropriate state Medicaid field office. Once approved, the procedure or service is provided to the patient and the provider is reimbursed by Medicaid.

Mandated Preuthorization services

Preauthorized Services
Most states that have not placed all Medicaid beneficiaries into a prepaid HMO have some form of prior approval or preauthorization for recipients. Preauthorization guidelines include:
● elective inpatient admission (document medical necessity justification of inpa- tient treatment and admission diagnosis and treatment plan)
● emergency inpatient admission (document medical necessity justification for inpatient treatment and admission diagnosis and treatment plan)
● More than one preoperative day (document reason[s] surgery cannot be per- formed within 24 hours of indication for surgery and specify number of additional preoperative day[s] requested)
● Outpatient procedure(s) to be performed in an inpatient setting (submit CPT code and description of surgical procedure along with medical necessity justification for performing surgery on an inpatient basis)
● days exceeding state hospital stay limitation due to complication(s) (submit diagnosis stated on original preauthorization request, beginning and ending dates originally preauthorized, statement describing the complication[s], date complication[s] presented, principal diagnosis, and complication[s] diagnosis)
● extension of inpatient days (document medical necessity justification for the extension and specify number of additional days requested)

Payment for Medicaid Services

Medicaid operates as a vendor-payment program, which means that states pay healthcare providers on a fee-for-service basis or states pay for Medicaid services using prepayment arrangements (e.g., an HMO). When Medicaid makes payment directly to providers, those participating in Medicaid must accept the reimburse- ment as payment in full. States determine their own reimbursement methodol- ogy and payment rates for services, with three exceptions: (1) for institutional services, payment may not exceed amounts that would be paid under Medicare payment rates; (2) for disproportionate share hospitals (DSHs), hospitals that treat a disproportionate number of Medicaid patients, different limits apply; and (3) for hospice care services, rates cannot be lower than Medicare rates.
States can require nominal deductibles, coinsurance, or copayments for certain services performed for some Medicaid recipients. Emergency services and family planning services are exempt from copayments. Certain Medicaid recipients are also excluded from this cost-sharing, including pregnant women, children under age 18, and hospital or nursing home patients who are expected to contribute most of their income to institutional care.
The portion of the Medicaid program paid by the federal government is known as the Federal Medical Assistance Percentage (FMAP) and is determined annu- ally for each state using a formula that compares the state's average per capita income level with the national average. Wealthier states receive a smaller share of reimbursed costs, and the federal government shares in administration expenses (minimum 50 percent match).
The federal government also reimburses states for 100 percent of the cost of services provided through facilities of the Indian Health Service, provides financial help to the 12 states that furnish the highest number of emergency services to undocumented aliens, and shares in each state's expenditures for the administration of the Medicaid program. Most administrative costs are matched at 50 percent, although higher percentages are paid for certain activities and functions, such as development of mechanized claims processing systems.

Medicare/Medicaid relationship

Medicare beneficiaries with low incomes and limited resources may also receive help from the Medicaid program. For those eligible for full Medicaid coverage, Medicare coverage is supplemented by services available under a state's Medicaid program. These additional services may include, for example, nursing facility care beyond the 100-day limit covered by Medicare, prescrip- tion drugs, eyeglasses, and hearing aids.

When an individual has both Medicare and Medicaid coverage, covered services are paid by Medicare first before any payments are made by the Medicaid program. The reason for this is because *Medicaid is always the payer of last resort.*

Dual eligibles

Medicare beneficiaries with low incomes and limited resources may receive help with out-of-pocket medical expenses from state Medicaid programs. Various benefits are available to dual eligibles, individuals entitled to Medicare and eligible for some type of Medicaid benefit (abbreviated as Medi-Medi). Individuals eligible for full Medicaid coverage receive program supplements to their Medicare coverage via services and supplies available from the state's Medicaid program. Services covered by both programs are paid first by Medicare and the difference by Medicaid, up to the state's payment limit. Medicaid also covers the following additional services:
● Nursing facility care beyond the 100-day limit covered by Medicare ● Prescription drugs ● eyeglasses ● Hearing aids

Medicaid as a Secondary Payer

Medicaid is always the payer of last resort. If the patient is covered by another medical or liability policy, including Medicare, TRICARE (formerly CHAMPUS), CHAMPVA, or Indian Health Services (IHS), this coverage must be billed first. Medicaid is billed only if the other coverage denies responsibility for payment, pays less than the Medicaid fee schedule, or if Medicaid covers procedures not covered by the other policy.

Participating Providers

Any provider who accepts a Medicaid patient must accept the Medicaid- determined payment as payment in full. Providers are forbidden by law to bill (balance billing) patients for Medicaid-covered benefits. A patient may be billed for any service that is not a covered benefit; however, some states have histori- cally required providers to sign formal participating Medicaid contracts. Other states do not require contracts.

Medicaid and managed care

Medicaid managed care grew rapidly in the 1990s. In 1991, 2.7 million benefi- ciaries were enrolled in some form of managed care. By 2004 that number had grown to 27 million, an increase of 900 percent. That represents 60 percent of the Medicaid population who receive benefits through managed care. States can make managed care enrollment voluntary, or they can seek a waiver of the Social Security Act from CMS to require certain populations to enroll in an MCO.
Medicaid managed care does not always mean a comprehensive healthcare plan that requires a monthly premium and is at financial risk for the cost of care provided to all enrollees. Medicaid beneficiaries are also enrolled in primary care case management (PCCM) plans, which are similar to fee-for-service plans except that each PCCM enrollee has a primary care provider who authorizes access to specialty care but is not at risk for the cost of care provided.
Most states that have not placed all Medicaid beneficiaries into a prepaid HMO have some form of prior approval or preauthorization for recipients. Preauthorization guidelines include:
● elective inpatient admission (document medical necessity justification of inpa- tient treatment and admission diagnosis and treatment plan)
● emergency inpatient admission (document medical necessity justification for inpatient treatment and admission diagnosis and treatment plan)
● More than one preoperative day (document reason[s] surgery cannot be per- formed within 24 hours of indication for surgery and specify number of additional preoperative day[s] requested)
● Outpatient procedure(s) to be performed in an inpatient setting (submit CPT code and description of surgical procedure along with medical necessity justification for performing surgery on an inpatient basis)
● days exceeding state hospital stay limitation due to complication(s) (submit diagnosis stated on original preauthorization request, beginning and ending dates originally preauthorized, statement describing the complication[s], date complication[s] presented, principal diagnosis, and complication[s] diagnosis)
● extension of inpatient days (document medical necessity justification for the extension and specify number of additional days requested)

Medicaid Eligibility Verification System

The Medicaid eligibility verification system (MEVS) (sometimes called recipient eligibility verification system, or REVS) allows providers to electronically access the state's eli- gibility file using the methods listed below. Then, a "receipt ticket" (Figure 15-1) is generated upon eligibility verification by MEVS.
● Point-of-service device: The patient's medical identification card contains a magnetic strip, and when the provider "swipes" the card through a reader, accurate eligibility
information is displayed. (The provider purchases magnetic card reader equipment.)
● Computer software: When the provider enters a Medicaid recipient's identification number into special computer software, accurate eligibility information is displayed.

Automated voice response: Providers can call the state's Medicaid office to receive eligibility verification information through an automated voice response system.

Medicaid Remittance Advice

Providers receive reimbursement from Medicaid on a lump-sum basis, which means they will receive payment for several claims at once. A Medicaid remittance advice (Figure 15-2) is sent to the provider which con- tains the current status of all claims (including adjusted and voided claims). The provider should compare content on the remittance advice to claims submitted to determine whether proper payment was received. If improper payment was issued, the provider has the option to appeal the claim. An adjusted claim has a payment correction, resulting in additional payment(s) to the provider. A voided claim is one that Medicaid should not have originally paid, and results in a deduction from the lump-sum pay- ment made to the provider. If a year-to-date negative balance appears on the Medicaid remittance advice as a result of voided claims, the provider receives no payment until the amount of paid claims exceeds the negative
balance amount.

*Remittance advice documents should be main- tained according to the statute of limits of the state in which the provider practices.

Utilization Review

The federal government requires states to verify the receipt of Medicaid ser- vices. Thus, a sample of Medicaid recipients is sent a monthly survey letter requesting verification of services paid the previous month on their behalf. (Such services are identified in nontechnical terms, and confidential services are omitted.) Federal regulations also required Medicaid to establish and maintain a surveillance and utilization review subsystem (SURS), which safeguards against unnecessary or inappropriate use of Medicaid services or excess pay- ments and assesses the quality of those services. A postpayment review pro- cess monitors both the use of health services by recipients and the delivery of health services by providers. Overpayments to providers may be recovered by the SURS unit, regardless of whether the payment error was caused by the provider or by the Medicaid program.
The SURS unit is also responsible for identifying possible fraud or abuse, and most states organize the unit under the state's Office of Attorney General, which is certified by the federal government to detect, investigate, and prosecute fraudulent practices or abuse against the Medicaid program.

Medical Necessity

Medical Necessity
Medicaid-covered services are payable only when the service is determined by the provider to be medically necessary. Covered services must be:
● Consistent with the patient's symptoms, diagnosis, condition, or injury. ● Recognized as the prevailing standard and consistent with generally accepted
professional medical standards of the provider's peer group.
● Provided in response to a life-threatening condition; to treat pain, injury, illness, or infection; to treat a condition that could result in physical or mental disability; or to achieve a level of physical or mental function consistent with prevailing community standards for diagnosis or condition.
In addition, medically necessary services are:
● Not furnished primarily for the convenience of the recipient or the provider.
● Furnished when there is no other equally effective course of treatment available or suitable for the recipient requesting the service that is more conservative or substantially less costly.

Fiscal agent

The name of the state's Medicaid fiscal agent will vary from state to state. Contact the local county government for information about the Medicaid pro- gram in your area. (In some states, third-party payers contract with Medicaid to process claims.)


Underwriting responsibility is shared between state and federal governments. Federal responsibility rests with CMS. The name of the state agency will vary according to state preference.

Form Used

The CMS-1500 claim is required.

Timely Filing Deadline

Deadlines vary from state to state. Check with your State's Medicaid office. It is important to file a Medicaid fee-for-service claim as soon as possible. The only time a claim should be delayed is when the patient does not identify Medicaid eligibility or if the patient has applied for retroactive Medicaid coverage.
Medicare-Medicaid crossover claims follow the Medicare, not Medicaid, deadlines for claims. (Refer to Chapter 14 for details of the Medicare claim fil- ing deadline.)

Allowable Determination

The state establishes the maximum reimbursement payable for each non- managed care service. It is expected that Medicaid programs will use the new Medicare physician fee schedule for these services, with each state establishing its own conversion factor. Medicaid recipients can be billed for any noncovered procedure performed. However, because most Medicaid patients have incomes below the poverty level, collection of fees for uncov- ered services is difficult.

Accept Assignment

Accept assignment must be selected on the CMS-1500 claim, or reimbursement (depending on state policy) may be denied. It is illegal to attempt collection of the difference between the Medicaid payment and the fee the provider charged, even if the patient did not reveal Medicaid status at the time services were rendered.


A deductible may be required. In such cases, eligibility cards usually are not issued until after the stated deductible has been met.


Copayments are required for some Medicaid recipients.

Inpatient Benefits

All nonemergency hospitalizations must be preauthorized. If the patient's con- dition warrants an extension of the authorized inpatient days, the hospital must seek an authorization for additional inpatient days.

Major Medical/Accidental Injury Coverage

There is no special treatment for major medical or accidental injury categories. Medicaid will conditionally subrogate claims when there is liability insurance to cover a person's injuries. Subrogation is the assumption of an obligation for which another party is primarily liable.
Because Medicaid eligibility is determined by income, patients can be eli- gible one month and not the next. Check eligibility status on each visit. New work requirements may change this, as beneficiaries may continue coverage for a specific time even if their income exceeds the state eligibility levels. Prior authorization is required for many procedures and most nonemergency hospital- izations. Consult the current Medicaid handbook for a listing of the procedures that must have prior authorization. When in doubt, contact the state agency for clarification.
Cards may be issued for the "Unborn child of . . ." (the name of the pregnant woman is inserted in the blank space). These cards are good only for services that promote the life and good health of the unborn child.
Because other health and liability programs are primary to Medicaid, the remittance advice from the primary coverage must be attached to the Medicaid claim.
A combined Medicare-Medicaid (Medi-Medi) claim should be filed by the Medicaid deadline on the CMS-1500 claim.
Before working with Medicaid claims, complete the Review located at the end of this chapter.

Mother/baby claim

A mother/baby claim is submitted for services provided to a baby under the mother's Medicaid identification number. (The mother's services are not reim- bursed on the mother/baby claim; they are submitted on a separate CMS-1500 claim according to the instructions in Table 15-1.)


TRICARE is a healthcare program for (1) active duty members of the military and their quali- fied family members, (2) CHAMPUS-eligible retirees and their qualified family members, and (3) eligible survivors of members of the uniformed services. CHAMPUS (now called TRICARE Standard) is an abbreviation for the Civilian Health and Medical Program of the Uniformed Services, a federal program created in 1966 (and implemented in 1967) as a benefit for depen- dents of personnel serving in the uniformed services (U.S. military branches that include the Army, Navy, Air Force, Marines, and Coast Guard), Public Health Service, and the National Oceanic and Atmospheric Administration (NOAA). TRICARE was created to expand health- care access, ensure quality of care, control healthcare costs, and improve medical readiness.

CHAMPUS (now called TRICARE) was implemented in 1967 as the result of an initiative to provide military medical care for families of active-duty mem- bers. The original budget was $106 million; the current budget is more than $24 billion (2002 Tricare Stakeholders' Report, volume IV). In the 1980s the Department of Defense (DoD) began researching ways to improve access to quality care while controlling costs, and demonstration projects were autho- rized. One demonstration project, the CHAMPUS Reform Initiative (CRI) carried out in California and Hawaii, offered military families a choice of how their health- care benefits could be used. The DoD noted the successful operation and high levels of patient satisfaction associated with the CRI, and it was determined that its concepts should be expanded to a nationwide uniform program.

** Used to be 12 regions; NOW there are 4 (3 U.S., 1 international)

Tricare management

This new program became known as TRICARE, a regionally-managed health- care program that joins the healthcare resources of the uniformed services (e.g., Army) and supplements them with networks of civilian healthcare profession- als to provide access and high-quality service while maintaining the capability to support military operations. TRICARE is a healthcare program for active-duty members of the uniformed services and their families, retirees and their fami- lies, and survivors of all uniformed services who are not eligible for Medicare.
There are four TRICARE regions: three in the United States and TRICARE overseas (Figure 16-1). Each is managed by a Lead Agent staff that is responsible for the military health system in that region. Commanders of selected military treatment facilities (MTFs) are selected as lead agents (LA) for the TRICARE regions. The Lead Agent staff serves as a federal healthcare team created to work with regional military treatment facility commanders, uniformed service headquarters' staffs, and Health Affairs (HA) to support the mission of the Military Health Services System (MHSS). The Military Health Services System (MHSS) is the entire healthcare system of the U.S. uniformed services and includes MTFs as well as various programs in the civilian healthcare market, such as TRICARE. Health Affairs (HA) refers to the Office of the Assistant Secretary of Defense for Health Affairs, which is responsible for both military readiness and peacetime health care.

Stepchildren lose eligibility after a divorce unless they are adopted by the sponsor.

Tricare Administration

The TRICARE Management Activity (TMA) (formerly called OCHAMPUS) is the office that coordinates and administers the TRICARE program and is accountable for quality health care provided to members of the uniformed services and their families. The TMA also serves as arbitrator for denied claims submitted for consideration by TRICARE sponsors and beneficiaries; its offices are located in Aurora, Colorado. TRICARE sponsors are uniformed service personnel who are either active duty, retired, or deceased. (Dependents of deceased sponsors are eligible for TRICARE benefits.) Sponsor information (e.g., SSN, DOB, and last name) can be verified in the Defense Enrollment Eligibility Reporting System (DEERS), a computer system that contains up-to-date Defense Department workforce personnel information. TRICARE beneficiaries include sponsors and dependents of sponsors.

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