When Medicare recipients visit their doctors, the medical office will typically ask for a portion of the payment due that is not covered by Medicare. After meeting the Part B deductible, patients will usually pay 20% of the Medicare-approved amount for most services delivered by a physician. That is also the case for outpatient therapy and durable medical equipment. The doctor then waits for payment from Medicare.

Medicare approach to payment calculations

Medicare uses varied approaches in the determination of payments to providers. Under Original Medicare, the system of payments to healthcare providers for covered Medicare benefits is typically based on a fee-for-service (FFS) payment structure. This traditional Medicare model has often been emulated by private insurers. The model includes payments to hospitals and doctors. The Affordable Care Act payment reforms and CMS Innovation Center approaches have contributed to a shift in focus toward quality and spending performance, encouraged by disbursing a higher share of traditional Medicare payments.

Medicare Fee Schedule defined

The organization that manages the Medicare program, Centers for Medicare & Medicaid Services (CMS), describes the Medicare fee schedule as a comprehensive list of maximum fees used by Medicare to reimburse physicians, other healthcare providers and suppliers.

Types of Medicare Fee Schedules

Medicare fee-for-service payments are for services rendered by doctors, ambulances and clinical laboratories. The schedule, which is developed by CMS, also includes payments for durable medical equipment (DME), prosthetics, orthotics and supplies. Following are two examples of fee schedules.

The Medicare Physician Fee Schedule Final Rule for the calendar year of 2020 has been displayed at the Federal Register since November 1, 2019. It includes payment policies, rates and other elements for services provided under the Medicare Physician Fee Schedule (MPFS).

The Ambulance Fee Schedule (AFS) is a national fee schedule for ambulance services provided as part of the Medicare benefits under the provisions of Part B. These services include volunteer, municipal, private, independent and institutional providers as well as skilled nursing facilities.

Continuous improvement in payment rules

CMS sometimes enacts regulatory changes in payment rules as a result of reevaluation to reduce burdensome requirements with regard to supervision, scope and licensing. In response to the President’s Executive Order on “Protecting and Improving Medicare for Our Nation’s Seniors,” EO # 13890, reforms have been proposed, and some have been implemented. For example, physician supervision for services rendered by Physician Assistants has been redefined. This allows therapist assistants to administer therapy under the Medicare benefits for home health care and lowers the minimum oversight required for hospital outpatient therapy.

For more information about the Medicare Fee Schedule, visit cms.gov.

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