Most healthcare providers, whether licensed individuals or institutions, find that the majority of their income comes from the care and treatment of Medicare beneficiaries. Medicare is a federal healthcare program that covers approximately 43 million individuals who are over the age of 65, or who are under the age of 65 and are disabled. Because of the demographics of Medicare beneficiaries, they are more frequent consumers of healthcare than younger, healthier individuals.

Title XVIII of the Social Security Act established Medicare in 1965. Since then, programs have been added and coverage has expanded. Medicare is currently composed of four parts that cover a wide range of medical services.

Professional medical billers and certified medical coders are cognizant of all parts of the Medicare system, its benefits, and its limitations. With a certified educational foundation, and ongoing continuing education, medical coders and medical billers understand how to assign codes correctly to describe medically necessary services, as well as how to assemble that information in meaningful ways to the applicable Medicare program. This article describes how professional medical billers and coders interact with Medicare program in order to receive appropriate reimbursement for services.

Medicare Part A

Part A Medicare covers inpatient services provided in a hospital, as well as follow-up care in a skilled nursing facility (SNF). It also covers hospice care, home health care, and inpatient care in a religious non-medical healthcare institution. Medicare Part A holds patients responsible for a deductible, an out-of-pocket expense by patients, before benefits are paid directly by Medicare. This deductible is applicable for each benefit period, loosely defined as the course of treatment for a single medical condition. After the deductible is met, Part A covers all services for the first 60 days, after which the patient is responsible for a set co-payment for each additional day. Inpatient stays longer than 90 days incur higher co-payments. and coverage for inpatient care longer than 90 days is limited on a lifetime basis.

Medicare reimburses hospitals according to Diagnosis Related Groups (DRGs). This means that a set amount is paid according to the patient’s condition as documented in the medical record. Inpatient medical coders and billers use diagnosis codes to determine the appropriate DRG code based on the ICD-9-CM codes assigned to an individual episode of care. All procedures performed during an inpatient episode are also coded, not for reimbursement purposes but assist the Medicare program in assigning appropriate rates to each DRG.

Medicare Part B

The Medicare program with which most people are familiar is Part B. Medicare Part B provides reimbursement for physician services, services by other licensed healthcare providers (nurse practitioners, physical therapists, nutritionists, counsellors, etc.), diagnostic laboratory and radiological tests, and procedures performed in the outpatient setting. For physical medical and surgical services, patients are responsible for 20 percent co-insurance. For mental health services, the co-insurance is currently 45 percent, though coverage is gradually being adjusted on an annual basis until it will match that of other medical services. Patients are responsible for an annual deductible before full Part B coverage begins.

Medicare Part B also pays for certain drugs delivered by a physician in the clinical setting, as well as durable medical equipment. The payment method Part B uses is the fee-for-service model. Medical billers and medical coders review the available documentation, then they assign applicable Healthcare Common Procedure Coding System codes (HCPCS) and ICD-9-CM diagnosis codes. Each HCPCS code is assigned a dollar amount for reimbursement, and providers agree to accept that rate as payment in full. By law, providers cannot charge more than that amount for covered services. Healthcare providers who do not participate in the Medicare program are not allowed to charge more than 15 percent above the Medicare approved rate.

Medicare Part C

The Centers for Medicare and Medicaid Services (CMS) contracts with commercial health insurance carriers to administer what is commonly called Medicare Advantage. Medicare Part B beneficiaries are eligible to enroll in a Medicare Advantage plan that functions much as an health maintenance organization. These patients receive the full benefits of Medicare Part B coverage, but they may be limited to a set network of providers. If they obtain services outside their specified network, services may incur a higher co-payment or deductible on the patient’s part.

Medicare Advantage plans often offer services not normally covered by Medicare, such as dental care or gym memberships. They may also offer coverage for prescription medications not covered under Part B by bundling Part D coverage into their contracts.

Medicare Part D

Prescription drug coverage has been offered by Medicare Part D since 2006. CMS contracts with commercial third-party companies to provide prescription drug coverage, but there is no set standard of benefits as is the case with Parts A, B, or C. Part D contractors assemble formularies of covered drugs and can organized them by tiers. Tier I drugs may have no copay, while Tier III drugs impose a higher patient financial obligation than Tier II medications. Medical coding and billing for the Medicare Part D program is the profession of billers who work for pharmacies that serve outpatients.

Medications that are prescribed and administered in the inpatient setting are bundled into the payment for a particular DRG. Many drugs administered in the outpatient setting, such as local anesthesia, are bundled into the payment for a specific procedure under the Part B program, though Part B does pay for vaccinations, and for other pharmaceuticals such as steroid injections or chemotherapy. Part D covers medications that are usually self-administered by the patient.

Fiscal Intermediaries

No one submits a claim directly to Medicare. CMS contracts with Fiscal Intermediaries (FIs) to administer the program in a specified geographic area. These FIs apply National Coverage Determinations (NCDs) and National Correct Coding (NCCI) edits to submitted claims to determine appropriate payment. FIs are also authorized to develop Local Coverage Determinations (LCDs) to limit localized use of certain procedures for certain conditions when regional medical practice is statistically out of step with national norms.

Medicare Part C plans are administered by a Medicare Advantage plan carrier according to their own internal standards as defined between the carrier and their contractual provider network. The benefits afforded to Medicare Advantage patients cannot be less than those covered under standard Medicare Part B, but the individual plans may have additional, contractual coding and billing requirements for providers. in order for providers to obtain maximum, reasonable reimbursement.

Fraud and Abuse

With 43 million covered beneficiaries, the Medicare program pays millions of health care claims every year. Medicare fraud and abuse is an important concern as more people become eligible for coverage and benefits expand. Recovery Audit Contractors (RACs) are hired by CMS to proactively review claims for coding accuracy and the inclusion of Medically Unlikely Edits (MUEs) which are combinations of codes that would not normally be reported together. RACs are also authorized to retroactively review medical documentation to ensure that the services that were actually performed are accurately reflected in a Medicare claim.

If fraud or abuse is detected, not only are monies already paid recouped by CMS, there are civil penalties associated with submitting improper claims, including monetary fines and imprisonment. For this reason, healthcare providers rely on professional medical billers and medical coders to be up-to-date regarding all the regulations and statutes that govern Medicare reimbursement, as well as the proper, literal assignment of medical codes as they are meant to be used.