Medicare and Hospital Costs
Medicare and Hospital Costs: Medicare Networks, Medicare Assignment, Balance Billing, and Other Factors Related to Hospital Costs
On this page, we discuss Medicare networks, Medicare assignment, balance billing, and the way hospital costs vary within a hospital (such as in the ER).
Hospitals often charge more, sometimes a dozen times more, for services provided in the emergency room than for the same services provided elsewhere in the hospital.
Understanding the different factors that can result in high hospital costs will help Medicare participants avoid needless charges for services not covered by their plan.
Medicare Assignment and Medicare’s Doctor Networks
Medicare has networks of hospitals and doctors who have agreed to participate in the network. Medicare Assignment works like this according to eHealth:[cite] Which doctors accept Medicare assignment?[/cite]
- Participating doctors accept Medicare assignment, meaning that they accept the Medicare-approved amount as payment for their services. These doctors charge the Medicare program 80% and the beneficiary 20% of the cost of the benefit.
- Non-participating doctors can choose to either accept or not accept Medicare assignment. If the doctor does not accept Medicare assignment, you might have to pay a 15% additional charge above the cost of the service, known as a Medicare excess charge. You would then be responsible for up to 35% of the reduced Medicare-approved amount instead of 20%.
- Doctors who have opted out of Medicare may charge you whatever they see fit for services and supplies, and you are responsible for the full cost of these benefits.
TIP: To find a participating doctor in your area, you may use the Physician Compare tool from Medicare.Gov.
Hospital Costs and Balance Billing
Medicare has agreements with hospitals to accept a set fee for particular services. Like other insurance companies, Medicare negotiates discounted fees for items and services with hospitals. These are called insurer-negotiated discounts.
If you use an out-of-network provider, you will not be covered by your insurer’s discount and might be billed for the balance. See Is Balance Billing Legal or Not? for some guidelines.[cite]Is Balance Billing Legal or Not?[/cite]
What is Balance Billing?
You can get unexpected medical bills when you use the services of a healthcare provider who is not in your network and does not accept Medicare assignment.
Medicare is designed to cover some hospital costs provided by doctors and hospitals who are in the Medicare network. Unfortunately, you might go out-of-network without realizing it and that will result in a balance bill (see balance billing).
Even if you go to an in-network hospital, a specialist like a Neonatologist, Pathologist, and Anesthesiologist might be out-of-network. Given this, it is important to confirm that non-emergency services (even at an in-network provider) are covered in full under your Medicare plan before you request or accept care.
If a service isn’t covered in-network, the hospital or doctor may bill you for the amount of the out-of-network provider’s bill or balance.Are You Covered Under Medicare
How do Hospitals Bill?
In 1985, Medicare changed its hospital reimbursement formula to the charge master, a list of agreed prices that is still used to determine hospital payments for items and services. There is a lack of transparency in hospital billing, and patients have little knowledge of or control over costs. Studies have found that hospitals manipulated the charge master price list to increase their billing.[cite]Study: Hospitals still using Chargemaster Markups to Maximize Revenue[/cite]
Also, since hospital bills are so complex, patients rarely have a chance to ask each provider if they are in network. As a result, they may receive bills for involuntary out-of-network services. According to one study, 20 Things to Know About Balance Billing, ER patients received unanticipated out-of-network bills 22% of the time.[cite]20 Things to Know About Balance Billing[/cite]
Medicare and the States
Medicare is a Federal Program but States Regulate Hospital Billing. That means hospitals bill differently according to each state’s laws.
Some states such as New York ban the practice of billing patients more than the Medicare allowable amount or the amount Medicare is willing to pay for a service. Thus, “balance billing” is against the law in New York. Other states allow balance billing so a patient might receive unexpectedly high hospital bills even if they have Medicare.
Most Medicare providers accept Medicare assignment, but it is not universal and can vary from one hospital to another and from state to state. For example, if you live in Texas, you are much more likely to receive an unexpected hospital medical bill than if you live in California or New York.
Am I a Qualified Medicare Beneficiary?
If you have Medicare and your income is at or below 100% of the Federal Poverty Level (FPL) or whatever income level is set by your state, you are a Qualified Medicare Beneficiary (QMB). If you are a QMB and have limited resources, you are not responsible for Medicare co-payments or cost sharing.[cite]Medicare Cost-Sharing for Qualified Medicare Beneficiaries[/cite]
What About Emergency Room Charges?
Tim Xu et al just published their May 30, 2017 study, Variation in Emergency Department vs Internal Medicine Excess Charges in the United States. [cite]Variation in Emergency Department vs Internal Medicine Excess Charges in the United States.[/cite] They examined charges within the same hospital vs. the amount Medicare was willing to pay. The study team found that emergency room charges ranged from 1.0 to 12.6 times more than the Medicare allowance
If you live in a state that will not allow hospitals to bill more than your insurance will pay, you are in luck. If, on the other hand, you live in a Southeastern or Midwestern state or use a hospital emergency room that serves a high proportion of minority patients, the providers are more likely to use balance billing to send you an unexpected bill.
The reason for regional differences is largely because people are more likely to be without health insurance in the areas mentioned above. This effects all of us, since we all foot the bill for unreimbursed hospital charges. See Does Everyone Get Medical Care in an Emergency?[cite]Does Everyone Get Medical Care in an Emergency?[/cite]
What if you are Uninsured?
If you receive care in an emergency room, which is the only place that uninsured Americans can get care, your chances of being subject to price gouging increase dramatically. This could cost you up to 340% more than the Medicare allowable amount for services like a CT scan.[cite]Emergency Room Patients Frequently Overcharged[/cite]
Uninsured patients at for-profit hospitals have historically been charged more than patients with Medicare.
Why is This Important?
The issue of hospital billing and cost is important because medical bills are the largest cause of bankruptcy in the U.S. See Uninsured in U.S. Charged 4 Times What Medicare Pays For ER Visit for an interesting summary.[cite]Uninsured in U.S. Charged 4 Times What Medicare Pays For ER Visit[/cite]
There is a lot you can do as an individual to ask your representatives to help make state laws fairer. I urge you to contact your state representatives.