Reasonable Charge Reductions Under Part B of Medicare

HRD-81-12: Published: Oct 22, 1980. Publicly Released: Oct 22, 1980.

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GAO examined whether Medicare beneficiaries are being properly reimbursed for doctors' bills under the Medicare program. Part B of the Medicare Program, which primarily covers the cost of physician services, is paying an increasingly smaller portion of the elderly's total cost for physician services. On the average, the charges submitted by doctors are reduced by about 20 percent by the program, because they do not meet Medicare's reasonable charge criteria. The percentage of claims where the program reimburses the beneficiary (unassigned claims) rather than the doctor (assigned claims) has increased from about 35 percent to about 50 percent. Where the program pays the beneficiary, he or she is liable for the difference between the submitted charges and Medicare's reasonable charges in addition to the normal 20 percent coinsurance amounts. On assigned claims, the physician agrees to accept Medicare's allowed charge as full payment, and the beneficiary is liable only for the coinsurance on the allowed charges.

GAO identified four areas where it believes beneficiaries are being subjected to inequitable reasonable charge reductions. These areas are: physician markups on laboratory procedures performed by independent laboratories, the use of fee and one-half reimbursement policies for pricing surgical procedures, the use of relative value schedules for computing a physician's customary charge for a procedure he or she rarely performs, and inadequate scrutiny of claims as they are processed by carriers. Pending legislation would require the Health Care Financing Administration (HCFA) to take additional measures to eliminate Medicare reimbursement for physician markups on laboratory procedures. HCFA requires that, for procedures done on the same day, carriers are to base reimbursement on the major procedure only, or the major procedure plus partial amounts for the other procedures. GAO found a high incidence of underpayments on claims with relatively large reasonable charge reductions. Beneficiaries in the same area should be treated equally whether they are seeing an established physician or a new physician. HCFA must establish more specific claims processing standards to provide assurance that beneficiaries are not underpaid. If underpayments are identified, they must be relatively significant. Claims requiring development by the carrier inherently require more time to process and cost more. Carriers have a built-in disincentive to careful claims development. Beneficiaries cannot be expected to know the details of claims processing requirements.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should instruct DC Blue Shield to work with the local medical society(s) and resolve the differences in physicians' charging practices and Medicare's pricing for multiple surgical procedures.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should direct that claims processing standards be made more stringent for unassigned claims.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should instruct Medicare carriers to determine the extent of reductions resulting from resolution of the differences between physicians' charging practices and Medicare's pricing and, if significant, take action to reduce or eliminate them.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should establish more specific claims processing standards.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should discontinue relative value schedules for computing customary charges.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should instruct DC Blue Shield to use the 50th percentile of physicians customary charges as is done for new physicians.

    Agency Affected: Department of Health and Human Services

  7. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Health and Human Services (HHS) should require carriers still using the schedules to study their effect on reasonable charge reductions.

    Agency Affected: Department of Health and Human Services

  8. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HHS should develop a legislative proposal to address the liability of beneficiaries for payment to physicians of unassigned claims with consideration of provisions to make it a misdemeanor for physicians to mark up laboratory charges and require laboratories to bill Medicare directly.

    Agency Affected: Department of Health and Human Services

 

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