A number of private health plans base out-of-network reimbursement rates on a percentage of Medicare fees. The Medicare-based reimbursement formulas, generally 110% to 140% of the fee set by Medicare, often result in reimbursement amounts that are much lower than those calculated under the traditional usual, customary, and reasonable (UCR) standards that reflect actual provider charges. The switch to Medicare-based rates confuses many consumers who are unaware of the financial implications of this method. Using a Medicare-based reimbursement method often means that consumers will have to pay a larger portion of their medical bills out of pocket when they seek out-of-network services.
“Medicare is a government-based fee schedule that was developed for specific populations such as the elderly and the disabled. It was not designed to serve as a benchmark for the general population in the private out-of-network context FAIR Health President Robin Gelburd said. ”Many consumers are not aware of the differences between Medicare and UCR payment schedules and the cost impact on patients when their plans switch to a Medicare-based formula. Consumers can now use the Medicare Compare feature on the popular Medical Cost Lookup to understand their cost exposure if their plans use a Medicare-based reimbursement method.”
Previously, the free FH Medical Cost Lookup estimated costs for the UCR-based reimbursement method for a queried procedure. The UCR-based method remains the default, but with FH Medicare Compare, consumers can select the “Medicare-based” button to view Medicare-based reimbursement for a specific procedure and “Compare” to see Medicare- and UCR-based amounts side-by-side.
Medicare-based reimbursement:
Insurance plans using Medicare as the basis for out-of-network reimbursement multiply the fee set by Medicare for a specific medical procedure by a specified percentage to determine the maximum amount that they will reimburse for the procedure.
For example, assume that a patient visits an out-of-network doctor in Chicago, Illinois, who charges $1,700.03 for a colonoscopy with a biopsy. The patient’s insurance plan reimburses the visit based on 140% of what Medicare would normally pay for someone covered by Medicare. If the Medicare fee is $297.48 for that office visit, the plan would agree to pay up to $416.47, and the patient would be responsible for the remaining $1,283.56.
UCR-based reimbursement:
Using the same fact pattern, assume instead that the patient’s insurance plan reimburses at the 80th percentile of what the insurance company determines as UCR and the charge at such percentile is $1,700.03. If the insurer reimburses based on 70% of UCR, or $1,190.02 in this case, then the patient would be responsible for only the remaining $510.01 for that visit.
In these two examples, although the percentage of reimbursement for UCR (70%) was lower than that of Medicare (140%), the patient was responsible for a smaller portion of the $1,700.03 bill when the plan based reimbursement on a percentage of UCR, than on the Medicare fee. The new feature will allow consumers to estimate their out-of-pocket costs based on options that better reflect their specific plan provisions.
For a fuller description of the use of the Medicare fee schedule in out-of-network reimbursement, please visit www.fairhealthconsumer.org/reimbursementseries/medicare.aspx.
To use FH Medicare Compare to calculate the difference between Medicare-based and UCR-based reimbursement, visit www.fairhealthconsumer.org/medicalcostlookup.
About FAIR Health:
FAIR Health is a national independent, not-for-profit corporation whose mission is to bring transparency to healthcare costs and health insurance information through comprehensive data products and consumer resources. FAIR Health uses its database of billions of billed medical and dental services to power a free website (fairhealthconsumer.org) that enables consumers to estimate and plan their medical and dental expenditures. The website also offers clear, unbiased educational articles and videos about the healthcare insurance reimbursement system. In addition to its consumer offerings, FAIR Health licenses data products to businesses, governmental agencies, healthcare providers and researchers. With its professional staff of experts in healthcare, statistics, technology and communications, FAIR Health strives to offer accurate, consistent and timely information to all stakeholders in the healthcare system.
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