Medicare Overview – Basics

60889-R8-V1

(c) 2012 Amgen Inc. All rights reserved

• This information is provided for your background education and is not intended to serve as guidance for specific coding, billing, and claims submissions. The decision on which codes best describe the services provided must be made by the individual providers based on specific payor guidance and requirements.

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Medicare Overview1

• Medicare is a insurance program insuring 50 million beneficiaries– Offers healthcare coverage to eligible individuals– Coverage not based on income or health status– Most beneficiaries enter the program after turning 65 years old

• Individuals can also become eligible for Medicare if they are eligible for Social Security Disability or have End Stage Renal Disease (ESRD)

• Medicare is defined by federal law• The law defines how the insurance program is to be

administered and may be subject to change

1. Kaiser Family Foundation. Medicare at a Glance. http://www.kff.org/medicare/upload/1066-15.pdf. Accessed November 25, 2012.

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Medicare Population

• Medicare’s 50 million beneficiaries make it the largest single payor in the United States

• This population is compromised of…– 83.5% elderly (over 65)– 15.7% disabled– 0.8% patients with ESRD

83.5%

15.7% 0.8%

Disabled(under age 65) ESRD

(under age 65)

Elderly (aged 65 years or

older)

Composition of The Medicare Population1

1. MedPAC Data Book June 2012. http://www.medpac.gov/chapters/Jun12DataBookSec2.pdf. Accessed October 24, 2012.

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Medicare History

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History of Medicare

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Medicare has evolved over time as a result of various pieces of legislation

1965 Title XVIII of the Social Security Act

1972 Social Security Amendments added underage 65

ESRD & permanently disabled

1977 Healthcare Financing Administration (HCFA) is

created to manage Medicare

1982 Tax Equity and Fiscal Responsibility Act (TEFRA)

1989 Omnibus Budget Reconciliation Act

1997 Balanced Budget Act (BBA)

2000 Benefits Improvement & Protection Act (BIPA)

2003 Medicare Modernization Act (MMA)

2006 Deficit Reduction Act (DRA) of 2005

2008/2009 Medicare Improvements for Patients and Providers Act (MIPPA)

2010 Preservation of Access to Care for Medicare Beneficiaries

and Pension Relief Act

2012 Middle Class Tax Relief and Job Creation Act

2007 Tax Relief and Health Care Act of 2006

2010 Patient Protection and Affordable Care Act and Health Care and Education Reconciliation Act

2011 Temporary Payroll Tax Cut Continuation Act

2013 American Taxpayer Relief Act

1996 Health Insurance Portability and Accountability Act (HIPAA) enacted

1999 Balanced Budget Refinement Act (BBRA)

2001 HCFA becomes Centers for Medicare & Medicaid Services (CMS)

2008 Medicare, Medicaid, and SCHIP Ext. Act of 2007

2009 Health Care and the American Recovery and Reinvestment Act (ARRA)

Medicare Program Benefit Structure• There are four benefits, or “Parts” to the Medicare program. Beneficiaries have cost-sharing

responsibilities for covered services, including coinsurance, deductibles, and premiumsBenefit Services Site of Service

Part AInpatient services, hospitalizations, hospice care,

skilled nursing facility stays, and some home health services

Hospital Inpatient, Skilled Nursing Facility, Home

Part BPhysician and outpatient services, Durable

Medical Equipment, and some home health care, laboratory service, Physical Therapy, and

Occupational Therapy

Physician Office, Hospital Outpatient, Home

Part D Pharmacy benefit Retail Pharmacy, Specialty Pharmacy

Hospital (inpatient and outpatient), Physician Office, Home Health,

PharmacyPart C Managed care that includes services

covered under Part A, B, and often times D

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Medicare Part A: Inpatient Hospital Benefit Part A covers services provided during an inpatient hospital stay– All services are bundled into a single payment based on the patient’s Medicare Severity -

Diagnosis Related Group (MS-DRG)If a drug is administered as part of an inpatient stay, it generally would be covered and bundled into the MS-DRG payment– No separate payment provided (except for certain blood clotting factors or designated new

technologies)Beneficiary cost share would be as follows:

Services Benefit Medicare Pays* Beneficiary Pays*

Inpatient HospitalSemiprivate room and board, general nursing

and other hospital services and supplies

First 60 days All but $1,184 $1,184

Days 61-90 All but $296 per day $296 per day

Days 91 - 150 All but $592 per day $592 per day

After day 150 $0 All costs

*Skilled Nursing Facilities and certain home health services are also covered under Part A but have different benefit, payment, and cost-sharing rules than inpatient.*Part A premiums and deductibles are revised annually. Table reflects patient cost-sharing requirements for 2013.

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1. Medicare Costs at a Glance. http://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html. Accessed January 3, 2013.

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Medicare Part B1• Covers many services including injectable drug therapy provided in the physician office and

hospital outpatient setting

• Pays 80% of the Medicare-approved amount for drugs and drug-related services covered under the Part B benefit

• Cost-sharing requirements for services covered under Part B for the physician office and hospital outpatient setting include:

Services Benefit Medicare Pays

Beneficiary Pays

Physician OfficePhysician services; medical and surgical services and supplies; physical, occupational and speech therapy;

diagnostic testsUnlimited if services are

medically necessary

80% of approved

amount (after deductible) for

most outpatient services

$147 annual deductible;

$104.90 monthly

premium*; 20% of

approved amount

Hospital Outpatient DepartmentHospital services and supplies received in hospital

outpatient setting as part of physician’s care

*Part B premiums and deductibles are revised annually. Table reflects patient cost-sharing requirements for 2013. Beneficiaries with income over $85,000 ($170,000 per couple) pay a higher, income-related premium.

1. Medicare Costs at a Glance. http://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html. Accessed January 3, 2013.

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Part B Drug Coverage Requirements: General Rules

CMS National Coverage CriteriaFDA Approved

•Safe and effectiveReasonable and Necessary for

Treatment•Follow statutory requirements as set forth in the Social Security Act

Usually not Self-Administered

•Exceptions: certain oral anti-emetic and anti-cancer drugs

“Incident to” Physician Services

•Supervision rules apply

•Must be purchased by the billing entity and administered in the office by an employee

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• In general, Part B covers most physician administered drugs provided in the hospital outpatient and physician office site of service

• CMS has published general coverage guidelines for drugs typically covered under Part B:

1. CMS, Medicare Drug Coverage under Medicare Part A, Part B and Part D. www.cms.gov/partnerships/downloads/11315-P.pdf. Accessed October 25, 2012.

Employer Sponsored Plan

32%

Medigap21%

Medicaid12%

Medicare Advantage

27%

No Supplemental Coverage

7%Public Sector/

Other 1%

Part B Supplemental Coverage1

• Approximately 93% of Medicare beneficiaries have some form of supplemental coverage that may assist with their Part B deductible and coinsurance or participate in Medicare Part C

• Supplemental coverage comes in different forms such as… – Medigap: plans vary, but may cover the patient’s

Part B deductible; most plans pay for all of the 20% coinsurance

– Employer sponsored: plans vary but typically pay similar to Medigap plans

Sources of Supplemental Coverage AmongMedicare Beneficiaries, 2009

Most Medicare beneficiaries will have some form of coverage that supplements or replaces the traditional Medicare benefit package

1. MedPAC. Data Book: Health care spending and the Medicare program, June 2012. http://www.medpac.gov/documents/Jun12DataBookEntireReport.pdf. Accessed October 25, 2012.

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• An alternative to traditional Part A & Part B Medicare where beneficiaries opt out of traditional Medicare and opt into a managed care plan

• In addition to services that are covered by Medicare, MA plans may offer beneficiaries extra benefits (ie, vision)

• MA plans are structured much like managed care plans implementing provider networks, primary care physicians and prior authorization for some services

– Includes HMOs, PPOs, private fee-for-service (PFFS) plans, special needs plans (SNPs), and Medical savings account plans (MSAs)

• The government pays private insurers a fixed amount per enrollee

• MA enrollment has more than doubled since 2004 • Provisions from the Affordable Care Act (ACA) that began

2011 and affect payments to MA plans, may have an impact on enrollment in the program2

Medicare Part C: Medicare Advantage (MA)

6.8

5.6

5.3

6.8

9.7

11.1

11.9

2000

2002

2004

2006

2008

2010

2011

Medicare Advantage Enrollment1

(in millions)

Coverage for drugs under a MA plan will vary by payor, similar to private commercial insurance

1. Medicare Advantage Fact Sheet November 2011. http://www.kff.org/medicare/upload/2052-15.pdf. Accessed October 29, 2012.2. Kaiser Family Foundation. Implementation Timeline. http://healthreform.kff.org/timeline.aspx. Accessed October 29, 2012.

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Examination of Medicare Part C (Medicare Advantage Plans)1

Managed Medicare through private health plans– Patients must be enrolled in Medicare Parts A & B prior to MA enrollment– Providers are typically reimbursed based on a contracted fee scheduleMedicare Advantage Plans with prescription drug coverage are sometimes called "MA-PDs”– Patients still have all of their Parts A & B coverage in addition to Part D

coverage under these plansVariation of cost-sharing and premiums among plans– Patients must pay monthly premium– Annual deductibles and co-insurance vary by planA Medigap policy cannot be used to cover cost-share responsibilities

1. Kaiser Family Foundation. Medicare Advantage Fact Sheet November 2011. http://www.kff.org/medicare/upload/2052-15.pdf. Accessed October 29, 2012.

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Medicare Part D

Part D plan option for Medicare beneficiaries in addition to traditional fee-

for-service Medicare

Part D plan option for Medicare beneficiaries with Medicare Advantage plans (Part C) that

cover Medicare services and prescription drugs

• Part D is the prescription drug benefit for Medicare beneficiaries• Began January 2006

• Part D typically provides coverage for oral or self-administered prescription drugs• Part D plans are administered by private organizations and offered through two

benefit structures

• All but about 10% of beneficiaries have Part D drug coverage or its equivalent

Prescription Drug Plan (PDP) Medicare Advantage Prescription Drug Plan (MA-PD)

1. Medpac. Report to the Congress: Medicare Payment Policy March 2012. http://medpac.gov/documents/Mar12_EntireReport.pdf. Accessed October 25, 2012.

2. Kaiser Family Foundation. The Medicare Prescription Drug Benefit Fact Sheet November 2011. http://www.kff.org/medicare/upload/7044-13.pdf. Accessed October 25, 2012.

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2013 Part D Overview and Coverage1

Initial coverage limit $2,970

Coverage gap program provides 52.5% discount (max of $1,975.97 on brand name drugs through the coverage gap

50% of CostsPaid

by Insurer($2,113)

Beneficiary pays 25% co-insurance ($661.25)

Coverage gap ends and catastrophic coverage

begins at $6,954.52in total drug spend

Beneficiary pays $325 deductible

5% cost sharing through catastrophic coverage (beneficiary has paid $4,750 out-of-pocket to reach catastrophic coverage)

75% Paid by Insurer ($1,983.75)

CatastrophicCoverage

Insurer & Medicare pay 95% of costs

2013

Low-income subsidy enrollees do not have “doughnut hole” in benefit

Beneficiary pays 47.5% (max of $1,787.79 in Rx spending on brand drugs through the doughnut hole (100% counts toward catastrophic coverage)

Insurer paidBeneficiary paid

Manufacturer paid

Coverage Gap

(Doughnut Hole)

1. CMS. Advance Notice of Methodological Changes for Calendar Year 2013 for MA Capitation Rates, Part C and Part D Payment Policies and 2013 Call Letter. https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2013.pdf. Accessed October 29, 2012.

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Low Income Subsidy – Part D1

Medicare beneficiaries who have limited income and resources may qualify for the Low Income Subsidy (LIS) or "Extra Help”• Beneficiaries with incomes under 150% of the Federal Poverty Level and with

limited assets may be eligible for LIS• Those who are eligible for LIS will get help paying for their monthly premium,

yearly deductible, prescription coinsurance and copayments and no gap in coverage

Some Medicare beneficiaries are automatically eligible for LIS including full benefit dual eligible's, SSI recipients with Medicare and Medicare Savings Programs participants. Others will have to apply• Beneficiaries can apply for LIS online at www.ssa.gov or may request a paper

application by calling 1-800-772-1213. Beneficiaries may also apply at their local state Medicaid offices

1. CMS. Medicare Prescription Drug Benefit Manual – Chapter 13. Premium and Cost-Sharing Subsidies for Low-Income Individuals. http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/Chapter13.pdf. Accessed October 25, 2012.

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Medicare Part B Pathways to Coverage

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Pathways to Coverage

• Medicare coverage for drugs or services is guided at the national level via CMS and the local level via contractors

Published coverage

bulletins and newsletter

Local Coverage Determinations

(LCDs)

Case-by-Case Determinations

National Coverage

Determinations (NCDs)

Local Contractors CMS Central Office

Pathways to Part B Coverage

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CMS Administration-Roles and Responsibilities• Administration of the Medicare program occurs at both the federal and local levels

• At the federal level, CMS administers the Medicare program through a central office – CMS is the agency of the Department of Health and Human Services (HHS) that oversees

the various contractors who administer Medicare

• At the local level, CMS relies on a group of contractors to administer the Medicare program (ie, process claims, determine coverage and issue payment, communicate policy to providers, etc.)

– Contractors are private companies that win contracts with CMS to administer Medicare claims for a select geographic region or jurisdiction

– Part A/B Medicare Administrative Contractors (MACs) are contracting entities that have been replacing Fiscal Intermediaries (FIs) and carriers through an effort to consolidate Medicare contractors, commonly referred to as “MAC Reform”

– FIs are the contractors that historically processed claims from hospitals

– Carriers are the contractors that historically processed claims from physician offices

– Part A/B MACs process claims submitted by both hospitals and physician offices

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CMS Coverage Guidance and NCD Process• Guidance issued by CMS that applies to all contractors

– Published on the CMS website

• There are at least two different ways to issue national guidance, each has a different process, scope, and publishing requirement

Benefit Category

Up to 6 months* 30 days Up to 60 days

*First stage can be nine months if CMS commissions an external technology assessment (TA) or Medicare Evidence Development & Coverage Advisory Committee (MEDCAC) review

– Medicare Benefit Policy Manual• Broadly defines the criteria that must be met for

an item or service to be considered reasonable and necessary • Allows contractors considerable discretion to add to or clarify the

national definition of reasonable and necessary for a particular item or service

– National Coverage Determinations (NCDs)• Narrowly defines the criteria that must be met for an item or service

to be considered reasonable and necessary • Limits contractor discretion to add to or clarify the national definition

of reasonable and necessary for a particular item or service• Less common for drugs and more uniform than local guidance

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NCD Process

Topic Accepted Staff ReviewDraft Decision Memorandum

PostedPublic

Comments

Final Decision Memorandum

and Implementation

Instruction

Preliminary Discussion

Draft LCD is

posted on website

45 day comment

periodOpen Draft

MeetingClosed CAC

Meeting

Final Decision

and 45 daynotice period

Contractor Guidance and LCD Process

LCD process takes approximately 6-9 months

Contractor recognizes

need for an LCD

LCD Becomes Active

• Contractors provide coverage and billing guidance through the following: – Local Coverage Determination (LCD): guidance to the local medical community regarding medical

necessity, coverage and coding for a service– Provider Bulletins and Articles: Regular educational correspondence to detail information on the

Medicare program as well as local guidance on coverage and coding for services

• LCD development is a formalized process with required comment periods, open meetings and notice periods

• In addition, the Carrier Advisory Committee (CAC) typically has a closed meeting to discuss the draft policy and public comments

– Each CAC is composed of local physicians of various specialty types (including oncology and hematology), a beneficiary representative, and representatives of other medical organizations

– CACs are established on a state-based level and perform the following functions:• Liaisons between provider specialties and Medicare• Communicate Medicare policy to providers• Provide physician perspective and input within Medicare policy development

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Contractor Landscape and Policy Research

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MAC Reform•The Medicare Modernization Act mandated an initial contractor consolidation into

15 Part A/B Medicare Administrative Contractor (MAC) jurisdictions responsible for processing claims for both hospital and physician services

•This consolidation has been ongoing since 2005

•By 2016, the15 MACs are expected to be consolidated further into 10 MACs to improve the efficiency and effectiveness of CMS’ contracted Medicare claims operations

1. CMS. Vision of Future Fee-for-Service Medicare Environment http://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/VisionofFutureFeeforServiceMedicareEnvironment.html. Accessed October 23, 2012.

2. CMS. Medicare Contracting Reform. http://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/PartAandPartBMACJurisdictions.html. Accessed October 23, 2012.

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Initial 15 MAC Jurisdictions and AwardsAs of October 23, 2012

24

RIRINJNJ

1414

11

77

66

55

44

33

1515

22 1313

1212

11111010

99

88

HIHI

AKAK

NVNV

WAWA

ORORIDID

CACA

SDSDWYWY

MOMO

NDND

AZAZ

MTMT

UTUT

IAIA

MSMS

LALA

ALAL

COCO

GAGA

NENE

KSKS

OKOKNMNM

TXTX

FLFL

KYKY

OHOHININ

MIMI

ILIL

WIWIMNMN

CTCT

NYNY

WVWV VAVA

SCSC

NCNCTNTN

NHNH

PAPA

MEME

MDMDDEDE

MAMA

VTVT

ARAR

RINJ

14

1

7

6

5

4

3

15

2 13

12

1110

9

8

HI

AK

NV

WA

ORID

CA

SDWY

MO

ND

AZ

MT

UT

IA

MS

LA

AL

CO

GA

NE

KS

OKNM

TX

FL

KY

OHIN

MI

IL

WIMN

CT

NY

WV VA

SC

NCTN

NH

PA

ME

MDDE

MA

VT

AR

1. CMS. Spotlight: Status of MAC Contract Awards. Available at http://www.cms.gov/Medicare/Medicare-Contracting/Medicare-ContractingReform/Spotlight.html. Accessed October 23, 2012.

2. CMS. A/B MAC Jurisdictions. Available at http://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/PartAandPartBMACJurisdictions.html. Accessed October 23, 2012.

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Former Jurisdictions

Consolidated Jurisdictions*

1 E

2, 3 F

4, 7 H

5, 6 G

8, 15 I

9 N

10 J

11 M

12 L

13, 14 K

RIRINJNJ

EE GG

HH

FFKK

LL

MMJJ

NN

II

HIHI

AKAK

NVNV

WAWA

ORORIDID

CACA

SDSDWYWY

MOMO

NDND

AZAZ

MTMT

UTUT

IAIA

MSMS

LALA

ALAL

COCO

GAGA

NENE

KSKS

OKOKNMNM

TXTX

FLFL

KYKY

OHOHININ

MIMI

ILIL

WIWIMNMN

CTCT

NYNY

WVWV VAVA

SCSC

NCNCTNTN

NHNH

PAPA

MEME

MDMDDEDE

MAMA

VTVT

ARAR

RINJ

E G

H

FK

L

MJ

N

I

HI

AK

NV

WA

ORID

CA

SDWY

MO

ND

AZ

MT

UT

IA

MS

LA

AL

CO

GA

NE

KS

OKNM

TX

FL

KY

OHIN

MI

IL

WIMN

CT

NY

WV VA

SC

NCTN

NH

PA

ME

MDDE

MA

VT

AR

Consolidated A/B MAC JurisdictionsAs of October 23, 2012

Consolidated Future A/B MAC Jurisdictions

* New Jurisdictions are named with letters starting with “E” to remain consistent with DME MAC names of A-D1. CMS. Spotlight: Status of MAC Contract Awards. Available at http://www.cms.gov/Medicare/Medicare-

Contracting/MedicareContractingReform/Spotlight.html. Accessed October 23, 2012.2. CMS. A/B MAC Jurisdictions. Available at http://www.cms.gov/Medicare/Medicare-

Contracting/MedicareContractingReform/PartAandPartBMACJurisdictions.html. Accessed October 23, 2012.

MAC Consolidation Timeline1

• As initial MAC contract awards meet their term limits of five years, new, consolidated solicitations will be released for all but five MACs

1. CMS. Spotlight: Status of MAC Contract Awards. Available at http://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/Spotlight.html. Accessed October 23, 2012.

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Current Jurisdiction

Consolidated Jurisdiction Current Contractor Consolidation Status

1 EPalmetto GBA. Re-compete awarded to NoridianAdminstrative Services (NAS) 9/20/12 but bid protest received and stay of contract performance is in effect.

Remaining separate.

2 F NASConsolidated with Jurisdiction 3. Contract awarded to NAS 8/2011 and fully implemented 2/28/12.

3 F NASConsolidated with Jurisdiction 2. Contract awarded to NAS 8/2011 and fully implemented 2/28/12.

4 H TrailBlazer Health EnterprisesConsolidated with Jurisdiction 7. Contract awarded to Novitas Solutions, Inc. (Novatis) on 11/9/11. Implementation underway.

5 G Wisconsin Physician Services Insurance Corporation (WPS). Re-competed contract awarded to WPS 7/31/12.

To be consolidated with Jurisdiction 6 in several years.

6 GNAS, National Government Services, Inc. (NGS), and WPS. Contract awarded to NGS 9/27/12 but bid protest received and stay of contract performance is in effect.

To be consolidated with Jurisdiction 5 in several years.

MAC Consolidation Timeline1 continued• As initial MAC contract awards meet their term limits of five

years, new, consolidated solicitations will be released for all but five MACs

1. CMS. Spotlight: Status of MAC Contract Awards. Available at http://www.cms.gov/Medicare/Medicare-Contracting/MedicareContractingReform/Spotlight.html. Accessed October 23, 2012.

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Current Jurisdiction

Consolidated Jurisdiction Current Contractor Consolidation Status

7 H Novitas and Cahaba Government Benefit Administrators (Cahaba)

Consolidated with Jurisdiction 4. Contract awarded to Novitas on 11/9/11. Implementation underway.

8 I WPS To be consolidated with Jurisdiction 15 in several years.

9 N First Coast Service Options, Inc. (FSCO). Re-compete expected September 2012. Remaining separate.

10 J Cahaba. Re-compete expected January 2013. Remaining separate.11 M Palmetto GBA. Re-compete expected in 2016. Remaining separate.

12 LNovitas. Re-compete awarded to Novitas 9/17/12 but bid protest received and stay of contract performance is in effect.

Remaining separate.

13 K NGS To be consolidated with Jurisdiction 14. Request for Proposal issued.

14 K NHIC, Corp. To be consolidated with Jurisdiction 13. Request for Proposal issued.

15 I CGS Administrators, LLC To be consolidated with Jurisdiction 8 in several years.

Medicare Resources

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There are many resources available to learn more about Medicare

• The Official U.S. Government site for Medicare www.medicare.gov

• Centers for Medicare and Medicaid Services1-800-633-4227 or www.cms.gov

• Social Security Administration1-800-772-1213 or www.ssa.gov

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Conclusion

• Medicare is the single largest payor in the United States that offers a variety of benefits

• Beneficiaries have cost-sharing responsibilities for covered services, including coinsurance, deductibles, and premiums

• Medicare Part B cost-share could by covered by supplemental insurance

• Through various regulatory and legislative changes, the Medicare program continues to evolve

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