Physician Practice

Understanding Medicare Parts A and B

Physician Practice Insider, October 6, 2015

By Judith L. Kares, JD, regulatory specialist for HCPro.


During several recent Medicare Boot Camp—Hospital Version® classes, I noticed some confusion about the four parts of Medicare. With respect to each part, there appeared to be confusion about the authority or entity responsible for determining the scope of covered services, beneficiary cost sharing, adjudication of claims, and payment for covered services. The four parts of Medicare are:

  • Part A
  • Part B
  • Part C
  • Part D


During our focus, we will identify the key elements of each part, including the following:

  • Services covered
  • Sources of funding
  • Responsible authority/entity
  • Administration/claims adjudication
  • Payer of claims
  • Payee
  • Beneficiary cost sharing


This note will review parts A and B, which together are sometimes referred to as “Original” Medicare.
 

Parts A and B


When the Medicare program was initially implemented in 1965, there were only two parts: A and B. This fact is why these two parts of Medicare are often referred to as Original Medicare. Most people in the U.S. are automatically entitled to Part A, but must enroll in Part B once they become eligible. Under Original Medicare (which is also currently referred to as “traditional” or “fee-for-service” Medicare), beneficiaries receive coverage for a broad range of inpatient and outpatient services. In particular, beneficiaries have maximum choice as to the selection of providers (both facility and professional) from whom to obtain services. Generally, Medicare will pay for covered services provided by any otherwise qualified provider, so long as that provider has enrolled in the Medicare program.


Covered services


Under Part A, Medicare provides coverage for a broad range of inpatient facility (hospital, skilled nursing facilities, home health, hospice) service—e.g., room and board, nursing services, other care, items, services and procedures performed—that meet applicable Part A coverage guidelines. Under Part B, Medicare provides coverage for a broad range of outpatient services, including

  • Outpatient facility and professional services (both screening and preventive) that meet applicable outpatient Part B coverage guidelines
  • Inpatient services that are not covered under Part A, but do meet applicable inpatient Part B coverage guidelines


Sources of funding


The primary sources of funding for Part A are:

  • Payroll taxes
    • Higher-income taxpayers pay higher rates
  • Enrollee premiums from those not entitled to premium-free Part A
  • Other sources (income taxes paid on Social Security benefits, interest earned on trust fund investments, etc.)
  • Beneficiary cost sharing (deductibles and coinsurance)

In contrast, the primary sources of funding for Part B are:

  • Enrollee beneficiary premiums
    • For most beneficiaries, designed to cover 25% of claims expense ($104.90 for calendar year [CY] 2015)
    • Higher premiums for those with incomes above the threshold
  • General fund/funds authorized by Congress
  • Other sources (interest on trust investments, etc.)
  • Beneficiary cost sharing (deductibles and coinsurance)

Responsible authority/entity


CMS is primarily responsible for oversight of Parts A and B, under the authority and at the direction of Congress and the HHS.


Administration/claims adjudication


CMS delegates much of the responsibility for administering Parts A and B, particularly the adjudication and payment of claims, to Medicare Administrative Contractors (MAC). MACs are awarded contracts to perform these functions for both facility and professional providers located in their respective multistate MAC jurisdictions.
 

Payer of Claims


Although the money comes, in large part, from the respective Part A and B trust funds, the MACs are responsible for remitting payments for covered services.
 

Payee


The majority of providers (both facility and professional) who furnish covered services under parts A and B are participating providers under the Medicare program. Participating providers have elected to accept assignment of payment, in which case payment is made directly to the providers (or those entities to whom they have reassigned their right to payment). Payment for those services furnished by providers enrolled in Medicare who have not chosen to accept assignment of payment is generally to the Medicare beneficiary.


Beneficiary cost sharing


Under Part A, there are 90 regular covered inpatient hospital benefit days per benefit period. For each benefit period, the beneficiary is subject to a single deductible ($1,260 in CY 2015) for the first 60 regular inpatient hospital benefit days and an additional daily coinsurance (25% of the CY inpatient deductible [$315 in CY 2015]) for the remaining 30 regular inpatient hospital benefit days during that benefit period. At the beginning of each subsequent benefit period, the beneficiary once again has 90 regular covered inpatient hospital benefit days for which he or she has applicable deductible and coinsurance obligations. In addition, once regular benefit days for that benefit period have been exhausted, each Medicare Part A beneficiary is entitled to 60 lifetime reserve inpatient hospital days (LRD), for which there is a daily coinsurance (50% of the CY inpatient deductible [$630 in CY 2015]). Once used, LRDs are gone forever.


Under Part A, there are also 100 covered inpatient SNF benefit days per benefit period. There is no beneficiary cost sharing for the first 20 inpatient SNF days, but there is a daily coinsurance (12.5% of the CY inpatient deductible [$157.50 in CY 2015]) for each of the remaining 80 covered SNF days.
Under Part B, there is a combined annual deductible for all services covered under Part B (both facility and professional), which is $147 in CY 2015. For most items covered under Part B, there is also a per item/service coinsurance, which is generally 20% of the Medicare allowable for that item/service.
 

Additional resources


See the following source authorities for additional information on parts A and B:


This article was originally published in HCPro’s Medicare Insider.
 

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