How does medicare payment system work?

[mf15]

Anyone here know how this really works,I cannot get a straight answer from the insurance company. We have a medicare advantage plan.

Wife went to ER, total bill $9700 we pay $50 copay, insurance said they paid $734 to hospital. Had EKG,CAT or CT scan,two bags antibiotics,bag salt water,and blood tests, 6 hours in ER.

Seems to me 9700 is high,but being paid only 734 seems quite low.
What happened to the $9000 or so dollars not paid.
Does medicare also pay the hospital,if so I wonder how much.
Does the hospital just write this off if they are not paid anymore dollars from medicare.
Curious to see what is really going on with medicare payments for services.
Old Mike

 

[Gotadimple]

mf15,
Your plan is the medicare plan. Medicare Advantage is not a supplement to medicare, but replaces Medicare in that the cost of coverage is borne by your insurance company instead of Medicare. The insurance company collects a premium from you and gets part of your Part B premium from Medicare as payment for providing coverage.

The $9700 represents the UCR (usual and customary charge) the hospital would bill to someone without insurance coverage. The $734 + $50 copay is the negotiated payment schedule between the hospital and your insurance company.

The $9,000? Poof!

Just remember, whether it's Traditional Medicare or Medicare Advantage, there is no profit in the charges for the hospital or doctor. Often, the cost of care represents a loss to the provider. They make up the loss by providing services to private payers, like group or individual insurance.

-- Rita

 

[mf15]

Thanks Rita: Well if the 9700 was anywhere near the true cost of service, which is hard to believe, something is very wrong with the system. The hospital got less than 10% of the charges even if they were inflated. I from this cannot see how the medicare system can be in trouble, they don't pay much of the actual cost.
Perplexing to me.
Thanks again.
Mike

 

[plex]

It works this way because 80% of people are covered by either Medicaid, Medicare, Employer plans, or large individual insurance plans. Medicaid pays far less than actual costs, Medicare often pays less, employer plans/individual plans pay somewhat more, and uninsured individuals are the only ones left to makeup the remaining difference in costs (they get bent over a barrel).

 

[mf15]

Plex: This gets more complex as more people comment. It would seem to me that most of the uninsured cannot afford the insurance, if this is true then how are the hospitals getting money from the uninsured who may not have much money anyway.

I fail to see how the Medicare funding system is in trouble, if they are paying less than 10 cents on the dollar for service. Unless Medicade is the real problem, where
little/no premiums go back into the system.
I read the Medicade laws here in Pa when my mother was sick, and they scared the hell out of me, they strip all assets from you with a 5 year look back. They also scared me into getting long term care insurance,which I hopefully never use.


Old Mike

 

[Gotadimple]

In any business, there are two parts to the equation: income and expense. While you've identified expense, you haven't considered income. Medicare is in trouble because it takes in less than it spends. Certainly your hospital trip was not an insignificant amount, but, Medicare picks up the tab for liver and kidney transplants, cancer treatments, etc., which far exceed the amount they take in.

My point is that the more catastrophic health incidents can wipe out income or savings (for any entity). Insurance companies try to avoid bankruptcy by building cash reserves and buying reinsurance to cover the catastrophic claims. Medicare builds reserves, but not to the same extent.

I encourage you to read about how Medicare is funded on the Medicare site.

-- Rita

 

[M Paquette]

Plex: This gets more complex as more people comment. It would seem to me that most of the uninsured cannot afford the insurance, if this is true then how are the hospitals getting money from the uninsured who may not have much money anyway.

You'll get a kick out of this. In Minnesota, some rural hospitals have started paying insurance premiums to shift patients onto the MinnesotaCare insurance program. The Tri-County Hospital CEO said this move would cut the hospital's annual losses in half.

Rural hospitals take unique approach to health care for the poor | Minnesota Public Radio NewsQ

 

[plex]

With modern medicine, there is now an inexhaustible demand for care. As mentioned, this means that Medicare is paying for a huge amount of care, actually a huge portion of all care received, it just gets it at a discount. The discount lets Medicare pay for more procedures than normal, but certainly not an unlimited number of them.

Medicaid is actually doing OK for now because it does not cover the (by far) neediest groups usually (the elderly/disabled), and because, as mentioned, it strips every asset a person besides pensions/SS before paying out. This may change in 2014 when Medicaid covers the poor (and the extremely frugal, but this is a very small group, I also think staying out of Medicaid will be preferable for those who can).

Individuals are the only group care providers can raise prices at an unrestricted rate. Even group insurance plans have caps, though they are quite high (especially in comparison to the government), since this is the 2nd place where care providers try to make up the difference.

And this is how it will continue to be past 2014 (actually it will get worse, since the individual pool/group insurance pool will shrink).

 

[mf15]

Ok Thanks: I pretty much know how it is funded paid into medicare for the past 40 or so years,have also looked at graphs of money flow in and out.
Yes its funny and a shame that the hospital has to buy insurance for the poor to save money.
We have a problem in the country, not sure if the new health bill will address or not.
I do know demographics of us boomers will cause a real mess, more care needed but much lowered tax base.
Old Mike