Quote:
Originally Posted by birdiebill
Medicare and private insurance reimbursements for medical claims are determined by taking the average of all usual and customary fees for a given procedure code. All health care providers know that they do not get reimbursed by insurance for the full fee they charge. They know what amount they will receive from either Medicare or private insurance and set their fee accordingly.
While I do not know the specific percentage of usual and customary fee, I will use this example. Suppose, in the case of the $1000 charge for a particular procedure, the approved amount by Medicare is $600 which is 60% of the average of all usual and customary billed amounts for that procedure. Remember this is just an example for easy math; I do not know the actual percentage applied to the average of the usual and customary fees. If the patient has met his medicare deductible, Medicare then pays 80% of the $600, or $480, and the patient or his/her supplement is billed for the remaining $120. The provider "writes off" the remaining $400 of the original charge. Writing it off means the provider deducts the $400 from the patient's account balance; the provider can not count the write off as a tax deduction against income though. It is just an accounting procedure to show the account has a zero balance after all insurance approved amounts have been paid.
If the provider knows that he/she will only get $600 approved for the procedure he bills the insurance, why does he not just bill $600 instead of the $1000? The reason is if the usual and customary amount for that procedure is billed by all providers at $600.00, insurance then will recalculate what they will allow. In the example above if the percent is 60%, the new allowed amount is .60 x 600 = $360 which is now the new amount allowed instead of the original $600.
The person without insurance is the one who suffers because when they get billed the usual and customary fee, they are expected to pay for the entire charge, not the amount that insurance companies approve. That is because providers must charge their usual and customary fee to all patients, or that fee is not usual and customary. They can not have one fee for insurance and another for non-insurance patients.
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That statement would have been partially true, PRIOR to January 1, 1992. The term "usual and customary" is now only of historical significance, sort of like "horse and buggy" or "butter churn". Since then, all charge reimbursement is based on RVRBS.
RVRBS (Resource based relative value scale) was a multi-year project started in 1988 by a group of Harvard based economists and others ATTEMPTING to compare the value of various medical services based on education, skill and risk required to perform that service. It was supposed to equalize the disparity in payment between procedural and cognitive services.
Each CPT code is assigned a "relative value", and then a dollar reimbursement is set and multiplied by the RVUs, with some geographical adjustment. So there is no need to keep "usual and customary fees" high, since they no longer exist nor have any impact on the reimbursement scale.
Just a note of cynicism here---When Dr. William Hsiao and his group were developing his RVRBS scale, I believe Jonathan Gruber was a grad student at MIT. You remember Gruber, the economist who devised the financial structure of Obamacare and later stated the reason the bill passed was "the stupidity of the American voter"
The problem with RVRBS is that it still overpays procedures and underpays primary care. The meetings that deal with this subject are private, not open to the public or uninvited guests. And best of all, the AMA owns the copyright on the CPT codes, so anyone, including the government who wants to associate RVUs with CPT codes has to PAY the AMA, which was about 70 million in 2015. So much for "transparency"
I do however, agree, with the rest of the post, especially the uninsured getting the short end of this reimbursement stick.