39

70

71;

20 per cent coinsurance feature 70 that requires a sharing of expenses above the deductible amount?1 This annual deductible and coinsurance amounts are not, however, applicable to cover expenses incurred each year for radiology or pathological services furnished to a hospital inpatient

72

by a physician. After October 30, 1972 they are not

73

applicable with respect to diagnostic tests performed in
a laboratory for which payment is made to the laboratory
at a negotiated rate. Finally, there is no 20 per cent
coinsurance amount imposed in respect to home health bene-
fits, effective with respect to services furnished in ac-
counting periods beginning after 1972.

74

Like the Hospital Insurance program, the Supplementary Medical Insurance program imposes a deductible equal to the expenses incurred for the first three pints of whole 75 blood or packed red blood cells.

b. The Medicare Amendments of 1974

The Medicare Amendment of 1974 would eliminate completely premium payments and all deductibles. However, these Amendments would establish a system of copayments with respect to inpatient hospital services ($5.00 per

Soc. Sec. Act §§1833 (a).

76

After application of the annual deductible, payments from the trust fund will cover 80 per cent of the remaining "reasonable charges" or "reasonable cost" as the case may be of expenses ,covered by the program.

72

Soc. Sec. Act §§1833 (a) (1) (B).

73

Soc. Sec. Act §§1833 (a) (1) (D).

74

Soc. Sec. Act 881833 (a) (2).

75Soc. Sec. Act 881833 (b)

76,

"Medicare Amendments of 1974, §§111 (a) ("1821(a)").

34-275 (Pt. 8) O 75 11

- 40

day), skilled nursing facility services ($5.00 per day),
home health services ($2.00 per visit), physician's ser-
vices ($2.00 per visit), dentist's services (20% of ap-
proved charges except no copayment for certain services),
mental health day care ($2.00 per day), diagnostic out-
patient services of independent laboratories or indepen-
dent radiology services not otherwise covered as institu-
tional services (20% of approved charges except when a
negotiated rate agreement precludes copayment), devices,
appliances, equipment and supplies (20% of approved
charges except no copayment for examination for glasses
or when copayment is waived), drugs, ($1.00 per filling
or refilling of a prescription), and ambulance services
(20% of approved charges).78

77

The incurring of copayments by an individual entitled to health insurance protection under the Medicare Amendments of 1974 would be subject to a catastrophic protection feature related to income.79

The se Amendments

would establish five income classes, with income class
I including all low income individuals and families.
The income ranges for the different income classes would
be subject to automatic annual revision in accordance

77 No copayments for drugs furnished to an HMO enrollee or administered within a hospital to an inpatient or outpatient or administered to an inpatient of a participating skilled nursing facility or for drugs furnished to an individual by a physician, a dentist as an incident to his professional services.

78 Medicare Amendments of 1974, §§lll (a) ("1821 (b)").

79

Medicare Amendments of 1974,

§§lll (a) ("1822 (a)").

41

with the consumer price index, but initially the income
ranges would be set as follows:80

4

$4,461-$5,570 $5,341-$6,410

$4,741-$6,330 $5,451-$6,810 $5,571-$6,980 $6,411-$7,480

5

Above $6,330 Above $6,810

Above $6,980

Above $7,480

Persons in income class 1 would never be subject to

81

Persons in income class

copayments (or be subject to coverage limits, to the extent
there are any, on services).
2, 3, 4 and 5 would initially be subject to the copayments
described above. However, copayments would cease when,
in a given year and the preceeding calendar quarter, a
specified out-of-pocket expenditure limit is reached.
income classes 2, 3 and 4, that limit would initially be
set at $125, $250 and $375 respectively (but subject to
annual revision in accordance with the CPI).82 In the
case of income class 5, the out-of-pocket expenditure
limit would be 6 per cent of annual income or, if lower,

80Medicare Amendments of 1974,
81Medicare Amendments of 1974,
82Medicare Amendments of 1974,

§§111 (a) ("1823 (b) (1)").
§§111 (a) ("1822 (b) (1)").
88111 (a) ("1822 (b) (2)").

For

5.

$750 (subject to annual revision of dollar limit in ac-
cordance with the CPI). 83 Credit towards the out-of-
pocket limits would be made for expenditures incurred
for copayments, and any expenditures incurred for ser-
vices furnished in excess of the coverage limits (in
case of certain psychiatric services). Moreover, when
the out-of-pocket expenditure limit has been reached,
these coverage limits would cease to apply for the rest
of the year.84

Conditions of and Limitations on Payment for Services

a. Present Law

Under the Hospital Insurance program, payments for services furnished an individual may be made only to providers of services85 and only if a written request for payment has been made by the individual (or in certain cases, by someone acting on such individual's behalf), a physician certifies (recertifies where such services are furnished over a period of time) the necessity for certain services covered under the program, and, in the case of inpatient hospital services and post

83 Medicare Amendments of 1974, §§111(a) ("1822 (b) (3)"). 84 Medicare Amendments of 1974, 88111 (a) ("1822 (b) (4)"). 85 See, Soc. Sec. Act 681814 (c)-(i) for provisions precluding, allowing, limiting or otherwise regulating payment to federal providers of service, payment for emergency hospital services, for inpatient hospital services prior to notification of noneligibility, for certain inpatient hospital services furnished outside the United States, for services of a physician rendered in a teaching hospital, for post hospital extended care services, and for post hospital home health services.

hospital extended care services, such services are not

found to be medically unnecessary under the system of
utilization review.86

The amount paid to any provider with respect to ser-
vices for which payment may be made under the program is
the lesser of the "reasonable cost"87 of such services,
the customary charges with respect to such services, or
(if such services are furnished by a public provider of
services free of charge or at nominal charge to the
88
public), fair compensation.

Existing law provides, in general, that the reasonable cost of any service is the cost actually incurred and is to be determined under regulations establishing the method or methods to be used and the items to be included in determining such cost for various types and classes 89 of institutions, agencies and services. The se regulations must take into account the principles developed and generally applied by national organizations or established prepayment organizations in computing the amount of payment to be made by third parties to providers of service. These regulations must also take into account direct and indirect cost to providers in order that costs incurred with respect to individuals covered by the

Hospital Insurance and Supplementary Medical Insurance

86 Soc. Sec. Act §§1814 (a); also see, Soc. Sec. Act 881151-1170.

87 Soc. Sec. Act

88 Soc. Sec. Act 89 Soc. Sec. Act

§§1861 (v).
§§1814 (b).
§§1861 (v) (1) (A).