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BY EDITH EDELSON, chairperson

HEALTH/WELFARE TASK FORCE

NJ FEDERATION OF SENIOR CITIZENS

PROBLEMS WITH MEDICARE B

Medicare, originally enacted to reduce medical costs for the public, has instead proven to be a bonanza for providers, so that consumers pay more for medical services today than they did before Medicare was enacted.

One reason for this is the provision in the Medicare law assuring providers that there would be no interference with their fees. Thus there is no negotiation of fees as there is between Blue Cross/ Shield and providers. Nor are doctors mandated to accept Medicare reimbursement as the full payment.

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IT IS URGENT THAT THIS PROVISION BE REPEALED.

Another problem with Medicare reimbursement is the law provision that the "reasonable" charge shall be the lowest of the actual charge, the customary charge and the prevailing charge. The prevailing charge is capped by an "economic index" which by law is based on outdated data. The source of these charges and the methodology are determined by the Secretary of HHS and the carrier (Prudential in New Jersey). Data used are not only outdated but also inaccurate and even inappropriate.

The result is that Medicare covers only about 40% of the medical costs to the consumer, and only about 20% of physicians in New Jersey accept Medicare on assignment (i.e., as complete payment). Also, there is under-utilization of medical services resulting in many cases in acute illness, deterioration of chronic illnesses, hospitalization or institutionalization the most expensive forms of medical care.

THE LAW SHOULD BE CHANGED SO A MORE REALISTIC
FORMULA THAN "REASONABLE CHARGE" WOULD BE USED
AS A BASIS FOR REIMBURSEMENT.

THE PRESIDENT'S MEDICARE PROPOSALS

The President has proposed a cut of more than $1.8 billion in Medicare for Fiscal Year '84. Almost all of these cuts would increase the cost-sharing by patients.

Hospital copayments

The proposal to eliminate the present copays on hospital stays in excess of 60 days while imposing copays for stays from the 2nd to the 60th day helps 2% of the patients but creates a great hardship for 98% of them. With an average stay of 11 days, the 98% would pay an extra average of $280, which would

go as high as $1179 for some. These copays are scheduled to increase annually as first day deductibles increase. These copays would be

an intolerable burden which many could not possibly pay. There would be an increase in bad debts that would burden hospitals and insurance companies as well as the patients.

Medicare premiums and deductibles would be increased. By 1988 the Medicare B premiums would be as high as 35% of the Medicare B costs. Many seniors could not afford this, nor would they be able to afford Medi-gap insurance that would cover these increases.

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Payments to physicians would be frozen at the '83 level for one year; this would not really create any hardship for doctors only for the patients since they would be obliged to make up the difference between Medicare's reimbursement and the doctor's charge; fewer doctors would be willing to take Medicare on assignment; many would raise their fees, and patients would postpone visits to the doctor. The result in many cases would be hospitalization.

Vouchers Medicare beneficiaries would be able to buy private health insurance instead of being covered by Medicare beginning in 1985 through the use of vouchers valued at 95% of the average payment to beneficiaries. Very likely the insurance companies would exclude the very sick, resulting in a higher per/person cost to Medicare.

All of the above proposals would endanger the health of the retired and disabled people, and might even prove to be more costly to government in the long run.

Our difficulties under Medicare point to the need for a National Health Program for all.

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Attached is an analysis of the problems with the reimbursement under Medicare B as well as suggested remedies.

SYNOPSIS OF PROBLEMS WITH MEDICARE REIMBURSEMENT

12/6/81

By law, reimbursement is based on a "reasonable fee," based on the lowest of the actual charge
for a service, the customary charge for such service throughout the year by the doctor, or the
prevailing charge which is 75% of the customary charge for similar services by all doctors in the
locality. But the annual increase in the prevailing charge is limited by an economic index.

The Secretary is the one who determines the reasonable charge.

Medicare beneficiaries pay nearly 70% of the doctor's bills themselves; Medicare pays about 30%.
Individuals who are under-reimbursed should file an appeal for a fair

hearing.

and other problems

The underreimbursement/result from the following:

1) An improper mix of doctors and of charges considered.

2) data that by statute is to 2 years old and so does not reflect the current inflated charges.
3) The way the economic index is calculated does not reflect the actual health care cost inflation
rate.

The law should be changed to eliminate the reasonable charge in favor
of a uniform national fee schedule adjusted for geographic cost-of-living
and differences in the cost of medical practices.

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in New Jersey

4) Only about 50% of the doctors accept assignment; i.e., agree to accept the "reasonable charge" their full charge to Medicare patients.

The law provision that there will be no interference with the fees of

the doctors charge should be eliminated. It should be mandatory for doctors
to accept assignment. Hospitals under Medicare and Medicaid could enforce this.
States could make it a condition for licensing physicians.

5) Many reports are filed with incorrect or incomplete information by the doctor.

6)

HCFA and carrier should provide specific instructions and specific standards.
HCFA should provide a nominal fee for doctors to cover the paperwork.

Some doctors refuse to fill out Pt. II until patient pays them.

This should be prohibited by law as in Florida.

7) Patients' notices, "This is not a Bill" fail to explain the basis of Reasonable Charge determination and the data used to compute the reasonable charge.

Medicare booklet should explain this and also how assignment works.

It should make reference to Legal Services for help in filing an appeal.

8) To determine similar services as part of "reasonable Charge," Medicare carriers developing
a coding system. Thus the codes and procedures are not uniform as between carriers, the medicaid
program and private insurance companies, and result in confusion and in preventing a comparison of
regional or national charges. office visits (3 types) and surgical procedures usually are mis-
coded. Unless reasons for higher charges are stated by the physician, the normal level of reimburse-
ment is chosen.
routine
Patients should ask their doctor to prepare detailed, itemized bill
showing any complications.

If fees in

9) The artex Secy determines what a locality will encompass. This may be out of date, having
failed to account for shiftin economy and population patterns since their inception.
one segment differs substantially from rest of locality, the mix will be affected disproportionate-
ly. In N. J. 8 regions set initially have been reduced to 3, combining inner cities with suburbs
inspite of different conditions in each; result is lower reimbursement.

Congressional representatives of the State could pressure the Secy and
carrier to remedy inappropriate designation of locality.

Submitted by Edith Edelson, chairperson
Health/Welfare Task Force

N. J. Federation of Senior Citizens

Note: Detailed analysis appears on attached pages.

Information is based mostly on "Medicare Litigation Strategies Conference Materials"
Distributed by Training Resource Center, Office of Program Support, Legal Services Corp.,
15th St., NW, Washington, DC 20005. $7.25

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MEDICARE B UNDER-REIMBURSEMENT

Facts about the Medicare Program Problems

Medicare beneficiaries pay
nearly 70% of their doctor's
bills themselves.

Medicare elderly poor use dortors far less than Medicare non-poor.

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