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MEDICARE: Challenges Remain in Setting Payments for Medical Equipment and Supplies and Covered Drugs

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CMS, an agency within HHS, is responsible for much of the federal governments multi-billion-dollar payments for health care, primarily through the Medicare and Medicaid programs. Medicare-the nations largest health insurance program-covers about 40 million elderly and disabled beneficiaries. Medicaid is a state-administered health insurance program, jointly funded by the federal and state governments, that covers eligible low-home individuals including children and their parents, and aged, blind, and disabled individuals. Each state administers its own program and determines-under broad federal guidelines-eligibility for, coverage of, and reimbursement for, specific services and items. Most Medicare beneficiaries purchase part B insurance, which helps pay for certain physician, outpatient hospital, laboratory, and other services medical supplies and durable medical equipment such as oxygen, wheelchairs, hospital beds, and walkers and certain outpatient drugs. Medicare part B pays for most medical equipment and supplies using a series of fee schedules. Medicare pays 80 percent, and the beneficiary pays the balance, of either the actual charge submitted by the supplier or the fee schedule amount, whichever is less. Generally, Medicare has a separate fee schedule for each state for most categories of items, and there are upper and lower limits on the allowable amounts that can be paid in different states to reduce variation in what Medicare pays for similar items in different parts of the country. The fee schedules specify a Medicare-allowable payment amount for each of about 1,900 groups of products.

Subject Categories:

  • Economics and Cost Analysis
  • Medicine and Medical Research

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