Unbiased Analysis of Today's Healthcare Issues

Medicare Reimbursement Information II

Written By: Jason Shafrin - Sep• 01•09

I will continue reviewing some Medicare reimbursement information as described in a variety of MedPAC reports.

Medicare Advantage

  • Medicare Advantage is a program where Medicare beneficiaries can receive private heath insurance, partially or fully funded by CMS.  The health insurance must provide coverage at least as generous as Medicare Parts A and B.
  • Private health plans bid to provide services to Medicare beneficiaries.  If a plan’s standard bid is above the benchmark, then the plan receives a base rate equal to the benchmark and the enrollees have to pay an additional premium that equals the difference between the bid and the benchmark. Ifa plan bid falls below the benchmark, the plan receives a base rate equal to its standard bid.
  • Medicare payments are also based on enrolled beneficiaries’ demographics and health risk characteristics. Medicare uses beneficiaries’ characteristics, such as age and prior health conditions, and a risk-adjustment model—the CMS–hierarchical condition category (CMS–HCC)—to develop a measure of their expected relative risk for covered Medicare spending.
  • Medicare Advantage Plans can be either local or regional.  Regional plans can be offered to any beneficiary of one of the 26 Medicare regions.   A region’s benchmark is a weighted average of the average county rate and the average plan bid.  The average plan bid is each plan’s bid weighted by each plan’s projected number of enrollees


  • Medicare Part D provides coverage for pharmaceutical expenses.
  • Overall, Medicare subsidizes premiums by about 75 percent and provides additional subsidies for beneficiaries who have low levels of income and assets.
  • The standard 2009 benefit includes: a $295 deductible; coverage for 75 percent of allowable drug expenses up to a benefit limit of $2,700; no coverage between $2700 and $6134, and about 5 percent coinsurance for drug spending above the catastrophic limit of $6154.
  • Individuals eligible for both Medicare and Medicaid with incomes up to 100 percent of poverty have no deductibles, nominal copays, and no coverage gap.
  • Medicare subsidies for Part D come in two forms: A direct, capitated payment to plans calculated as a share of the adjusted national average of plan bids, and individual reinsurance of 80 percent of drug spending above

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