News and Updates >> Client Update
January 1, 2006
What Medicare changes may mean to your practice
(courtesy of Meyers Brothers Kalicka, PC, Healthcare Services Division, see below for more information)
Since its passage, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 has
begun to reshape Medicare benefit provisions. During 2006, the effects of the act will reach beyond
Medicare beneficiaries and affect providers in several key areas.
Medicare Fees
Most broadly felt will be the budgeted 4.3 percent decrease in Medicare fees to meet spending cuts
mandated by the Sustainable Growth Formula. The budgetary formula was devised in an effort to preserve
Medicare funding for the coming years.
The reimbursement decreases are a result of rising Medicare spending as well as increasing numbers of
Medicare subscribers. The sharp reduction in fees will account for a $4,300 decrease in collections from
your bottom line for every $100,000 of Medicare billing at the present reimbursement rate.
Reimbursements for clinical laboratory services will remain frozen at their 2003 levels for five years. In
subsequent revenue projections for your practice, assuming that annual inflation will take only a 1 percent
bite out of the value of a dollar, this reimbursement level will amount to a 5 percent decrease in fees by
the end of the revenue freeze period.
Another change will affect some specialty providers who administer drugs in
their offices. The payment for administering certain drugs, such as chemotherapy
agents, will increase. The payment for many of the drugs will decrease.
To calculate the effect of these changes on your practice, refer to the specific reimbursement
fees for each drug published in the Medicare Physician Fee Schedule (see www.cms.hhs.gov/physicians/pfs/default.asp).
Specialty Hospitals
Do you practice at least part of the time at a cardiac, orthopedic or surgical specialty hospital?
Be aware that the new Medicare act also places an 18-month hold on the development of new specialty
hospitals, except for those already under development before Nov 18, 2003.
The act also allows existing specialty hospitals to increase the beds on the current campuses by
only a limited number. This may prevent or slow down expansion of your practice in these specialty areas
due to lack of beds or available patient days.
Medicare Plans
Medicare Advantage Plans will begin in 2006. Part of their appeal to beneficiaries is the
ability to pay once premium to cover their Medicare, Medigap insurance and prescription drug plan.
For providers, as with other PPO-type contracts, each will need to be evaluated and compared to
traditional fee-for-service Medicare. Depending on how many of your current fee-for-service Medicare
patients elect to join one of these plans, your billing may feel the impact of lower reimbursement rates.
Two changes for the Medicare beneficiary are coming that might indirectly affect your practice. Medicare
beneficiaries are faced with an $11 per month, or $132 per year, increase in premiums. This increase can
impact their ability to pay for co-pays or out-of-pocket expenses.
Prescription Drug Coverage
On January 1, 2006, Medicare prescription drug coverage will come into full scope. The transitional discount
prescription card program will phase out on that date.
Enrollment for prescription coverage began on November 15, 2005, and continues through May 15, 2006. After
that time, persons who enroll late will be faced with higher monthly premiums.
The beneficiaries will have a variety of drug prescription plans to choose from. The monthly premium
will be approximately $35.
Aside from the premium, each beneficiary must meet a $250 deductible and pay 25 percent of the drug costs
between $251 and $2,250. They must pay 100 percent of the drug costs between $2,251 and $5,100. Then
they will pay only 5 percent of drug costs until the end of the calendar year.
By understanding how the plans work, you can be in a better position to help patients balance out
their ability to pay for their medications with your recommendations for treatment.
This article is courtesy of the Healthcare Division of Meyers Brothers Kalicka, PC, Certified Public
Accountants and Business Consultants. For more information, contact James B. Calnan, CPA, Partner
at (413) 536-8510 or visit them on the web at www.meyerskalicka.com