I often get asked if a retiree even needs a Medigap plan. The answer might sound a bit surprising, coming from an insurance agent. Whether or not you need a Medicare Supplement depends on which type of doctor you use.
In this post I want to clarify the 3 relationships doctors have with Medicare. You will need to decide for yourself if Medigap is right for you.
Before any discussion about the relationship doctors have with Medicare can be understood it is necessary that you have a clear understanding of how they get paid.
This explanation from Plan Provider is as good as it gets to explain how Medicare’s compensation formula works.
“Since 1992, the Medicare program has been using a Resource-Based Relative Value Scale (RBRVS) to determine how doctors should be paid for the doctors’ services they provide. Instead of being paid on an absolute fee-for-service basis, payments for services through the RBRVS system are relative to the combination of three separate determining factors: doctor’s work (52%), relative practice expenses (44%), and professional liability insurance (4%). The reimbursement fee is then adjusted for the geographical location in which the service is provided.
Three times a year, a special committee of doctors meets to discuss recommendations on updates to how much doctors should be paid for their work and other relative values. The committee, also known as the Relative Value Scale Update Committee (RUC), is made up of individuals convened by the American Medical Association (AMA) and other medical-specialty trade groups. Around 90 percent of the recommendations by the RUC are followed by the Center for Medicare and Medicaid Services (CMS), allowing the committee great influence over the billions of taxpayer dollars in the Medicare program.”
A doctor who participates in Medicare has agreed to accept what Medicare says is a fair price for the treatment or advice they provide. He has agreed not to charge you any more, provided you are covered by Medicare.
His office will file your claim directly with Medicare on your behalf. If you have already met your Medicare B deductible for the year, when you go to the doctor you will only need to pay 20% of the bill.
If you have a Medigap, it will help pay that expenses for you. Depending on which Medigap plan you have, you will only be responsible for your co-pay or nothing at all.
This term is a little misleading. It does not mean that your doctor will not help you with your Medicare claim. It means that you will need to pay him directly and then file a claim for reimbursement from Medicare.
In other words, Medicare will pay you rather than your doctor.
There is another right that non-participating doctors have. Although they have not agreed to accept Medicare’s approved amount as payment in full for their services, they are limited as to how much more they can charge you. A non-participating doctor can charge you as much as 15% more than what Medicare approves but no more. This is called an, “Excess Fee.”
Be advised that if you elect to use a “Non-Participating” doctor, Medicare will still help you with the bill. However, you will need to pay your doctor first and be reimbursed for Medicare’s portion.
If you do not have one of the Medigap plans that also cover “Excess Fees” you could wind up paying as much as 35% of your doctor’s bill out of your pocket.
A doctor who is not enrolled in Medicare has made a choice to opt-out of the Medicare program completely. If you elect to receive health care from one of these providers, you will be required to sign a contract before treatment begins verifying that you are aware that the doctor has opted-out of Medicare and will not assist you with any Medicare claims.
If you elect to use a doctor like this, you will be required to pay him directly. You are forbidden to file a claim for reimbursement with Medicare.
Since Medicare does not pay anything when you use a doctor who has opted-out of the program, neither would Medigap. If you use a doctor like this, Medigap may not be necessary.
Doctors who are not enrolled in Medicare are few and far between but they do exist. Most doctors are going to be either Participating or Non-participating.
I know that at this time of year the A.M.A. lobby tries to scare seniors with the threat, “If Congress does not grant a ‘Doc Fix‘ and pay us more money through Medicare, we will tell our members to no longer participate in Medicare.”
The press and the ultra-left use that to scare seniors into pressuring congress into granting another Medicare raise to doctors. The truth is that unless a doctor totally opts-out of Medicare, there is not as much to be afraid of as the threats imply.
Whether your doctor “accepts” Medicare or not is immaterial. If you are able to go to the doctor now, you will still be able to go to them. The difference is how that doctor gets paid.
If you use a doctor who participates in Medicare, he will be paid directly from Medicare. If you use a doctor who does not participate in Medicare, you will pay that doctor up front, file a claim with Medicare and be reimbursed a portion of what you paid. In both cases, since Medicare pays toward your health care, if you have a Medicare Supplement, it will also pay.
The only time you have a problem is if your doctor “Opts-out” of Medicare. Even then you can get treatment but only if you can afford his bill.