Supplementary medical insurance benefit for physician and supplier services - Medicare and Medicaid Statistical Supplement

Health Care Financing Review, Annual, 1992 by Charles Helbing, John T. Petrie

Balance billing liability per user on unassigned physician and supplier claims was highest in the West Region ($184), followed by the Northeast ($169), South ($142), and North Central ($139) Regions. Among the Divisions, the average liability ranged from $123 in the East South Central to $194 in the Pacific Division. By State, the average balance billing liability was lowest in Maine ($63) and highest in Alaska ($246).

Assignment rates, by State: 1983, 1985, 1990

DEFRA 1984 implemented PAR to reduce potential beneficiary liability on unassigned physician claims. Prior to the enactment of DEFRA, Medicare allowed physicians flexibility in how they billed for services covered by Medicare by permitting them to accept assignment on a claim-by-claim basis. Physicians who did not accept assignment could bill patients for the difference (balance billing) between the physicians' submitted charge and the Medicare-allowed charge.

Under DEFRA, participating physician and suppliers who join PAR agree to accept assignment for all Medicare covered services provided to beneficiaries for the duration of the agreement (usually 1 year) and to accept the Medicare-allowed charge as payment in full. Incentives for physician participation include directories of participating physicians, dissemination of names of participating physicians via toll-free telephone numbers, and provision for electronic receipt of claims by carriers.

Non-participating physicians and suppliers who provide covered services to Medicare beneficiaries make assignment decisions on a claim-by-claim basis and may bill Medicare beneficiaries more than the Medicare allowed charge on unassigned claims. On January 1, 1991, physician payment reform legislation of 1989 (PPR) began phasing-in limits on the amount that non-participating physicians can charge Medicare beneficiaries. By 1993, a non-participating physician will not be allowed to charge a Medicare beneficiary more than 115 percent of the amount listed in the MFS.

As shown in Table 7.15, the Medicare assignment rate (based on the ratio of assigned allowed charges to total allowed charges) on physician and supplier claims has risen substantially as a result of PAR. Generally, a higher assignment rate reduces the beneficiary out-of-pocket liability. The annual assignment rate increased from 51 percent in 1983 to 67 percent in 1985, and then to 82 percent in 1990.

There was substantial variability in the assignment rate by State of residence of the Medicare beneficiary (Figure 7.16). For example, the assignment rate during 1990 ranged from 45 percent in South Dakota to 98 percent in Massachusetts. (Massachusetts, Pennsylvania, and Rhode Island have laws requiring physicians and suppliers to accept assignment on all Medicare claims.) Nationally, the assignment rate was 82 percent. The assignment rates in Table 7.15 were calculated based on the ratio of assigned allowed charges to total allowed charges.

The ratio of Medicare physician-submitted charges to allowed charges increased from 1.31 in 1983 to 1.38 in 1985, and then to 1.51 in 1990. This indicates that there has been an increasing differential between the physicians' submitted charge and the Medicare allowed charge since the inception of PAR. By State, in 1990, the ratio of submitted charges to allowed charges ranged from a low of 1.39 in Montana, Nebraska, and Washington to a high of 1.81 in Rhode Island.