Medicare Answers: Is Medicare Now Paying Only 78% of a Claim?

  • Originally published June 27, 2014 , last updated February 10, 2015
  • Medicare
Medicare Answers: Is Medicare Now Paying Only 78% of a Claim?

An agent recently asked SMS's Dwane McFerrin about EOB's showing Medicare paying 78%, instead of 80% of a claim.

Q. I am seeing EOB's showing Medicare paying 78%, instead of 80% of a claim. I thought there was no reduction to Medicare per the debates in Washington?

A. President Obama's Budget Control Act of 2011, which went into effect 4/1/13, requires Medicare to reduce their payment amount for any medical or hospital services and supplies by 2%. This is referred to as Medicare's 2% sequestration reduction amount.

Providers that accept Medicare's assignment, which is the vast majority of providers, are obligated to write off this 2% reduction amount. Thus, in most cases, this payment reduction by Medicare is a non-issue for the insured as they are not liable to pay for it.

On carrier EOB statements, it should indicate Medicare's full 80% payment amount before the reduction. The EOB message alluded to is a carrier's way to address the fact that Medicare's actual payment may be different than what is shown on the EOB. Again, in most cases, this message is a technicality as it has no financial impact to the insured.

Please note this reduction in Medicare's payment has no affect at all on the Med Supp benefit payment. Carriers still pay the full coinsurance benefit amount due under the policy, the same as if no reduction in Medicare's payment was applied.

Where it could impact the insured financially is if the provider elects not to accept Medicare's assignment. In that event, the provider has the right to balance bill the insured for this 2% amount. Medicare Supplement policies do not pay the 2% reduction amount as there are no provisions in the policy that accommodate for this type of expense. The provider should alert the insured to this situation up front if this is the case.