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Understanding Medicare Part D for better medical billing practices

medicare part d

Medicare Part D is a federal program established in 2006, and was created to alleviate the financial burden caused by high medication costs. There are many benefits associated with Medicare Part D. Medical billing specialists and coders, however, need to be aware of the rules and regulations to remain compliant.

What is Medicare Part D?

Medicare Part D is one of two federal programs created to provide funding for individuals who need assistance paying their pharmacy bills. The federal government does not pay pharmacy companies directly. Instead, it funds private insurance providers who, in turn, make payments on the patient’s behalf.

How does Medicare Part D work?

There are essentially four elements of Medicare Part D coverage. They are:

• Annual Deductible
• Initial Coverage
• The Coverage Gap
• Catastrophic Coverage

The annual deductible is the amount that the patient pays before coverage from the provider comes into the equation. The patient pays for expenses out of pocket until the deductible threshold is reached. The insurance provider pays for the remaining expenses after the patient has met his or her financial obligations.

Those who follow the Initial Coverage structure make a copayment for medication based on a tiered platform. This element of Part D essentially means that patients pay a portion of the overall cost for medications while the insurance provider provides payment for the remaining balance.

The Coverage Gap plan comes into the equation after patients have reached the initial coverage limit for the year. Recipients enter the Coverage Gap period, at which point they pay a maximum of 25 percent of the retail cost for prescription drugs.

Catastrophic coverage is primarily used for individuals who have reached the end of the Coverage Gap period. Such patients generally return to the original scheme of fees, which may present financial hardships for those who already struggle to pay the 25 percent out-of-pocket cost for prescription drugs.

Catastrophic Coverage serves as a sort of safety net so that patients experiencing financial difficulties can still get the medications they need without paying astronomical prices.

Factors that affect Medicare Part D coverage

Of course, there is more to Medicare Part D than insurance providers paying part of the pharmacy bill. In fact, there are certain limitations that restrict how much a provider can pay a pharmacy.

Quantity limits regulate how much medication an individual can receive within a given time period. A patient who comes to fill a 30-day prescription, for instance, cannot receive another refill before the month’s end.

The central purpose of quantity limits is to protect patients from unintentional overdose and to also safeguard the system against those who attempt to use doctors’ prescriptions for malicious purposes. Doctors who prescribe more than the quantity limit may have to provide a written explanation for why the patient needs so much medication within a given time period.

Another factor that affects the rate at which pharmacy bills are paid according to Medicare Part D is Prior Authorization. Some medications require the doctor to request authorization before prescribing them to patients. Physicians who bypass this rule put their patients at risk of having to pay for the full amount of the prescription drug out-of-pocket. Insurance providers that follow the Medicare Part D plan do not typically override the prior authorization rules to appease patients.

The final factor that may affect pharmacy billing is recognized as Step Therapy. This process primarily requires the patient to explore alternative medications that are less expensive yet just as effective as the first choice of treatment. The main goal of Step Therapy is to save money. Both the patient and insurance provider save if the alternative option works as well as the primary choice.

Billing precautions

Medical billing specialists and coders should be aware of changes to Medicare Part D so that they remain in compliance with federal law. It is important to have knowledge about Medicare Part B too, which is also medical coverage that pays for prescription medications.

There are certain pharmaceuticals covered by both Medicare Part B and Part D. Other instances of billing require the specialist to charge the patient under one or the other. It is a crime to charge a patient under Part D for items that require billing under Medicare Part B. Thus, the specialist will need to have a thorough knowledge of the similarities and differences between the two programs.

Medicare Part D was created to alleviate the financial hardship often inflicted on individuals in need of several prescription drugs. The government program is designed to protect both the patient and insurance providers. Medical billing specialists and coders need to understand the basics of how Medicare Part D works to properly charge patients and providers for medications.

For more on Medical Billing & Coding, Healthcare Administration, and Insurance News and Updates, you’re already at the right place. Be sure to stay on top of everything by subscribing to the Rx for Success Medical Billing Blog here!

Also, check out our article on Anticipated Changes to the Medicare Physician Fee Schedule for 2019


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