The Medicare program is operated by the Centers for Medicare & Medicaid Services (CMS), an agency within the federal Department of Health and Human Services (HHS). CMS personnel set the rules for the operation of Medicare, including the procedures covered by the program. CMS is responsible for the complex payment schedule, under which each procedure has a special code and payment.
The actual payments and processing of bills are handled by private firms, known as Medicare Administrative Contractors (MAC). In addition to processing and paying the more than 1 billion Medicare claims each year, MACs: enroll providers in the program; offer education on coverage rules and billing procedures; respond to provider and beneficiary inquiries; and engage in activities aimed at reducing fraud and abuse. There are 15 separate MAC jurisdictions.
Accuracy of payments is a key issue. According to the report, "The MAC’s claims review activities are designed to identify and prevent improper payments, that is, claims paid that should not have been paid because the services were not covered or there was not adequate documentation to justify the claim. Sometimes improper payments may indicate fraud or illegal activities. If the MAC uncovers potential fraud through its review process, it will notify appropriate law enforcement or Medicare’s specialized contractors that are tasked with correcting past improper payments and preventing fraud."
The growth and development of Medicare activity is determined through a complex evaluation process. For example, medical researchers and practicing doctors might recommend payment for a surgery that was experimental but is now considered safe for general patients. As another example, there might be a new device, such as a defibrillator, approved as safe. Expert panels appointed by Medicare will debate and discuss whether the procedure, device or drug is appropriate for the Medicare population. If they grant approval, Medicare adopts a code and payment schedule for the new product or procedure. Medicare pays for a significant portion of medical spending; therefore it sets the trend. Something approved by Medicare is usually approved for payment by insurance companies covering the population under age 65.
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