A Primer about Health Insurance

Medicare uses a long list of codes for every medical service known to mankind! There is a diagnostic code for the rare medical situation of being sucked into a plane’s jet engine. We kid you not! The listing is the doctor’s billing bible. It is called the Current Procedural Terminology (CPT) guide which is updated constantly. The CPT guide book offers a unique code and a brief description for each of tens of thousands of medical services. They are further broken down into units (hours, visits, etc.) which are “allowed” for each CPT service code. For all CPT codes, Medicare sets a Relative Value Unit (RVU) rate based on the cost of labor, how much equipment (like a CT scanner) is involved and where the procedure is performed.

The rate is higher in urban areas assuming costs are more expensive in cities as opposed to rural areas. Once it determines a cost for a service it allows a tiny profit and then sets the cost as the “Allowed Amount” or maximum they will pay for that service. Traditionally, the RVU for mental health providers has been low because we use paper and pencils with no machines. My chiropractor has an ancient X-ray machine, articulating table and weird hand-mounted vibrators which all serve to bring his RVU up. Thus, you see new equipment being installed everywhere in medical settings, but little increase in use of clinical knowledge and experience.

We'll address standard Medicare which pays 80% of outpatient costs, with you being responsible for the 20% copay amount. Now there are supplemental insurances you can buy to cover the 20% gap (called Medicare Gap insurance). This is like being able to buy insurance to pay the $500 deductible on you car insurance–insurance for your insurance. Also discussed are Medicare replacement products like "Advantage" plans and HMO's. Finally we'll take a look at the benefits of Medicare, which would be a good insurance for all Americans'

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