How does Medicare pay for medical services?

Question: How does Medicare pay for medical services?

Answer: Under the outpatient prospective payment system, hospitals and community mental health centers are paid a set amount of money (called the payment rate) to give some outpatient services to people with Medicare. The payment rate includes:

• Medicare’s payment amount for the service you get
• Your yearly Medicare Part B deductible ($110 in 2005, if you haven’t already paid it for the year). This amount can change each year.
• Your copayment amount or coinsurance

The payment rate is not the same for all hospitals and community mental health centers. The payment rate for a hospital or community mental health center is a national rate adjusted to reflect what people are paid to work in hospitals in the area where you get services. Each January 1, Medicare updates the payment rates to keep up with changes in the cost of providing services.