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How does Medicare work?

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Question: How does Medicare work?
Answer: Medicare uses what’s called the "outpatient prospective payment system" to pay for most outpatient services covered by Medicare Part B in the Original Medicare Plan.

The Medicare benefits system:

  • Covers outpatient services you receive in a hospital or a community mental health center
  • Determines how much you pay and how much Medicare pays for outpatient services.

    Depending on the type of service you get and where you get the service, your out-of-pocket costs may change from year to year, even for the same service.

  • Lowers your out-of-pocket costs over time. This will save you money.

Under the Medicare benefits payment system, you get outpatient services the same way you would get them with other types of health insurance. You can receive services from any hospital or community mental health center that participates in the Medicare program.

The only change with the Medicare benefit system is how much you pay, and how much Medicare pays for hospital and community mental health center outpatient services.

Note: The outpatient prospective payment system described above does not apply to you if you are in a Medicare Advantage Plan. For more information on the Medicare Advantage Plans, see How to Get Free Medicare Publications.

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