Almost fifty-five years ago in the world of health insurance, a split occurred between the medical benefit and pharmacy benefit. Claims processing for pharmaceuticals had grown to a volume that required a unique solution for insurers. New companies and subsidiaries were created to meet this growing demand, and unique pharmacy billing practices arose from them. US pharmaceutical sales reached approximately $555 Billion in 2021, the vast majority of which were processed through insurance governed by the pharmacy benefit instead of the medical benefit. As states continue to pass provider status legislation, the majority of covered clinical services would be covered by the medical benefit.
There is much to learn about pharmacy billing and reimbursement requirements necessary for pharmacies to get paid for clinical services. In this guide, we’ll break down the key details on pharmacy claims to help pharmacy providers better understand pharmacy benefit vs. medical benefit processes.
How each provider acquires and administers medication impacts whether this service is covered by a medical benefit vs. a pharmacy benefit. So let’s start by taking a more detailed look at both.
Also known as ‘Major Medical,’ medical benefit typically refers to what is covered under a patient’s medical insurance plan. Medications covered by medical benefits are often referred to as “Buy and Bill” because it’s common for providers to purchase the medications themselves and administer them in an outpatient setting. The list of costs covered typically includes:
- Physician/provider services
- Physician/provider supplies and equipment
- Medications administered by physician/provider in an outpatient setting
The total cost is dependent on plan deductible co-pay or co-insurance limits. Both billing and reimbursement are completed after the administration of the drug and can be paid using various insurance billing methods, including PPO, HRA, HSA, and Flex Cards.
Pharmacy benefit covers medications that patients can either administer to themselves at home or that can be given by a provider at their office, depending on how the drug is administered. Medications falling under this umbrella include:
- Infused medicines
- Oral medications
- Topical preparations that are compounded, such as ointments and creams
However, the complete list of medicines that may be prescribed is set by the pharmacy benefit manager or medical plan. The pharmacy deductible is separate from medical in most cases, and the key features from a pharmacy billing perspective are:
- Coverage includes Part D for Medicare beneficiaries
- Coverage can be subject to co-payment or co-insurance
- Coverage often follows a tiered system, where exceptions can be requested for Medicare patients at reduced costs
Medical Benefit vs. Pharmacy Benefit: Primary Differences
The primary differences for pharmacies lie in the type of drugs that can be provided, the billing process, and the cost and reimbursement benefits:
- Outpatient drugs are most often distributed and dispensed via retail, mail order, and specialty pharmacies, whereas infusion drugs (IV, intrathecal, etc.) are dispensed via medical benefit because the supplies needed for infusion are not always dispensed by pharmacies.
- Any specialty drugs billed via pharmacy benefit are processed in real-time. In contrast, with medical benefits, there is a lag between administration and payment due to the longer process of third-party insurance billing.
- The pharmacy benefit has better access to rebates, most of which are passed onto the plan sponsors. A plan sponsor is the company who insures the beneficiary (most often times the patient’s employer); therefore, pharmacy benefit rebates are typically higher than those billed under a medical benefit.
The Impact on the Pharmacy Billing Process
How do pharmacies get paid by insurance plans? For pharmacies who are leaning into their provider status by branching out into medical benefit services, there are some essential differences in pharmacy billing processes in terms of the overall ease of invoice submission, formatting, and the timescale for payments.
- Medical benefit vs. Pharmacy Benefit: Ease of Submission
Pharmacy benefit claims are generally easier to submit because they are often approved quickly, providing a physician prescribes the medication and the drug is on the approved list on the patient’s insurance plan.
With medical benefit claims, there are several medical billing policies to follow, and pharmacies usually must provide complete documentation of the services they’ve provided. Rejections can be costly, which is why it’s important for pharmacies to have the right tools and support to reduce denials and maximize their revenue. DocStation’s revenue cycle team has a 96% claim success rate and notifies users within 24 hours if action is required to rescue a problem claim.
2. Medical Benefit vs. Pharmacy Benefit: Invoice Formatting
There are two standard requirements for billing for prescriptions — prescription numbers and National Drug Codes (NDC). From there some prescriptions may require various indicator codes, such as disease state or override codes; however, medical billing uses an entirely different set of codes. In order to get paid for services provided under a patient’s medical benefit plan, pharmacists must familiarize themselves with the Healthcare Common Procedure Coding System (HCPCS) and Current Procedural Terminology (CPT). Pharmacists billing to the medical benefit with DocStation can take advantage of software that offers customized claim templates for a plethora of codes. Pharmacies can lean on DocStation as a partner who will understand the latest codes, modifiers, and submission requirements for pharmacies billing to the medical benefit and take this work off your plate.
3. Medical Benefit vs. Pharmacy Benefit: Reimbursement Timescale
Medical billing claims take longer to be reimbursed. While pharmacy billing claims are approved or denied very quickly, medical billing claim status processing can take up to 14 business days from the time they are submitted. If a claim is denied, it must be resubmitted, meaning it can take weeks — or even months — to receive a payment if everything is not in order the first time. This makes precision billing to the medical benefit a top priority for pharmacies. Did you know? Most of rejected claims from pharmacies billing to the medical benefit are recovered for reimbursement by the DocStation team with absolutely no action from the pharmacy!
Medical Billing Solutions
Do you want to spend less time bouncing between different systems, hunting down drug codes and prescription numbers, and more time providing patient care and maximizing your revenue? At DocStation, we’re revolutionizing the world of medical benefit invoicing with FHIR-standardized pharmacy billing software that enables us to transform the care you provide into payments. Here’s how it works.
How are Pharmacy Medical Benefit Claims Submitted?
Pharmacy medical benefit claims are submitted digitally and without the need for a CMS-1500 at the pharmacy. The form still exists; you just don’t need to see it. We simply submit claims for you based on the care documented in our pharmacy EMR that includes patient profiles, encounter workflow, and billing and reimbursement software.
With everything automated on our cloud-based care platform, there is no need to worry about reimbursement schedules. We’ll let you know if there’s a problem with any of your claims, and we’re here to support you if something goes wrong, maximizing your opportunity to get paid for your work.
DocStation pharmacy billing software can help you find and manage your patients efficiently and streamline your care with our standardized workflow tasks, whether you’re a single community pharmacy or a large chain. Simple connectivity tools enable you to share data with those that need it, and our software integrates seamlessly with your existing systems meaning your records will always be up to date.
DocStation gets pharmacies paid for services. Pharmacies use DocStation to provide care, auto-bill medical claims, and participate in value-based programs with innovative health plans.
Get started today and discover how easy it is to get paid for the services you provide every day when you partner with DocStation.
National Association of Chain Drug Stores. “DIR Fees.” Accessed August 5, 2022.
Bolger, Bill. “The Pharmacy Benefit vs. The Medical Benefit.” Pharmacy Times, December 1, 2011. Accessed August 5, 2022.
National Association of Medication Access and Patient Advocacy. “The Importance of a Thorough Benefits Investigation to Help Navigate Medical vs. Pharmacy Benefit.” Accessed August 5, 2022.
CMS.gov. “HCPCS — General Information.” August 1, 2022. Accessed August 5, 2022.
Dotson, Peggy. “CPT Codes: What Are They, Why Are They Necessary, and How Are They Developed?” Advances in Wound Care, December 2013. Accessed August 5, 2022.