Traditional Medicare Beneficiary Coinsurance for Hospital Outpatient Services

Background

A loophole in Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… law related to hospital outpatient services (such as diagnostic tests, radiology, and certain surgeries) burdened beneficiaries with nearly half of the cost for those services instead of the standard 20 percent. The increased cost resulted from basing the coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured.  In contrast, a copayment is a specific dollar amount that must be paid for a specific service. on 20 percent of hospital charges, rather than on the amount Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… approved.

Since 2000, Congress has mandated that beneficiary coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured.  In contrast, a copayment is a specific dollar amount that must be paid for a specific service. as a share of payments for hospital outpatient services be reduced each year through a “buy-down” provision. Its intent is to cut beneficiary coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured.  In contrast, a copayment is a specific dollar amount that must be paid for a specific service. payments to 20 percent of total payments for outpatient services. In 2014, beneficiaries’ copayments accounted for 22 percent of total payments.

Recently the Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… Payment Advisory Commission and The Centers for Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… & Medicaid Services noted a rise in the number and length of hospital “observation” stays. Patients in observation statusA designation hospitals use to distinguish patients who are not formally admitted to the hospital as inpatients even though they may in the hospital for several days. Cost-sharing for patients in observation status is higher than for inpatients. are classified as hospital outpatients, not inpatients, even if they are in a hospital setting for more than 24 hours and are using a hospital bed. The consequences and costs of this classification can be significant. For an observation stay beneficiaries must pay a percentage of the allowed charge for each outpatient service, including observation, and there is no cap on how much they may owe for multiple outpatient services. As an inpatient, their costs would be limited to the inpatient deductibleThe amount that individuals must pay for services covered under an insurance plan before the insurer pays benefits. Not all out-of-pocket spending counts toward the deductible. amount.

Additionally, because Part B does not cover the cost of self-administered drugs provided to outpatients, beneficiaries under observation are typically responsible for the full hospital charges for these drugs, which are often many times the cost of buying the same drugs in a non-hospital pharmacy (e.g., $209 for drugs that cost $43 outside the hospital).

These out-of-pocket costs can quickly add up, in particular for beneficiaries on fixed incomes. Finally, time spent under observation does not count toward the three-day prior inpatient stay required for Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… to cover subsequent skilled-nursing facility services. Therefore, someone who needs this postacute care may not qualify for coverage, despite spending more than three days in the hospital under observation. (See also this chapter’s section on Traditional Fee-for-Service Medicare/Provider Payment—Postacute Care.)

TRADITIONAL MEDICARE BENEFICIARY COINSURANCE FOR HOSPITAL OUTPATIENT SERVICES: Policy

TRADITIONAL MEDICARE BENEFICIARY COINSURANCE FOR HOSPITAL OUTPATIENT SERVICES: Policy

Decreasing outpatient coinsurance

The Centers for Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… & Medicaid Services should ensure that the phase-down of beneficiary coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured.  In contrast, a copayment is a specific dollar amount that must be paid for a specific service. for outpatient hospital care continues as rapidly as possible.

Federal policymakers should accelerate the buy-down of beneficiary coinsuranceA form of health care cost sharing in which a percentage of covered expenses must be paid by the insured.  In contrast, a copayment is a specific dollar amount that must be paid for a specific service. for all outpatient services to the appropriate level of 20 percent of Medicare Authorized in 1965 under Title XVIII of the Social Security Act, Medicare provides health insurance coverage for people age 65 and older and for some disabled people under age 65. This federal program consists of Part A (Hospital Insurance), Part B (Supplemental Medical Insurance), Part… ’s approved amount as quickly as feasible.

Congress should limit the maximum amount of beneficiary copayments for each outpatient service to one-half of the hospital inpatient deductibleThe amount that individuals must pay for services covered under an insurance plan before the insurer pays benefits. Not all out-of-pocket spending counts toward the deductible. .

Federal policymakers should prohibit hospitals from billing beneficiaries who stay in the emergency room or under observation beyond a maximum length of time (such as 24 or 48 hours) as outpatients, whether or not they are subsequently admitted as inpatients.

Congress should allow any days spent in observation statusA designation hospitals use to distinguish patients who are not formally admitted to the hospital as inpatients even though they may in the hospital for several days. Cost-sharing for patients in observation status is higher than for inpatients. to be counted toward the current three-day hospital stay requirement for skilled-nursing facility coverage. (See also this chapter’s section on Traditional Fee-for-Service Medicare/Provider Payment—Postacute Care for related policy.)