Backdoor Medicare Cut Could Raise Your Out-of-Pocket Costs

A new Medicare cost-saving rule that was launched late in 2020 will cut payments to hospitals for some surgical procedures and could potentially raise costs for Medicare recipients.  According to an article by Susan Jaffe, of Kaiser Health News, the Centers for Medicare and Medicaid Services (CMS) has for years classified 1,740 surgeries and other services as “so risky” for older adults that Medicare would pay for them only when people were admitted to the hospital as inpatients.  But under the new rule, CMS is beginning to phase out that requirement.  By the end of 2023, these “inpatient only services” which includes complicated procedures such as heart and brain operations, is scheduled to be gone.

CMS said in a press release that this change is to provide patients and their doctors more options and to lower costs by promoting more competition among hospitals and independent surgical centers.  But while these surgeries will be removed from the inpatient-only list, the government did not approve any of them to be performed anywhere else.  Patients will still have to get care at hospitals but, because these services have been reclassified, they will be billed under Medicare Part B as outpatient services, instead of Medicare Part A for hospital services.  Medicare beneficiaries pay a bigger share of the costs under Part B, than under Part A for an inpatient stay, and those costs would also drive up Medicare Part B premiums in the future.

Even though Medicare recipients getting these services may stay in the hospital overnight or longer, getting the same nursing care, lab tests and drugs as they would if inpatients, their bill will be calculated very differently.  Patients admitted for in-patient stays usually are responsible for the Medicare hospital deductible of $1,484 for a stay of up to 60 days.  They may also pay 20% of doctor charges.  Many people have Medigap or Medicare Advantage plans that cover much or even all of this expense.  Outpatient services, on the other hand, are charged differently, with the patient paying 20% of the Medicare approved amount for each service.  In addition, the new billing changes would hit patients with “facility fees” that can run up to several thousand dollars to cover hospital overhead charges.  And since, prescription drug plans don’t cover medication for hospital patients, beneficiaries would be charged 100% of the full retail cost of drugs they need, even those they normally routinely take at home.

The CMS rule change would also make it more difficult to qualify for nursing home and even home health care coverage after leaving the hospital.  To qualify for nursing home coverage, one must spend three days as an inpatient.  Outpatient stays do not qualify for Medicare coverage of nursing home stays.  Without a qualified hospital inpatient stay, patients may even have trouble finding home health care agencies that would serve them due to Medicare’s lower Part B reimbursement rates.

While the policy will mean that Medicare would spend less, patients will spend more— often, a lot more, and the charges would broadside most beneficiaries, coming as a complete surprise.  TSCL is strongly opposed to this type of backdoor benefit cut, and has written a letter to President Biden urging him to rescind this CMS rule.  Please sign our petition!


Sources:  “Under New Cost-Cutting Medicare Rule, Same Surgery, Same Place, Different Bill,” Susan Jaffe, Kaiser Health News, March 23, 2021.