Many Medicare Outpatients Pay More
at Rural Hospitals, Report Says
Medicare pays country hospitals more
generously so they won’t go out of business
By Jordan Rau KHN Staff Writer
9, 2014 - Many Medicare beneficiaries treated at primarily rural
“critical access” hospitals end up paying between two and six times more
for outpatient services than do patients at other hospitals,
according to a report
released Wednesday by the inspector general at the Department of Health
and Human Services.
There are more than 1,200 critical
access hospitals, which are generally the sole hospital in rural areas
and can have no more than 25 beds. Medicare pays them more generously so
they won’t go out of business. In Illinois, 50 hospitals, more than a
quarter, hold this designation.
Medicare requires patients to pay
20 percent of the amount a critical access hospital charges. At other
hospitals, patients also pay 20 percent coinsurance, but it is based on
the amount Medicare decides to reimburse the hospital, which is almost
always significantly below what the hospital charges.
As a result, Medicare patients in
2012 receiving an electrocardiogram at a critical access hospital owed
an average of $33, while patients at other hospitals had to pay $5,
according to the report. Patients getting an initial infusion into a
vein had to pay $56 on average at a critical access hospital, while
patients at other hospitals paid $25.
Many supplemental insurance
policies for the elderly pick up the tab, but one in seven Medicare
recipients lacks such a
policy. In addition,
these higher medical costs are ultimately factored into the premiums
The inspector general’s office
recommended Congress change the law so that a Medicare beneficiary’s
financial responsibility better reflects the cost of the service.
Brock Slabach, a senior vice
president at the National Rural Health Association, said this issue has
been raised before by the Medicare Payment Advisory Commission, or
MedPAC, which counsels Congress. He said that because the law requires
that critical access hospitals be paid their “reasonable” costs plus 1
percent, Congress would either have to change the law or Medicare would
need to pay more to make up for the lower patient portions.
“The reason this hasn’t been solved
is it would require the Medicare program to subsidize more,” Slabach
Since the MedPAC report in 2011,
which offered a number of ways to fix the system, the share of medical
costs picked up by patients has risen further, the inspector general
found. The patients’ portions of critical access hospital bills in 2012
were 47 percent of Medicare’s estimate of the cost of the treatment,
with Medicare paying the remainder, the report said. Medicare
beneficiaries paid about $1.5 billion of the $3.2 billion in outpatient
services at critical access hospitals.
Medicare offered a short response
to a draft version of the report in August, saying it “thanks the OIG
[inspector general’s office] for its efforts and looks forward to
working with OIG on this and other issues in the future.”
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