Patient financial responsibility for observation care

Area of Science:

• Health Services Research
• Health Economics
• Medicare Policy

Background:

• Observation care is increasingly common for Medicare beneficiaries, often replacing inpatient readmissions.
• Observation care is classified as outpatient, potentially leading to higher out-of-pocket costs for beneficiaries compared to inpatient stays.
• Understanding the financial implications of repeated observation care is crucial for Medicare beneficiaries.

Purpose of the Study:

• To determine if Medicare beneficiaries incur greater costs with repeated observation care stays compared to inpatient readmission.
• To analyze the cumulative financial liability of beneficiaries with multiple observation care episodes within a 60-day period.

Main Methods:

• Utilized a 20% sample of the Medicare Outpatient Standard Analytic File from 2010-2012.
• Included fee-for-service Medicare beneficiaries with Part A and Part B coverage.
• Primary measure was beneficiary financial responsibility for facility fees.

Main Results:

• Beneficiaries with multiple observation stays averaged $947.40 in cumulative financial liability.
• This average liability was significantly lower than the $1100 inpatient deductible (P < 0.01).
• However, 26.6% of beneficiaries with multiple observation stays exceeded the inpatient deductible in cumulative costs.

Conclusions:

• More than a quarter of Medicare beneficiaries with multiple observation stays face higher financial liability than if they were readmitted under Part A benefits.
• This suggests a need to re-evaluate cost-sharing structures for observation care.
• The findings highlight potential financial burdens for a significant portion of Medicare beneficiaries utilizing observation services.