Observation Status, Poverty, and High Financial Liability Among Medicare Beneficiaries

Medicare beneficiaries hospitalized under observation status are subject to cost-sharing with no spending limit under Medicare Part B. Because low-income status is associated with increased hospital use, there is concern that such beneficiaries may be at increased risk for high use and out-of-pocket costs related to observation care. Our objective was to determine whether low-income Medicare beneficiaries are at risk for high use and high financial liability for observation care compared with higher-income beneficiaries.

We performed a retrospective, observational analysis of Medicare Part B claims and US Census Bureau data from 2013. Medicare beneficiaries with Part A and B coverage for the full calendar year, with 1 or more observation stay(s), were included in the study. Beneficiaries were divided into quartiles representing poverty level. The associations between poverty quartile and high use of observation care and between poverty quartile and high financial liability for observation care were evaluated.

After multivariate adjustment, the risk of high use was higher for beneficiaries in the poor (Quartile 3) and poorest (Quartile 4) quartiles compared with those in the wealthiest quartile (Quartile 1) (adjusted odds ratio [AOR], 1.21; 95% confidence interval [CI], 1.13-1.31; AOR, 1.24; 95% CI, 1.16-1.33). The risk of high financial liability was higher in every poverty quartile compared with the wealthiest and peaked in Quartile 3, which represented the poor but not the poorest beneficiaries (AOR, 1.17; 95% CI, 1.10-1.24).

Poverty predicts high use of observation care. The poor or near poor may be at highest risk for high liability.