Rural Medicare Patients Pay More, Study Finds

Medicare patients who visit critical access hospitals for outpatient services are paying unfairly high coinsurance fees compared to enrollees who visit acute care hospitals, according to a new government probe.

The finding is in a report by the US Department of Health and Human Services’ Office of the Inspector General (OIG).

The government created the Critical Access Hospital (CAH) designation in 1997 to ensure all Medicare patients had access to hospital care, even in rural communities. Small hospitals can be given the designation if they meet certain criteria. Nearly 2.4 million beneficiaries received care at CAHs in 2012, according to the report.

However, patients who visit CAHs face a different coinsurance structure. For most hospitals, Medicare uses its Outpatient Prospective Payment System (OPPS), a predetermined, universal schedule of fees. Patients are responsible for paying a set percentage of those fees. However, patients who go to CAHs must pay 20% of what the government calls “reasonable costs.” Those costs are set at 101% of what the government determines to be the hospital’s “reasonable” cost for the service.

Over time, that system has created a significant disparity between what acute care hospital patients pay and what CAH patients pay.

“…For 10 outpatient services that were frequently provided at CAHs, beneficiaries paid between 2 and 6 times the amount in coinsurance than they would have for the same services at acute-care hospitals,” the OIG reported.

The OIG urges HHS to seek congressional authority to change the payment structure for CAHs.

One suggestion in the report is to calculate coinsurance rates based on the OPPS structure, while still paying CAHs “reasonable costs.”

“If (the Centers for Medicare and Medicaid Services) wanted to take steps to mitigate the potential increase in Medicare expenditure (resulting from the proposal), it could do so in multiple ways, seeking legislative changes as needed. As it did with OPPS, it could phase in the changes over several years to reduce the immediate burden to Medicare.”

It’s unclear what will happen with the data. CMS issued a noncommittal response when presented with the findings.

“CMS responded to the report but neither concurred nor nonconcurred with our recommendation,” the OIG wrote.