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Poorer Medicare patients held for observation more frequently

August 12, 2017

Out-of-pocket spending for hospital care by people with Medicare may be higher for those with lower incomes, because they’re more likely than wealthier Medicare beneficiaries to be kept in the hospital without being officially admitted, a new study suggests.

Under Medicare, the government insurance program for the elderly and disabled, people admitted to the hospital pay a fixed out-of-pocket fee that covers the majority of their care there, as well as follow-up acute nursing care and repeat hospitalizations within the first two months after they go home.

But people who aren’t sick enough for an inpatient admission may be kept in the hospital for observation, which not only carries a one-time out-of-pocket fee but also requires patients to pay 20 percent of the bills for hospital services and pick up the tab for certain drugs.

The poorest people on Medicare had more hospitalizations for observation, researchers found.

For the study, they examined Medicare claims data for 2013, including more than 67,000 patients who had a total of more than 132,000 hospital stays for observation.

Compared with the wealthiest 25 percent of patients, the people in the poorest quartile were 24 percent more likely to be hospitalized for at least three observation stays per year, the study found. The risk of high out-of-pocket costs was lowest for the wealthiest patients, and peaked for people who were poor, but not the very poorest.

“We know from prior work that multiple observation stays can lead to high out-of-pocket costs for Medicare beneficiaries,” said lead study author Dr. Jennifer Goldstein, a researcher with Christiana Care Hospitalist Partners and Sidney Kimmel Medical College in Philadelphia.

“To our knowledge, this is the first nationally representative study to find that beneficiaries who are least able to afford it may be at greatest risk for incurring these high costs,” Goldstein said by email.

Overall, people in the study had an estimated average household income of $51,872.

The study included 97 percent of counties nationwide. Researchers sorted Medicare members based on the proportion of people living in poverty in their county of residence. In the wealthiest counties, 12.2 percent of residents lived in poverty, whereas poverty rates were above 19.1 percent in the poorest counties.

One limitation of the study is that researchers couldn’t account for which patients might have qualified for additional medical coverage through Medicaid, the U.S. health program for the poor, or through so-called Medigap plans people can buy to cover expenses not paid by Medicare.

“While it makes sense that the higher use of observation stays for persons with lower socioeconomic status is associated with higher charges, it is likely that much of these higher costs would be covered by Medicaid,” said Dr. Kumar Dharmarajan, a researcher at Yale University School of Medicine, New Haven, Connecticut, who wasn’t involved in the study.

“After accounting for Medicaid contributions, it is actually conceivable that persons with low socioeconomic status actually have lower total out-of-pocket payments,” Dharmarajan, who wasn’t involved in the study, said by email.

Still, the study highlights differences in out-of-pocket costs for observation versus inpatient hospital stays that patients may not understand, said Dr. Ann Sheehy, a researcher at the University of Wisconsin School of Medicine and Public Health in Madison who wasn’t involved in the study.


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