Medicare Costs May Increase for Some ProceduresSome medical procedures for people on Medicare may, starting on January 1, 2021, be classified as out-patient procedures instead of hospital procedures. The difference in classification affects the payment for the procedures. Generally, health-providers (such as hospitals, ambulatory surgery centers, and physicians) can charge more for hospital procedures than they can charge for outpatient procedures.

According to the Washington Post, the reclassification is due to a change made by the last administration during its final days. Until the reclassification, the Centers for Medicare and Medicaid Services (CMS) “classified 1,740 surgeries and other services so risky for older adults that Medicare would pay for them only when these adults were admitted to the hospital as inpatients.”

Starting January 1st, 266 shoulder, spine, and other musculoskeletal surgeries could be approved without the requirement that the surgeries be done in-patient. By December 2023, the Washington Post continues, the requirement for in-patient surgeries for many other complex procedures will be eliminated too.

Why this change in classification could cost Medicare users more money

CMS officials said the reclassification was designed to increase competition; out-patient facilities could now do the procedures and more hospitals could perform the procedures. Further, reclassifying some procedures as outpatient instead of inpatient should have been beneficial to patients because the bill for the procedures should be less. After all, an outpatient procedure takes less time than an in-patient hospital stay, both in terms of the procedure itself and the recovery times needed.

Unfortunately, the prior administration failed to approve having the procedures done anywhere else. Per the Washington Post:

While removing the surgeries from the inpatient-only list, the government did not approve them to be performed anywhere else. So patients will still have to get the care at hospitals. But because the procedures have been reclassified, patients who have them in the hospital don’t have to be considered admitted patients. Instead, they can receive services on an outpatient basis.

CMS pays hospitals less for care provided to beneficiaries who are outpatients, so the new policy means the agency can pay less than it did last year for the same surgery at the same hospital and Medicare outpatients will usually pick up a bigger part of the tab.


CMS did add services that it will cover when provided by ambulatory surgery centers this year, the spokesperson said last month, but those don’t include procedures that were on the inpatient-only list.

The net result is that seniors on Medicare who receive these newly classified procedures will have higher out-of-pocket expenses. The out-of-pocket expenses are the costs the patient must pay – not Medicare – which means the most vulnerable populations could be left with larger expenses, and no way to address them.

Catherine MacLean, chief value medical officer at New York City’s Hospital for Special Surgery, said “CMS should have tested the change as a pilot project to be sure it’s safe for patients.” She said the procedures being reclassified involve a lot of cutting and bleeding with the need for significant post-surgery monitoring.

There could be significant, and expensive, changes to post-surgical care

Normally, Medicare patients who are admitted to a hospital only pay the yearly deductible ($1,484 for 2021) for stays of up to 60 days – and 20% of the doctor’s fees. A supplemental Medicare policy could pay that 20%, minus a deductible.

For outpatient care, the patient normally pays 20% of the Medicare-approved amount for each service plus 20% of the doctor’s fees. While there are limits on the deductibles for the outpatient services, the patient can end up paying much more for outpatient-billed care than in-patient billed care because of “facility fees.” In addition, the drug costs to the patient can be higher for out-patient services than in-patient services. On top of these issues, some providers who don’t accept the Medicare-approved amount as full payment may charge “excess charges,” and the new rule could affect payment for after-care.

This limit on after care could post, perhaps, the largest risk to elderly patients who require nursing home care:

Medicare patients don’t qualify for nursing home coverage even if they stay in the hospital for the required three days. That time doesn’t count because they were not admitted to the hospital…. Outpatients may also find it more difficult to get home health care. Medicare pays home-care agencies more for people after a hospital inpatient stay, but those who are not admitted may have trouble finding agencies willing to serve them at Medicare’s lower reimbursement.

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