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
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
“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
“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
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.
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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
“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.
More research is needed to make it easier for patients to grasp,
Sheehy said by email.
“No study to date has been able to compare cost of inpatient to
(observation) stays for the exact same set of services and hospital
length of stay, and none have been able to account for all costs a
patient may incur,” Sheehy said. “As a physician, I cannot
accurately tell the patient I am caring for what they will pay for
an observation hospitalization compared to inpatient.”
SOURCE: http://bit.ly/2wJbGMo The American Journal of Medicine,
online July 31, 2017.
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