[Congressional Record Volume 143, Number 12 (Tuesday, February 4, 1997)]
[Extensions of Remarks]
[Pages E122-E124]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  LEGISLATION TO CORRECT MEDICARE BENEFICIARY OVERCHARGES IN HOSPITAL 
                         OUTPATIENT DEPARTMENTS

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Tuesday, February 4, 1997

  Mr. STARK. Mr. Speaker, today Representative William Coyne and I 
introduced a bill to correct a glaring failure in the Medicare 
Program--the massive overcharging of beneficiaries in hospital 
outpatient departments [HOPDs]. This bill will save Medicare disabled 
and senior beneficiaries about $35.7 billion between 1999 and 2003. It 
will stop the steady, upward climb in the percentage of HOPD costs that 
beneficiaries have to pay.
  The problem is difficult to describe and the legislative solution is 
also complicated. But what is not complicated is understanding the 
impact on Medicare beneficiaries. I would like to include in the Record 
at this point an article from the June 30 New York Times and the AARP 
Bulletin of August, 1996 that does an excellent job of explaining why 
our bill is needed--ASAP.
  I also include some prospective payment assessment commission 
analysis of data from the Health Care Financing Administration on how 
beneficiary copayments in HOPDs can far exceed a patient's 20 percent 
share at an ambulatory surgical center. Clearly, these HOPD payments 
are grossly excessive, and patient advocacy groups should help spread 
the word about cheaper sources of safe and effective medical care.

                [From the New York Times, June 30, 1996]

    Quirk in Medicare Law Yields Bigger Bills for Outpatient Care; 
           Officials Say Burden on the Elderly Is Increasing

                            (By Robert Pear)

       Washington, June 30--Because of a quirk in the Federal 
     Medicare law, elderly people are being required to pay more 
     than their normal share of the bill for hospital outpatient 
     services. It is far more than Congress originally intended 
     and the burden is rising rapidly as such services account for 
     a larger portion of all health care in the United States.
       Beneficiaries are ordinarily responsible for 20 percent of 
     the cost of services under Part B of the Medicare program. 
     But because of the law, they are now responsible, on average, 
     for 37 percent of the total payments to hospitals for 
     outpatient services, one of the most important benefits under 
     Part B, according to a recent report to Congress by a Federal 
     advisory panel.
       For many such services, the patients' share is even larger. 
     Donna E. Shalala, the Secretary of Health and Human Services, 
     said beneficiaries were paying more than 49 percent of the 
     total Medicare payment to hospitals for outpatient surgery, 
     radiology and other diagnostic services.
       And Dr. Shalala said, ``We expect that the beneficiary 
     share of total hospital payments for these services will 
     continue to increase rapidly,'' to 68 percent in 2000.
       Since 1983, the Government has paid a flat amount for each 
     Medicare patient admitted to a hospital, depending on the 
     diagnosis. But there are no such limits on outpatient 
     services. A hospital can often increase its Medicare revenue 
     ``by simply increasing its charges'' for outpatient services, 
     the Department of Health and Human Services told Congress. 
     When the hospital increases its charges, the beneficiary pays 
     more.
       The Clinton Administration acknowledges that the costs are 
     already causing hardship for many Medicare beneficiaries. But 
     Administration officials say they lack the authority to limit 
     what hospitals charge for outpatient services under Medicare, 
     and they are fighting a lawsuit by Medicare patients who 
     insist that the Government is supposed to set such limits.
       The new Medicare handbook, sent to all beneficiaries in 
     May, explains the situation this way: ``When you use your 
     Part B benefits, you are responsible for paying the first 
     $100 each year of the charges approved by Medicare. This is 
     called the Part B annual deductible. After the deductible is 
     met, Medicare pays 80 percent of the Medicare-approved amount 
     for most services. You are responsible for the remaining 20 
     percent.''
       But, it states, there is one big exception: ``If you 
     receive outpatient services at a hospital, you are 
     responsible for paying 20 percent of whatever the hospital 
     charges, not 20 percent of a Medicare-approved amount.''
       In March, the Federal advisory panel, the Prospective 
     Payment Assessment Commission, urged congress to correct this 
     problem. ``The growing financial burden for Medicare 
     enrollees who receive services in hospital outpatient 
     departments should be alleviated immediately,'' the panel 
     said. ``Beneficiary coinsurance for these services should be 
     limited to 20 percent of the Medicare-allowed payment.''
       But neither Congress nor the Clinton Administration is 
     pushing for a quick solution, partly because of the 
     complexity of the problem and partly because of disagreement 
     over who would foot the bill. If beneficiaries paid less, 
     then the Federal Government would have to pay more or 
     hospitals would have to accept less overall? Any solution 
     would increase Federal Medicare costs, reduce hospital 
     revenue or both.
       For example, a 74-year-old woman named Marie Lohse had 
     outpatient cataract surgery on one eye at a Los Angeles 
     hospital. The hospital charged $6,277. She was responsible 
     for 20 percent of that amount, or $1,255. But, she later 
     learned, Medicare paid the hospital only $1,280. So the 
     hospital received a total of $2,535, and Ms. Lohse paid 49.5 
     percent of the total reimbursement.
       If she had paid 20 percent of the Medicare-approved amount, 
     as required for many other Part B services, she would have 
     paid only $507.
       Robert J. Myers, who was chief actuary of the Social 
     Security Administration for 23 years, said of the current 
     formula, ``It's a raw deal, a gross injustice to 
     beneficiaries that ought to be remedied.''
       Mr. Myers said it had always been ``the general philosophy, 
     the general principle of the Medicare program, that the 
     beneficiary should be responsible for 20 percent of what 
     Medicare recognizes as the reasonable and appropriate amount 
     for a service.''
       And in most cases that is true. But hospital outpatient 
     services are different: the patient is responsible for 20 
     percent of whatever the hospital charges. Originally, what 
     hospitals charged and what Medicare recognized as reasonable 
     were about the same. But in recent years, hospitals have 
     charged far more than Medicare pays for outpatient services. 
     So in paying 20 percent of the hospital charges, 
     beneficiaries end up paying much more than 20 percent of what 
     the hospitals ultimately receive for such services.
       Earlier versions of the Medicare handbook, in 1991 and 
     1992, said inaccurately that beneficiaries were responsible 
     for only 20 percent of the approved amount.'' The handbook 
     now says ``20 percent of whatever the hospital charges.''
       The financial burden on patients has been increasing 
     because outpatient care accounts

[[Page E123]]

     for a rapidly growing share of all medical care.
       New surgical technology and advances in anesthesia have 
     reduced the need for overnight hospital stays. Common 
     outpatient services include colonoscopy, breast biopsy and 
     hernia repair. But complex procedures like hysterectomies and 
     reconstructive knee surgery can also be done in hospital 
     outpatient departments.
       The demand for such services increases as the procedures 
     become safer and easier to perform. In addition, said Dr. 
     Richard B. Reiling, chairman of the ambulatory surgical 
     committee of the American College of Surgeons, ``Managed care 
     and financial considerations have given us incentives to do 
     more procedures on an outpatient basis.''
       Carol S. Jimenez, a lawyer at the Center for Health Care 
     Rights in Los Angeles, said, ``Medicare beneficiaries 
     expecting to pay a 20 percent copayment should not be paying 
     49 percent or more of the amount paid to the hospital.''
       But in a legal brief recently filed with the United States 
     Court of Appeals for the Ninth Circuit, in San Francisco, the 
     Clinton Administration said such charges were ``entirely 
     permissible'' under current law.
       Congress has never instructed Medicare officials to ``limit 
     what hospitals could charge to beneficiaries for outpatient 
     services,'' the Clinton Administration said.
       And in a letter to a Medicare beneficiary in Florida, the 
     Federal Government said that ``there are no restrictions on 
     the amount that a hospital charges'' for outpatient services.
       While expressing sympathy for Medicare beneficiaries 
     ``burdened by ever-rising medical costs,'' the appeals court 
     has so far refused to step into the dispute.
       Outpatient services can be a major source of revenue 
     because hospital admissions have fallen over the last decade 
     and Medicare has sharply restricted payments to hospitals for 
     inpatient services.
       Spending for outpatient hospital services, by Medicare and 
     other insurers, has grown twice as fast as outlays for 
     inpatient hospital care, rising 15.7 percent a year since 
     1980, to $86.7 billion in 1994, while inpatient spending rose 
     7.8 percent a year, to $212.4 billion.
       Many elderly people have supplementary insurance, known as 
     Medigap policies, to help pay costs not covered by Medicare, 
     but as they pay more for outpatient services, their Medigap 
     premiums tend to increase. In December, when the American 
     Association of Retired Persons announced premium increases 
     averaging more than 25 percent for 1996, it cited the 
     increased use of outpatient services as a major reason.
       Under instructions from Congress, the Department of Health 
     and Human Services is developing a proposal to pay hospitals 
     a fixed amount, set in advance, for each outpatient service. 
     Medicare could then follow its general policy of requiring 
     beneficiaries to pay 20 percent of the approved amounts. Such 
     a system would be complex and would need approval from 
     Congress.
                                  ____
                                  

                 [From the AARP Bulletin, August 1996]

   medicare Outpatient Debacle--Hospitals Allowed To Charge More for 
                            Outpatient Care

                            (By Don McLeod)

       A federal court ruling has focused new attention on a 
     growing problem for Medicare beneficiaries, first reported 
     nearly four years ago in the Bulletin.
       The problem is this: When beneficiaries receive medical 
     treatment in hospital outpatient facilities, they often pay 
     much more than their fair share of the bill.
       Why? Because under federal law hospitals can charge 
     Medicare beneficiaries whatever they wish for hospital 
     outpatient care. (By contrast, federal law does limit how 
     much hospitals can charge Medicare inpatients and how much 
     doctors can charge Medicare beneficiaries.)
       All of this is perfectly legal. And if the situation is to 
     be fixed, the Ninth U.S. Circuit Court of Appeals said in 
     essence this summer, it is up to Congress to fix it.
       Congress has the authority to limit what hospitals charge 
     Medicare outpatients, all experts agree, but thus far has 
     declined to do so.
       Since Congress hadn't exercised its authority in this area, 
     some Medicare beneficiaries sued the Department of Health and 
     Human Services (HHS), which runs Medicare, to force the 
     agency to correct the situation.
       But in its ruling the court agreed with HHS Secretary Donna 
     Shalala that existing law does not require her to take action 
     on the issue.
       All of which means hospitals can continue to charge 
     Medicare outpatients any amount they want.
       The high charges beneficiaries pay for hospital outpatient 
     service are ``terribly unfair,'' says Brandeis University 
     economist Stuart Altman. And, he adds, the problem ``is 
     getting worse and worse.''
       The situation comes about because of a longstanding 
     loophole in the law. Under current law, Medicare pays for 
     hospital outpatient treatment under Medicare's Part B, which 
     also covers physician costs.
       In the case of doctors, Medicare pays them 80 percent of 
     what it considers a ``reasonable and customary'' amount, 
     based largely on costs, and beneficiaries pay the remaining 
     20 percent of what Medicare considers reasonable.
       When it comes to hospital outpatient services, Medicare 
     pays 80 percent of what it considers reasonable, based on a 
     complex formula that includes the hospital's costs.
       But beneficiaries, by contrast, are required to pay 20 
     percent of the amount that hospitals decide to charge them, 
     rather than 20 percent of what Medicare considers reasonable.
       And that hospital charge can be sizable. As a result, 
     beneficiaries often find themselves paying almost as much as 
     the government does for hospital outpatient treatment.
       In a report to Congress last year, HHS's Shalala estimated 
     that Medicare outpatients on average pay 49 percent of the 
     total payment made to hospitals for several common 
     treatments.
       In part, this is extra income for hospitals. If beneficiary 
     copayments for these treatments were cut to the 20 percent 
     Medicare believes reasonable, she said, the amount paid by 
     enrollees ``would be reduced by over $4 billion in 1997 and 
     by $15.7 billion in 2001.''
       Nor is that all. Given the way hospital charges are rising, 
     beneficiaries could be paying as much as 68 percent by the 
     year 2000, Shalala warned.
       ``This is a windfall for hospitals,'' says AARP legislative 
     representative Kirsten Sloan. ``There's no question about 
     it.''
       Not surprisingly, hospitals see the situation differently. 
     Under Medicare, hospitals ``are already being paid less than 
     their costs,'' says Carmela Coyle, the American Hospital 
     Association's vice president for policy.
       Paradoxically, the anomaly in hospital outpatient payments 
     stems from an attempt in 1986 to bring outpatient payments 
     closer to the billing system for inpatients.
       But what Congress actually did in 1986 was create a 
     temporary payment structure for determining what Medicare can 
     pay hospitals for outpatient fees. At the same time, it left 
     unaddressed the question of whether there should be limits on 
     what beneficiaries themselves must pay. This structure is 
     still being used and has created the inequity that exists 
     today.
       Since then, reimbursement for outpatient care has been 
     treated differently. Beneficiaries have been required to pay 
     20 percent of the charges that hospitals bill them. That 
     didn't seem significant in 1986, says Brandeis' Altman, 
     because relatively few treatments were done on an outpatient 
     basis and hospital charges were close to their costs.
       Times have changed. Between 1985 and 1989 the number of 
     outpatient surgeries performed by hospitals on Medicare 
     beneficiaries increased by 50 percent and has risen since.
       Other forces are helping drive up the amounts hospitals 
     charge, some associated with actual hospital costs, some not, 
     critics say.
       Whatever the reasons, ``20 percent of charges has turned 
     out to be a lot more than 20 percent of costs,'' says Altman, 
     meaning that beneficiaries are paying a good deal more than 
     what critics believe is ``reasonable.''
       Beneficiaries are feeling the pinch. ``With more people 
     using hospital outpatient services,'' says AARP's Sloan, 
     ``the problem of the amount that beneficiaries pay out of 
     pocket is becoming much more severe.''
       The recent court decision, all sides agree, tosses this 
     growing problem into the lap of Congress. ``So the question 
     becomes,'' says Altman, ``why don't they change the law?''
       Thus far, Congress has shown little interest in revamping 
     the law. The major reason: money. Either Medicare--its future 
     spending already under attack in Congress--would have to make 
     up the costs, or hospitals would lose their windfall and have 
     to absorb the costs.
       Or the two would have to share the fiscal pain. For 
     instance, the American Hospital Association's Coyle, 
     insisting that Medicare has underestimated hospitals' actual 
     outpatient costs, suggests that hospitals and beneficiaries 
     join forces to compel ``Medicare to pay [its] fair share of 
     costs.'' That idea hasn't caught on.
       Until Congress decides what to do, beneficiaries should 
     help themselves by being informed consumers, analysts say. 
     ``Before they go in for hospital outpatient surgery, they 
     should ask about the likely cost to them,'' advises AARP 
     legislative representative Patricia Smith.
       But that's only a stopgap solution. With concern in 
     Congress growing, a move to produce change could occur next 
     year or shortly thereafter, analysts say. It won't be easy: 
     Congress will have to change the law in a way that hospitals, 
     as well as Medicare and the taxpayers who finance it, will 
     support.
       The ball is squarely in Congress' court now, says Altman. 
     The Ninth Circuit Court of Appeals has essentially ruled, he 
     adds, that ``the law is the law, and it remains for Congress 
     to change it. And that's what needs to be done.''

         BENEFICIARY COINSURANCE PAYMENTS ACROSS SETTINGS, 1995         
------------------------------------------------------------------------
                                                                   20   
                                                        20      percent 
                                          Median     percent     of the 
              Procedure                  hospital     of the    national
                                           OPD       national  physician
                                       coinsurance   ASC rate     fee   
                                                                schedule
------------------------------------------------------------------------
Cataract removal w/lens insertion....        $558        $176       $195
Diagnostic colonoscopy...............         164          79         65
Upper GI endoscopy w/biopsy..........         172          79         51
Diagnostic upper GI endoscopy........         150          59         45
Diagnostic sigmoidoscopy.............          75   .........         18
Initial inguinal hernia repair.......         519         112         92
------------------------------------------------------------------------


[[Page E124]]


 ANNUAL HOSPITAL OPD COINSURANCE PAYMENTS FOR BENEFICIARIES WHO RECEIVED
                       HOSPITAL OPD SERVICES, 1995                      
------------------------------------------------------------------------
                                                                Annual  
                     Deciles (percent)                       beneficiary
                                                             coinsurance
------------------------------------------------------------------------
Top 10.....................................................         $802
Top 20.....................................................          505
Top 30.....................................................          335
Top 40.....................................................          227
Median.....................................................          154
Bottom 40..................................................          103
Bottom 30..................................................           67
Bottom 10..................................................           20
------------------------------------------------------------------------


    MEDIAN BENEFICIARY COINSURANCE PAYMENTS FOR CATARACT SURGERY FOR    
                     HOSPITALS IN THE SAME MSA, 1995                    
------------------------------------------------------------------------
                                        Percent                 Median  
               Provider                 of total    Median   coinsurance
                                         volume    charges     payment  
------------------------------------------------------------------------
Hospital A...........................         39     $2,751        $550 
Hospital B...........................         52      1,218         244 
Others (2)...........................         10  .........  ...........
                                      ----------------------------------
  Total..............................        100      2,002         400 
------------------------------------------------------------------------

                                                             

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