Addressing Bad Debt Among Medicare Beneficiaries

Options for Reducing the Deficit: Reducing Medicare’s Coverage of Bad Debt

By Sheena Rogers

MHA516-Operating in Structure: Health Sector Policy and Governance

Professor Michelle Rose

March 20th, 2020

























Health care facilities are responsible for providing a wide array of services, which should be easily accessible and cost effective for both patients and organizations alike. Now more than ever, hospitals and other health care entities have incorporated lean methodologies in order to reduce operating costs and improve health care delivery. Based on the report “Options for Reducing the Deficit: 2017 to 2026” from the Congressional Budget Office website, a feasible option for reducing the deficit would be option ten: Reduce Medicare’s Coverage of Bad Debt. According to the report, bad debt is defined as out of pocket payments unable to be collected by Medicare. Medicare usually covers eighty percent of services and the patient is then responsible for the remaining twenty percent. This of course changes if the patient has secondary or tertiary coverage in which the remaining balance is then collected by the carrier(s). The purpose of this report will be to evaluate this particular cost saving option and evaluate the effects its implementation will have have on a health care facility. The report will also identify how proposed changes can help mitigate negative effects on a hospital system.

Medicare and Medicaid services provide the fundamental guidelines for all other insurance carriers to follow in regard to reimbursing health care spending and there have been a number of contributing factors which have led to the increase of this spending throughout the course of the past thirty decades. “An important reason for the rise in spending for health care per beneficiary in recent decades has been the emergence, adoption, and widespread diffusion of new medical technologies and services. Other contributing factors include increases in personal income and the expanded scope of health insurance coverage”(Options for Reducing the Deficit: 2017-2026, 2016). So, given the amount of options provided by the CBO, one of the most feasible and realistic would be to follow-up on the out of pocket costs patients are usually responsible for after their health care insurance has covered what they’re responsible for. These out of pocket costs are considered bad or allowable debts and “Under current law, Medicare reimburses eligible facilities—hospitals, skilled nursing facilities, various types of health centers, and facilities treating end-stage renal disease—for 65 percent of allowable bad debt...Reducing coverage of bad debt could also encourage facilities to discuss treatment costs with Medicare patients ahead of time, examine their alternatives more carefully, and set up manageable payment plans as needed”(Options for Reducing the Deficit: 2017-2026, 2016). The federal government originally designed the Medicare product to absorb all health related costs for its beneficiaries However, the reality of dealing with innovative technology, budgetary cuts, and increases in operational costs has lead to a very boundary driven relationship between Medicare/Medicaid spending and health care providers being reimbursed by adhering to specific requirements outlined by these governing factions.

This particular option of reducing the deficit is a realistic option currently being implemented across the nations health care system as providers are constantly finding ways to increase their revenue cycle. Although it is a multilayered issue that stems from federal guidelines and trickles its way down to state and local health care entities, eliminating “bad debt” from health care systems is quite essential to providing services at an optimal level for an a

American public which is constantly seeking the best care for their money. Medicare beneficiaries have to be able to compromise regarding out of pocket expenses in comparison to the actual cost of services provided. Each inpatient hospital stay, ambulatory surgery, and outpatient visit far exceeds the cost of what is actually being asked to pay out of pocket. Given the amount of options available to reduce uncollected out of pocket costs, it is highly likely we as a healthcare community will be able to reach a solution in the near future that will benefit the needs of everyone involved in the health care process.

References




CONGRESS OF THE UNITED STATES CONGRESSIONAL BUDGET OFFICE. (2016). Options for Reducing the Deficit: 2017 to 2026. Retrieved from https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/52142- budgetoptions2.pdf

Federation of American Hospitals. (2018). Medicare Bad Debt. Retrieved from https://www.fah.org/issues-advocacy/medicare/medicare-bad-debt

Minarik, J. (n.d). 1,017 Ways to Reduce the Deficit. Committee for Economic Development. Retrieved from https://www.ced.org/blog/entry/1017-ways-to-reduce-the-deficit