Seniors paying price for Obamacare fraud

Fewer seniors are re-entering the hospital after an initial stay, according to recent data from the Centers for Medicare and Medicaid Services. The Obama administration says that we have Obamacare to thank for this “positive transformative change.”

But the only thing that’s “changed” is how hospitals fill out the government’s forms. Many are choosing to record hospital stays under Medicare, the federal government’s health care program for seniors, as outpatient “medical observation” rather than formal readmission. That classification can present patients with huge bills and limited options for follow-up care.

So hospitals are, indeed, meeting Obamacare’s statistical goals – at the expense of patients.

Obamacare’s architects wanted to reduce the number of times a patient returned to a hospital. Fewer readmissions, they reasoned, meant a hospital was doing a better job.

To achieve that goal, they created a penalty. If a hospital had an “excessive” number of readmissions within 30 days of an inpatient stay, Obamacare would reduce its Medicare payments by 3 percent.

Last year, the law cut payments to 2,592 hospitals – almost half of all hospitals – for a combined loss of $420 million. According to the Kaiser Family Foundation, all but 209 of these hospitals faced the penalty last year. Even if a hospital reduces readmissions over the previous year, it can still be subject to the fine.

It’s no wonder that hospitals have sought to avoid the penalty. During 2012-13, hospitals reported 150,000 fewer readmissions among Medicare patients.

To drive down readmission rates, hospitals simply manipulated the data. Patients returning with complications were no longer formally readmitted and given inpatient status. Instead, hospitals entered them as under outpatient “observation status.”

Indeed, as an August Health Affairs report noted, the readmission penalty “pressures hospitals to cheat.”

Of the 3,500 general hospitals subject to Obamacare’s penalty, readmission rates dropped by 9 percent from 2010 to 2013. But observation rates soared 48 percent. That uptick accounted for about 40 percent of the reduction in readmissions.

Problem solved, penalty avoided – all at the stroke of a computer key.

Unfortunately, patients under “observation” don’t qualify for Medicare’s benefits. For the program to pay for a subsequent nursing-home stay, a beneficiary must spend at least three nights in a hospital as an inpatient.

A patient under observation doesn’t meet that standard. So even if he or she spends days in a hospital bed, the federal government will refuse to cover the cost of his or her rehabilitative treatment or medication afterward.

That can leave seniors responsible for thousands of dollars in medical bills.

Consider the case of Bob Wellentin, a retired teacher from Washington State. After his wife spent four days in a hospital in 2014, she went to a nursing home. But since she had been classified as “under observation” – not as a readmission – Medicare wouldn’t pay for her nursing-home stay. She was handed a bill for $20,000. To pay it, she and her husband had to liquidate a life-insurance policy.

In a Boston hospital, Harold Engler endured a 10-day outpatient “medical observation” stay because of complications from hernia surgery. He ended up with $7,859 in nursing-home rehabilitation costs.

Once patients have been deemed under observation, it’s difficult to get the classification reversed. They often must pay out of pocket for their care and then seek reimbursement. That’s difficult for the many Americans who don’t have thousands of dollars lying around. And they must wage a two-front legal battle against both the federal government and medical bureaucracies. That fight can stretch on for years.

Keeping seniors from having to be readmitted to the hospital is a worthy goal. Unfortunately, Obamacare has blessed fraud as an acceptable means of meeting that goal. Seniors are paying the price.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top