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  1. Congressional Hearing on Surprise Medical Bills; Center for Medicare Advocacy Submits Statement on Observation Status
  2. Report Highlights Overpayments to Medicare Advantage Plans and Raises Important Policy Considerations
  3. Webinar: Where Does the Money Go? Insights and Consumer Perspectives on Nursing Home Profits and Losses
  4. Elder Justice Newsletter – New Issue Available Now

Congressional Hearing on Surprise Medical Bills; Center for Medicare Advocacy Submits Statement on Observation Status

“Protecting Patients from Surprise Medical Bills” – a hearing held on May 21 by the House Ways and Means’ Subcommittee on Health – considered the bills for health care services that patients get after they received care from health care providers who were not in the patients’ health insurance network.[1] Typically, patients receive these bills for services that were provided either during an emergency department visit or from non-network providers who are working at in-network hospitals. For example, a patient may have surgery performed by an in-network physician at an in-network hospital, but then receive a bill from an out-of-network anesthesiologist that the patient did not have an opportunity to choose. Pathologists, emergency department physicians, anesthesiologists, and radiologists are the health care professionals who are most likely to send patients surprise medical bills. Ambulances and air ambulances also send surprise bills to patients.

In the hearing’s first panel, Representative Katie Porter (D-CA-45) described her personal experience last summer with a surprise medical bill and Representative Cathy McMorris Rodgers (R-WA-5) described another patient’s experience.  The second panel consisted of representatives from the American Medical Association (AMA), the American Hospital Association (AHA), America’s Health Insurance Plans (AHIP), and the ERISA Industry Committee (representing self-insured plans).

Although all of the witnesses supported protecting patients from surprise medical bills, they disagreed about how non-network providers would be paid – whether benchmark rates, negotiated rates, in-network rates, or rates based on Medicare rates should be used. They also discussed network adequacy, how disputes about rates would be resolved, the effectiveness and significance of state laws, and whether, and what type of, federal legislation is necessary.

Unfortunately, the hearing did not address one of the most significant and largest surprise medical bills that Medicare patients face: the full bill for a stay in a skilled nursing facility when the patient’s prior stay in the hospital was called observation or other outpatient designation, rather than inpatient. The surprise bill occurs because Medicare Part A limits coverage for a SNF stay to a patient who was hospitalized as an inpatient for at least three consecutive days, not counting the day of discharge.[2] At the Center’s National Voices of Medicare Summit last week, Congressman Joe Courtney (D-CT-2) described observation status as “surprise billing on steroids.” 

Although the Medicare program now requires hospitals to inform patients of their status as outpatients,[3] Medicare regulations expressly prohibit patients from appealing observation status.[4] A patient’s inability to protect himself or herself from the bill for the skilled nursing facility stay makes observation status another example of a surprise medical bill. 

The Center will submit a written statement for the hearing record, suggesting that the Improving Access to Medicare Coverage Act of 2019 (H.R. 1682/S. 753) could resolve this surprise medical bill issue for Medicare patients by counting all time in the hospital, whether called inpatient or outpatient or observation, as satisfying Medicare’s requirement for a three-day inpatient hospital stay. An ad hoc coalition of 33 health and advocacy national organizations that support the legislation, of which the Center is a member, will also submit a written statement for the record.


[1] The witnesses’ statements are available at
[2] 42 U.S.C. §1395x(i); 42 C.F.R. §409.30(a)(1).
[3] Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE Act), 42 U.S.C. §1395cc(a)(1)(Y).
[4] 42 C.F.R. §405.926(u).


Report Highlights Overpayments to Medicare Advantage Plans and Raises Important Policy Considerations

The Kaiser Family Foundation (KFF) recently released a report entitled “Do People Who Sign Up for Medicare Advantage Plans Have Lower Medicare Spending?” (May 2019). As summarized in the report, “Even after risk adjustment, the results indicate that beneficiaries who choose Medicare Advantage have lower Medicare spending – before they enroll in Medicare Advantage plans – than similar beneficiaries who remain in traditional Medicare, suggesting that basing payments to plans on the spending of those in traditional Medicare may systematically overestimate expected costs of Medicare Advantage enrollees.” [emphasis added]

The report analyzes differences in Medicare spending by demographics, chronic conditions, and by county (specifically, 20 “relatively large markets”). Key findings include: “People who switched from traditional Medicare to Medicare Advantage in 2016 spent $1,253 less in 2015, on average, than beneficiaries who remained in traditional Medicare, after adjusting for health risk.” Further, “Even among traditional Medicare beneficiaries with specific health conditions, those who shifted to Medicare Advantage in 2016 had lower average spending in 2015, including people with diabetes ($1,072), asthma ($1,410), and breast or prostate cancer ($1,517).” The difference in average spending “increases with the number of chronic conditions … suggest[ing] that potential overpayments may be largest for the Medicare Advantage plans that are serving the sickest beneficiaries.”

The report raises a number of important policy considerations, including:

    • “The results suggest that favorable self-selection into Medicare Advantage plans is occurring, even among traditional Medicare beneficiaries with similar health conditions. The findings raise questions as to why beneficiaries who are higher utilizers are less likely to go into Medicare Advantage and instead remain in traditional Medicare” [emphasis added].
    • Studies that examine use of services by individuals in MA plans have generally found that such individuals “use fewer services than those in traditional Medicare” and “the authors of these studies almost universally attribute differences in service utilization to care management by the plans – rather than to pre-existing differences in care seeking behavior and use of health services.” In contrast, KFF notes that “[t]his study suggests that differences in health care use, and spending, are evident before beneficiaries decided to enroll in Medicare Advantage plans or remain in traditional Medicare, raising questions about the extent to which plans are actually lowering spending or managing care.” [emphasis added]
    • Potential overpayments could amount to billions in excess Medicare spending over a ten-year period if the observed differences in spending hold up as beneficiaries age and Medicare Advantage enrollment continues to rise.” [emphasis added]
    • “Policymakers could consider adjusting payments to reflect Medicare Advantage enrollees’ prior use of health care services, which could lower total Medicare spending and in turn reduce Medicare Part B premiums and deductibles for all beneficiaries [emphasis added]. With more than 20 million enrollees in Medicare Advantage plans and Medicare payments to plans projected to reach $250 billion in 2019, the stakes are high for making payments to plans as accurate as possible.”

Lack of MA Data

In an editorial published by Modern Healthcare entitled “Let’s Open the Books on Medicare Advantage” (May 9, 2019), Merrill Goozner states “Insurers say they’ve earned their soaring enrollments and rising profitability by focusing on care coordination, offering incentives for healthy behavior, and providing targeted interventions for high-cost patients with multiple chronic conditions. The Kaiser study suggested it may actually be due to ‘pre-existing differences in care seeking behavior.’”

Goozner then asks: “Who’s right? One way to tell would be by analyzing whether high utilizers who joined MA saw their claims go down once they were in a private plan. Alas, as the Medicare Payment Advisory Commission discussed in depth at its spring meeting, the data flowing from MA plans to the CMS is completely inadequate for evaluating spending patterns.” He then notes that in order to get better data, “MedPAC recommended the CMS withhold payments to MA plans until they provide complete and accurate encounter data. It also called for using Medicare administrative contractors, which process fee-for-service claims, to collect the MA data if that didn’t work.”

The editorial concludes: “It’s time for full transparency on MA service payments to providers, with the data including both the quantity of services delivered and their prices. If, as some providers allege, MA plans are using their market power to pay less than Medicare rates, the CMS will eventually want to use that information to calculate the annual updates for Medicare Advantage plans.”


More transparency is only a first step.  Evidence is mounting that the Medicare program overpays Medicare Advantage in relation to traditional Medicare. Meaningful government response to address this imbalance, however, is in short supply. Instead, policymakers continue to expand the scope of services that MA plans can provide (in part, using some of these overpayments) without similar coverage expansions in traditional Medicare. At the same time, the current Administration is actively promoting enrollment in MA over traditional Medicare. Policymakers must stop tipping the scales in favor of MA and right this growing imbalance.


Webinar: Where Does the Money Go? Insights and Consumer Perspectives on Nursing Home Profits and Losses

On May 21, 2019, the Long Term Care Community Coalition (LTCCC) hosted a webinar on nursing home profits and losses. Dara Valanejad, a Policy Attorney with both the Center for Medicare Advocacy and LTCCC, participated in the webinar. Mr. Valanejad presented findings from the Medicare Payment Advisory Commission’s March 2019 report to Congress, discussed how poor quality of care may be driving down nursing home occupancy rates, and identified a medical loss ratio as one solution for ensuring that nursing home operators direct taxpayer dollars to resident care rather than profit or administration. Richard Mollot, Executive Director of LTCCC, gave an insightful overview of how nursing homes are paid and consumer concerns, including those regarding ownership and hidden profits.


Elder Justice Newsletter – New Issue Available Now

Elder Justice: What “No Harm” Really Means for Residents is a newsletter published by the Center for Medicare Advocacy and the Long Term Care Community Coalition. The purpose of the newsletter is to provide residents, families, friends, and advocates information on what exactly a “no harm” deficiency is and what it means for nursing home residents. Our latest issue has real stories from nursing homes in New York, Ohio, California, and Pennsylvania.


The Center for Medicare Advocacy is a non-profit organization.
Your contributions to the Center are essential to maintaining our ability to advance access
to comprehensive Medicare coverage and quality health care.

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