2024 Deductibles, Coinsurances and Copayments – Know the Numbers

Since we are a few days into 2024, and every Medicare patient’s yearly deductible resets, it is an opportune time to review a few payment facts. Remember though that it is not the job of case management to counsel patients on their financial obligations; hopefully, you have financial counselors who can do that. But understanding the costs can often help in your discussions with patients about their admission status when they tell you that “AARP says to insist on being admitted as inpatient.”

The Medicare Part A deductible goes up to $1,632, an increase of $32, less than the $44 increase seen for 2023. The Part A deductible is due for every spell of illness, which is defined as the period which starts with an inpatient admission to a hospital or skilled nursing facility (SNF) under Part A and ends when the patient has not received any Part A services for 60 consecutive days. That means a patient could owe multiple Part A deductibles in one calendar year.

The Medicare Part B deductible goes up to $240, an increase of $14. From 2022 to 2023 there was a $7 decrease due to the mistaken projections on spending for medications for Alzheimer’s disease. The Part B deductible is due once per calendar year, applicable to the first services that submit claim(s) for Part B services.

The base observation payment (C-APC 8011) to hospitals for 2024 is $2,610.71. This is a $171.69 increase. This percentage increase is much higher than many other payment rate increases in 2024, again reflecting the hard work associated for accurately reporting costs.

Remember that each hospital’s actual payment is adjusted for their hospital wage index so the actual payment may vary. Also remember that observation stays are paid as a “mini-DRG” with a single, fixed payment that covers all services provided during the hospital stay, with some (inexplicable) exceptions imposed by the Centers for Medicare & Medicaid Services (CMS). In the distant past, observation stays were paid on a per-service basis, generating very large bills.

So, how do you use these numbers?

The Medicare patient being placed outpatient with observation services in January who has no procedures during their stay and has Medicare A and B and no supplement and has not paid their Part B deductible will owe $714.14 for their observation stay (for the mathematicians, that is the Part B deductible of $240 plus the 20 percent co-insurance of $474.14.) If they are admitted as inpatient, they owe $1,632. Look, observation costs less than inpatient!

• (Caveat 1: if you charge outpatients for self-administered drugs, that $714.14 could go up, but, as I say every year, you shouldn’t be charging for self-administered drugs, but that’s a separate discussion [you can read my article about that here.]) 

• (Caveat 2: if a physician claim, such as the ED physician, gets to the Medicare claims system before the hospital claim, then the Part B deductible might be attributed to that physician charge and not to the hospital charges so the patient would only owe $522.14.)

Now once that patient pays their yearly Part B deductible, any future observation stays in 2024 will cost the patient $522.14 and an inpatient admission would cost them $1,632. So, observation is even less costly than inpatient. 

Now what about if they were recently an inpatient in the last 60 days and paid their Part A deductible? Well, then if placed in observation it would cost $522.14 but if admitted as inpatient it would be $0 so inpatient would cost them less. Finally, AARP can proudly say they are right.

But if you are choosing a patient status based on how much it would cost the patient or what the patient requests rather than following the regulations, please do not do it. We must all follow the rules regardless of the financial implications for the patient.

Now what if the patient has a Medigap supplement (as do well over 80 percent of patients with Parts A and B) or a Medicare Advantage (MA) plan or a commercial plan or a marketplace plan or Medicaid? Well then forget about figuring out their out-of-pocket costs. It’s impossible with way too many variables. Just put them in the right status and the numbers will fall where they do. 

Now what is the right status? Well, 2024 brings some sanity with MA plans having to follow the Two-Midnight Rule but the subjectivity of a two-midnight expectation will remain along with many other issues that are beyond the scope of this discussion.

Programming note:

Listen to Dr. Ronald Hirsch as he makes his Monday rounds on Monitor Monday with Chuck Buck, 10 Eastern.