New deductibles and payment rates lead to new patient financial obligations for 2023.

EDITOR’S NOTE: Listen to Dr. Ronald Hirsch’s live reporting Monday on Monitor Mondays with Chuck Buck at 10 Eastern.

Happy New Year!

2023 has already started and as with every year, the new Medicare out-of-pocket rates take effect. And while the out-of-pocket costs for care should not affect how we care for our patients, it often comes up in conversation with patients so let us review the numbers.

The Medicare Part A deductible goes up to $1,600, an increase of $44.

The Medicare Part B deductible goes down to $226, a decrease of $7 It is unusual to see a decrease but this is the result of the very high increase in 2022 in anticipation of high expenditures for the new Alzheimer’s drug which didn’t get full approval from the Centers for Medicare & Medicaid Services (CMS) so less was spent than expected. While CMS realized this mid-year, they chose to wait until 2023 to cut payment rates.

The base observation payment to hospitals for Comprehensive APC 8011 for 2023 is $2,439.02. This is a $107 increase from 2022. But your facility is unlikely to get this exact amount as the payment is adjusted for your hospital wage index. You may be more, and you may get less.

Now, how should hospital staff use these numbers?

The Medicare patient being placed observation in 2023 who has Parts A and B and no supplement and has not paid their Part B deductible will owe $713.80 for their observation stay (for the mathematicians, that is the 20 percent co-insurance of $487.80 plus the Part B deductible of $226.) If they are admitted as inpatient, they owe $1,600. It is clear that an observation stay costs less than inpatient, even when the patient has not paid their Part B deductible!

(Caveat- if you charge outpatients for self-administered drugs, that $713.80 could go up, but then again you shouldn’t be charging for self-administered drugs, but that’s a separate discussion [you can read my article about that here.]) 

Now once that patient pays their yearly Part B deductible, any future observation stays will cost the patient $487.80 (plus self-administered medication costs)and an inpatient admission would cost them $1,600. 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 $487.70 but if admitted as inpatient it would be $0 so inpatient admission would cost them less. 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, that is a compliance issue and should not happen. Instead, talk to the patient and stress to them that you must follow the rules and cannot choose their status based on their out-of-pocket costs.

Now what if they have a supplement or an Medicare Advantage (MA) plan or a commercial plan? 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 admission status? Well, I have a lot to say about that but will save it for a different time.


Ronald Hirsch, MD, FACP, CHCQM, CHRI

Ronald Hirsch, MD, is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays. The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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