Despite Medicare, Financial Barriers to Care Plague Older U.S. Adults

People in the U.S. over the age of 65 are more likely to be sick and more likely to have problems paying for the cost of health care than similarly aged counterparts in 10 other industrialized nations, according to the findings of a survey published by The Commonwealth Fund. The survey, which asked people 65 and older from 11 different industrialized countries about their health and financial access to care, revealed that the U.S. falls behind in almost every category, when compared to other industrialized countries.


According to a Commonwealth Fund press release, the survey analyzed responses from 15,000 older adults in Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the U.S. According to the release, the study offers an interesting view into the comparative effectiveness of Medicare, because the older adults in each of the other high-income countries surveyed have some form of universal health insurance coverage.

High Costs

Among the most notable of the findings were the financial costs that older adults in the U.S. face for health care, despite having access to the broad coverage of Medicare. For example, 21 percent of older adults in the U.S. spent $2000 or more a year in out-of-pocket costs for health care, while only 2 percent of older adults in the U.K. did. Similarly, while U.S. respondents were most likely to report difficulties paying medical bills, with 11 percent of older U.S. adults indicating reporting such financial troubles, only 1 percent of older adults in Sweden and Norway reported those problems.


Costs were also reported more often as a financial barrier to accessing care in the U.S. than they were in any of the other 10 nations, with 19 percent of U.S. adults 65 or older reporting they did not visit a doctor, skipped a medical test or treatment recommended by a doctor, did not fill a prescription, or skipped doses because of the cost of care. The reasons behind the higher costs, according the Commonwealth Fund, are “high deductibles and copayments, especially for pharmaceuticals, and limitations on catastrophic expenses and long-term care coverage.”


U.S. respondents reported relative difficulty getting same- or next-day doctor’s appointments, with only 57 percent saying they could obtain such appointments, while 83 percent in France and New Zealand, and 81 percent in Germany were able to be seen the same- or next-day. In a related matter, older adults in the U.S. were more likely to rely on the emergency department for care that a primary physician, if available, would have been able to provide. Specifically, 39 percent of older U.S. adults reported using the emergency department in the past two years and 35 percent of those adults indicated that they used the emergency department for something their primary doctor would have treated.


The survey did have some bright news for senior care in the U.S. For example, at 58 percent, older adults in the U.S. reported some of the highest rates of discussing treatment plans for chronic illnesses with their doctors. Less than half of chronically ill older adults in the other 10 countries, with the exception of the U.K., reported the same. Older U.S. adults also had a high prevalence of reporting that they had a treatment plan they could carry out in their day-to-day lives. High rates of positive patient-doctor communication, low occurrences of gaps or confusion in transitions from hospital to home, and high rates of end-of-life planning discussions were also reported by U.S. adults over 65. Specialty care appointments were another area where the U.S. excelled, with 86 percent of older U.S. adults saying they were able to get an appointment with a specialist in six weeks, which outranked the older adults in Norway and Canada, where only 46 percent of older adults could get a specialist appointment on the same timeline.

Part B Consumers Beware: ‘Pitfalls, Problems and Penalties’

In a report that included recommendations for improvements to the Medicare enrollment system, the Medicare Rights Center also focused on the existence of issues that often plague Medicare enrollees and how to avoid these pitfalls so as to escape often severe and long-lasting penalties. Besides identifying how consumers may sidestep these issues within the complicated program, the report, entitled “Medicare Part B: Enrollment: Pitfalls, Problems and Penalties,” also called for a streamlining of the enrollment system as it noted that the aging of the American population was occurring “at an unprecedented rate.”

Pitfalls and Problems

To premise the review of the Medicare Part B enrollment process, the authors noted that, “an often reported fact is that 10,000 Baby Boomers turn 65 and become Medicare-eligible each day,” yet, “less well known and commonly misunderstood, are the rules concerning how to enroll in Medicare.” To highlight the issues faced by many enrollees, the Medicare Rights Center reviewed more than 15,000 calls received by the Medicare Rights’ national hotline in 2013 and found that almost one-quarter of the calls were from individuals that were experiencing some type of challenge regarding enrollment. Of those callers, 38 percent were “navigating a specific hurdle,” 28 percent did not understand the enrollment periods, and 13 percent were not able to determine whether they were eligible for enrollment in Medicare. Another area that the report identified in terms of what types of challenges that consumers were experiencing during enrollment was transitions from existing coverage to Medicare. In sum, the Medicare Rights Center found that the majority of issues for enrollees fell into one of these three categories: (1) navigating coordination of benefits rules; (2) understanding enrollment time frames; and (3) dealing with late enrollment penalties. 


In addition to coverage gaps due to failure to enroll in a timely matter, “higher out-of-pocket costs in the form of lifetime late enrollment penalties (LEPs) may also apply.” While some may be able to appeal LEPs through a process called equitable relief, in which those who can prove they were provided misinformation from a federal source about enrolling in Medicare are granted immunity from those penalties, it is estimated that in 2012, approximately 740,000 Medicare beneficiaries paid Part B LEPs.

Fixing the System

In addition to educating consumers regarding the rules of Part B Medicare enrollment, the Medicare Rights Center also recommended steps to take in order to improve the process itself. Among the suggestions for streamlining the complicated process, the report included the following: (1) increasing education for soon-to-be enrollees; (2) simplifying enrollment periods; (3) increasing avenues for consumer relief; and (4) filling gaps in knowledge. With regard to the final suggestion, the report noted that “the true impact of enrollment changes on newly Medicare-eligible seniors and people with disabilities is difficult to discern,” and as such, “Congress should take steps to analyze the true scope of these issues.”

DSH Cuts and Uncompensated Care Costs Impacting Hospital Reimbursement

Medicare payments to hospitals that serve a disproportionate share of poor people will continue to decrease in fiscal year (FY) 2015.  In FY 2015 CMS calculates that the total amount available for the Medicare disproportionate share hospital (DSH)  payment will decrease  by $1.225 billion compared to the amount available in FY 2014.  This decrease should come as no surprise to anyone as the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) required these reductions.  The thinking was that  DHS payment should decrease because as more and more individuals obtain health insurance coverage or are enrolled in an expanded Medicaid, there will be fewer and fewer people who will not be able to pay or have their hospital bills paid for them.  And this has been found to be just the case as the Office of the Assistant Secretary for Planning and Evaluation reported that uncompensated care was reduced by $5.7 billion in 2014.   The great majority of this reduction though came in states that had expanded Medicaid eligibility, putting hospitals in states that did not expand Medicaid eligibility in a particularly difficult spot; they will be receiving less in DSH payments, but the amount of uncompensated care is not decreasing.

DSH Payments

DSH payments began in the 1980s as a way to provide more money to hospitals that serve a poorer population of people who cannot afford to pay or have some other entity like insurance or a public health program pay for their hospital bills. Section 3133 of the ACA dramatically changed how DSH payments would be calculated.  All hospitals would receive 25 percent of what they would have received under the pre-ACA system.  The remaining amount would come from a pool of money the amount of which is calculated based on the change in the percentage of uninsured from the current year to the year just prior to the year the ACA was signed.  As the number of uninsured decreased so would the amount available to hospitals in their DSH payments. For FY 2014 CMS calculated that the percentage of uninsured declined from 18 percent during the year prior to the ACA’s adoption to 16 percent.  For FY 2015 CMS has calculated that the percentage of uninsured is 13.75 percent of the population.

Available Amount

These two reductions have resulted in a corresponding reductions in the amount available for uncompensated care payments, or the portion of the DSH payment not equaling 25 percent of what the DSH payment would have been if the changes in the ACA were no adopted.  For FY 2015 the amount of money for uncompensated care payments is $7.6 billion which is down from $9.033 billion in FY 2014.  CMS estimated in the Final rule updating the hospital inpatient prospective payment system (IPPS) for FY 2015 that hospitals would see approximately a 1.3 percent reduction in the amount of their DSH payments from FY 2014.

The percentage is less than one would expect because during this time period the amount available for the original 25 percent has increased from year to year somewhat offsetting the decrease in uncompensated care payments. This increase is primarily due to the increase in the number of Medicaid recipient due to the expansion of Medicaid, but it also is attributable to just an overall increase in the payment amount over time.  In FY 2014 $3.193 billion was avialable to pay the pre-ACA amount and in the FY 2015 this amount was increased to $3.345 billion. The number of Medicaid patients a hospital treats is used to determine the amount of the hospital pre-ACA DSH payment.

Uncompensated Care

An increase in the amount of Medicaid patients has resulted in a significant decrease in the cost of uncompensated care by hospitals.  HHS is reporting that FY 2014 hospitals incurred $5.7 billion less in uncompensated care costs due to an increase in the number of patients that are now covered by an expanded Medicaid.

This decrease in uncompensated care costs did not occur in states that did not expand Medicaid eligibility. Hospitals in those states find themselves in a difficult situation as they are receiving less DSH payments, but are not seeing an increase in revenue from patients with Medicaid or private insurance coverage.  Many of these hospitals rely heavily on DSH payments and decreases in the amount  of money they receive could have dire consequences for these institutions and the people they serve

Kusserow on Compliance: Summary of Top 10 Management & Performance Challenges Facing HHS

The HHS Office of Inspector General (OIG) has released its 2014 report on the Top Management and Performance Challenges (TMC). Annually, the OIG prepares a summary of the TMC facing HHS. Many of the challenges noted reflect continuing vulnerabilities previously identified, as well as new and emerging issues. This report fulfills OIG’s requirement under the Reports Consolidation Act of 2000 (P.L. 106-531) to identify these management challenges, assess progress in addressing each challenge, and submit this statement annually. This year’s report includes the following areas:

  1. Implementing, Operating, and Overseeing the Health Insurance Marketplaces, also known as Health Insurance Exchanges. Marketplaces are critical for the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). In 2014, CMS operated Marketplace functions on behalf of 36 states, which created one of the most significant challenges for HHS and will continue in 2015. These include ensuring accurate eligibility determinations; processing enrollments, re-enrollments, and qualifying life change events; and communicating timely and accurate information to health insurance issuers and consumers. They must also facilitate Medicaid enrollment for those who qualify, requiring effective communication and coordination between and among all internal and external parties with the Internal Revenue Service (IRS). The OIG cites progress, but notes additional work is needed.
  2. Ensuring Appropriate Use of Prescription Drugs in Medicare and Medicaid. CMS provides prescription drug coverage for 4 million Medicare beneficiaries and 59.4 million Medicaid beneficiaries with the combined prescription drug expenditures of $93 billion. The OIG cited its ongoing monitoring and oversight of the programs, and noted that it has uncovered improper and potentially harmful prescribing practices, pharmacies billing for drugs not dispensed, and diversion of prescription drugs. The OIG noted CMS’ actions to date, but stated CMS must increase Part D plan sponsors’ abilities to limit questionable utilization of drugs, particularly drugs that are vulnerable to diversion and recreational abuse. The report cites the following as examples of identified problem areas: Questionable Utilization and Billing Patterns for HIV drugs; Drug Diversion and Abuse of Controlled Substances; and Drug Diversion and Abuse of Non-Controlled Substances. Noted as a rapidly growing trend is the illegal billing and diversion of non-controlled medications (e.g., anti-psychotics), which presents a substantial financial vulnerability to federal health care programs. Many cases involve pharmacies billing federal programs for expensive brand-name medications that were never dispensed.
  3. Protecting an Expanding Medicaid Program From Fraud, Waste, and Abuse. CMS reported that enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) had increased by 8.7 million people since individuals became eligible to apply under the ACA’s expanded eligibility With this growth, so does the urgency in finding ways to control inappropriate spending through Iimplementing a functional, national Medicaid database for effective oversight of payments and services. OIG continues to find existing national Medicaid data are not complete, accurate, or timely and that additional data are needed to conduct national Medicaid program integrity activities. Coupled with this is the problem of identifying and recovering improper payments estimated at 5.8 percent. With almost three-quarters of all Medicaid beneficiaries were enrolled in some type of managed care system, it creates a challenge to ensure program integrity. Another problem identified is the state policies that inflate federal costs.
  4. Fighting Waste and Fraud and Promoting Value in Medicare Parts A and B. HHS must reduce wasteful spending, estimated that 30 percent of U.S. health spending (public and private) or roughly $750 billion. The OIG credited CMS with steps taken in 2014, but noted additional focused attention is needed on reducing improper payments through using contractors; better prevention of and responding to fraud; fostering more economical payment policies; and transitioning from volume to value-based payments.
  5. Ensuring Quality in Nursing Home, Hospice, and Home- and Community-Based Care. HHS faces challenges in ensuring that beneficiaries who require nursing home, hospice, or home- and community-based services (HCBS) receive high quality The OIG is continuing its work with the DOJ and others to pursue enforcement actions against those that render substandard care. The OIG cited new legislation to assist in this effort, and calls upon HHS to continue high priority to quality of nursing home, hospice, and HCBS.
  6. The Meaningful and Secure Exchange and Use of Electronic Health Information. There is increased reliance upon health information technology (HIT) and the electronic exchange and use of health It also creates problems of protecting health information. The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 requires adopting, implementing, upgrading, or demonstrating meaningful use of electronic health records (EHRs) and established a variety of grant programs to encourage widespread adoption of EHRs, as well as reporting of breaches of unsecured protected health information. The OIG cited a number of challenges that have arisen from these new requirements.
  7. Effectively Operating Public Health and Human Services Programs To Best Serve Program Beneficiaries. HHS funds and operates public health and human services programs that promote health and economic and social well-being, including programs to prevent, track, and treat acute and chronic diseases; respond to natural and man-made disasters; and protect, care for, and educate children. Key challenges include (1) ensuring effective preparedness and response to current and future public health emergencies, (2) protecting the health and safety of America’s vulnerable populations, and (3) ensuring access for intended beneficiaries and delivery of quality services such that beneficiaries’ needs are met.
  8. Ensuring Effective Financial and Administrative Management. The huge size of HHS creates a major stewardship obligation that has as its underpinning financial management an administrative infrastructure that employs appropriate internal controls to minimize risk to the programs and safeguard Financial statement audits are crucial to this effort. A major focus of effort must be on improper payments cost federal programs billions of dollars annually that was estimated at almost $50 billion in the Medicare program alone and $65 billion overall.
  9. Protecting HHS Grants and Contract Funds From Fraud, Waste, and Abuse. HHS is the third largest grant-making and contracting organization in the federal government with over $389 billion in grants and $20 billion in contracts last year. The OIG noted weaknesses in the oversight of grantees, as demonstrated by late or absent financial and related reports, insufficient documentation on progress toward meeting program goals, and failure to ensure that grantees obtain required annual financial audits.
  10. Ensuring the Safety of Food, Drugs, and Medical Devices. HHS, through the FDA, is responsible for protecting public health by ensuring the safety, efficacy, and security of drugs, medical devices, biologics, dietary supplements, tobacco, and much of our nation’s food It must ensure that once a drug, biologic, or device has been approved for use, it conducts effective post-market monitoring. The OIG’s work has revealed weaknesses in the FDA’s ability to adequately oversee the safety of drugs, biologics, medical devices, and food. The OIG cited particular problem areas as including drug compounding, importing of modified drugs, food safety problems, dietary supplements, and marketing abuses.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.