Understanding Medicare Part B: Outpatient Care Costs and Site-Specific Payments

Outpatient Care and Medicare Part B

Outpatient care falls under Medicare Part B. It includes services like routine check-ups, treatment for illnesses and injuries, minor surgeries, preventive care, chronic disease management, physical therapy, and diagnostic procedures. In 2021, about 33 million people with traditional Medicare used Part B services. The share of Medicare spending on these services is increasing. In 2013, Part B accounted for 43% of total Medicare spending. By 2023, it increased to 49% and is projected to reach 53% by 2033.

Payment Differences Across Settings

Payment rates for outpatient services vary depending on the setting. Traditional Medicare pays differently based on whether the service is billed under the Physician Fee Schedule, the Outpatient Prospective Payment System (OPPS), or the Ambulatory Surgical Center Payment System. Typically, the total payment for outpatient services is higher in hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) than in physician offices.

For example, in 2023, Medicare paid $1,015 for a colonoscopy in an HOPD. In contrast, physicians received $345 for the same service in their offices and $616 in an ASC.

Impact on Consumer Costs

Higher payments lead to greater out-of-pocket expenses for consumers. Under Medicare Part B, patients usually pay 20% of each outpatient service after meeting the deductible. Patients with traditional Medicare often pay two to four times more for services in HOPDs compared to those in office settings. For instance, the out-of-pocket cost for a skin biopsy in 2023 was $128 in an HOPD, $35 in an ASC, and $32 in an office.

Broader Implications of Site-Specific Payments

Medicare’s site-specific payments increase overall healthcare costs. They lead to unnecessary spending for Medicare, raise costs in the healthcare system, and may encourage providers to use the highest payment rates available.

Site-Neutral Payment Policies

Site-neutral policies aim to reduce the negative effects of site-specific payments. They propose that outpatient provider payments be based on the type of service rather than the setting where it is provided. These policies can differ widely based on which services are included and which care sites are impacted. Ongoing discussions focus on existing site-neutral policies in Medicare and potential new reforms.