Medicare Tales; Circa 2013

By Brad Thomason, CPA

 

Guy goes into the hospital because he fell and broke his leg.  He’s 90, and it’s a bad break, so they have to perform surgery to repair some damage and properly set the bone.  Surgery goes fine.  The doctors are pleased with his daily progress, though everyone is aware that such a trauma is pretty big deal for a guy his age, and they also wish he wasn’t in as much pain.

On the morning of the 4th day the doctors are told they have to discharge him.  They are told this by the team at the hospital who reviews compliance with Medicare claims.  Turns out that the surgery should have been classed as outpatient and that they never should have admitted him in the first place.  Guy is told, hate to tell ya, but ya gotta go.  It is not lost on his doctors that he’s essentially incapacitated; nor that “broken leg” is not a description that fully captures the scope of this particular case; nor are they impractical people who fail to see the logistical problems created by the pronouncement.  But it doesn’t change anything.  He’s discharged.

Beyond the physical aspects of this determination, there’s also a financial one.  Medicare is not going to be getting a bill for those days in the hospital.  He is.  And since it was outpatient, he won’t qualify for the physical therapy benefits under Medicare.  So he gets to pay for that too.

The person who told me this story earlier this week – a senior administrator at a large hospital system – estimated that our leg patient was looking down the barrel of about $25,000 in unexpected medical bills, time it was all said and done.  (Full disclosure:  I don’t know who the patient was, nor was any confidential information shared with me.  This was one of those conversations along the lines of, “Here’s the kind of stuff we see all the time.”  It was within the broader context of, “This has been a crappy week at work.”  Not everyone who works in healthcare is a heartless bastard).

As we know, there is a major push to reduce medical costs.  When it comes to Medicare, one of the enforcement mechanisms works like this (assuming I understood how it was explained to me):  If a hospital sends Medicare a bill for something they shouldn’t have, two things happen.  The claim is rejected, and the hospital gets fined.  If the erroneous bill is for $1, then the fine is $3.  And it is branded a fraud (a term which gets thrown around way too liberally these days, given the very careful and specific definition that it has always had within the common law tradition…but that’s a topic for another day).

Additional enforcement comes from the private sector.  There is now a cottage industry of “auditors” who go back over Medicare claims with combs of finest tooth, looking for any sort of error.  If they find one, they get to keep a portion of the claim denied.  Again, we don’t have room for a lot of dilation on the topic here, but I think that thoughtful readers will at once see that such a system could have some cons in addition to any pros it might have.

Back to the hospital: it is clear why they would care about getting the classification right, and why they would have to take action if they found a mistake.  The likelihood that the mistake would go uncaught forever is essentially nil.  So large hospital systems now have their own team of in-house error-catchers.  And to give the system teeth, they get to dictate decisions which traditionally have been left to the people trying to get the patient well.  Welcome to the future.

So that’s a tale from this week on the front lines of health care.  I decided to write about it to highlight just one of the kinds of medical expense risks that are out there for seniors.  Obviously this story also has both philosophical and political relevance as well, but I try to keep these posts focused as much on the financial as I can (though by all means, take from it what you will).  For most people, having to pull an unexpected $25K out of retirement (assuming they had it at all) would send shock waves through the rest of their overall financial plan.

As individuals, none of us has much of a shot at changing the way the healthcare system works.  It is questionable if we as a nation can even pull it off.  So the focus has to be in the other direction; that is, actions individuals can take to protect themselves.  Awareness of the kinds of things that can come flying in from left field is the first step to designing comprehensive planning steps aimed at protecting your resources and maintaining your ability to live your life.  Though uncomfortable, it pays to take some time to think about what could “get you,” because doing so helps to point the way to what we need to do to keep it from happening.

Hopefully, forewarned, this will not be one which gets you.

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