Proposed Medicare Change Could Save Retirees $70 Million in 2027

A newly proposed Medicare rule could lower out-of-pocket costs for beneficiaries, helping them save money in retirement. The Centers for Medicare & Medicaid Services (CMS) proposal isn't yet finalized and is part of the proposed 2027 outpatient payment rule, which was released in early July. The proposal is in the public comment period, and no final rule has yet been issued.

If you or a loved one participates in Medicare, the proposal, if passed, might affect what you pay for certain services in 2027.

The price disparity that Medicare has been paying

The proposal addresses the payment disparity that occurs in payments for certain imaging services, including X-rays, CT, and MRI scans, based on where those services were performed.

Under current rules, Medicare often pays higher prices when beneficiaries receive certain outpatient services in a hospital-owned outpatient department compared to when they receive those same services in a physician's office or ambulatory surgery center. Medicare may be required to pay substantially more for these routine outpatient services when they're performed in a hospital-owned facility, even though it doesn't mean that there's any difference in the quality of care that Medicare beneficiaries receive.

The disparity in the prices may be steep. For example, the cost of an allergy skin test may nearly quadruple when it's performed at an off-campus outpatient hospital clinic when compared to what it would cost at a physician's office. The cost of a chest X-ray may nearly triple when performed at a hospital-owned outpatient clinic compared to the cost at a physician's office.

How increased costs impact Medicare and beneficiaries

Since Medicare has paid more for these services based on the service location for years, the payment disparity costs the program more money.

Since Medicare beneficiaries often pay a percentage of the approved amount for outpatient services in the form of coinsurance, reducing the cost of those services could mean that beneficiaries may see reduced coinsurance payments, too. Ultimately, reducing the costs of the services might help beneficiaries save on their out-of-pocket health care costs regardless of where they receive the services.

Reduced costs might quickly add up for beneficiaries who frequently need imaging services, potentially leading to significant savings.

What the proposal might do

The proposal seeks to implement site-neutral payments for imaging services like X-rays, CT scans, and MRIs. CMS has already implemented site-neutral payments for some services, and the proposal seeks to expand that policy to include imaging services.

If implemented, site-neutral payments would mean that Medicare would pay the physician fee schedule rate for a service regardless of whether it was performed in a hospital-owned outpatient department or a physician's office. The proposal would help ensure consistent pricing for both Medicare and its beneficiaries, potentially saving both parties money.

How much money the proposal might save

According to CMS, the proposal might save Medicare and beneficiaries significant amounts of money. CMS estimates that if implemented, the proposal might save Medicare Part B about $190 million in 2027 alone. Beneficiary premiums might be reduced by about $70 million, and beneficiary cost-sharing might also be reduced by about $70 million. The per-person savings aren't yet quantified, though they'll likely be greatest for beneficiaries who repeatedly receive imaging at hospital-owned sites.

In addition to the financial savings, site-neutral payments might give Medicare beneficiaries more flexibility and freedom in terms of where they choose to have their medical services performed. If beneficiaries know that they'll pay a higher copay when they have imaging performed at a hospital-owned outpatient location, they might feel pressured to travel to a lower-cost physician's office, even if it's inconvenient. Knowing that pricing is consistent regardless of location might encourage beneficiaries to receive care at the locations that are most convenient for them.

Opposition to site-neutral payments

Historically, hospitals, particularly rural ones, have opposed the expansion of site-neutral payments. The basis of that argument is the fact that hospitals may have to pay additional costs that physician offices don't have to cover, which increases the cost of the services performed in hospital-owned sites.

Rural Sole Community Hospitals would be exempt from this reform expansion.

Bottom line

This proposal hasn't yet been finalized, but since CMS already implemented site-neutral payment rules for clinic visits and drug administration, this rule might have a greater chance of being finalized and expanding that existing reform. CMS needs to review public comments regarding the rule before finalizing it for 2027. If the rule is implemented, changes may take effect as soon as 2027.

In the meantime, it's important to be aware of the fact that where you get your imaging might affect how much you pay for the service. When scheduling your imaging, consider asking whether the facility is hospital-owned or an independent facility, or request that your doctor send the imaging request to an independent office. Doing so may help you avoid money mistakes and prevent a higher copayment.