Medicare's Hospital Markup Is Costing Seniors | Opinion

Medicare's hospital markup for certain imaging services is causing seniors to pay significantly more than they should. In July, the Department of Health and Human Services (HHS) proposed eliminating this markup for common procedures, such as X-rays, MRIs, and ultrasounds, without contrast. This change would save seniors and taxpayers $260 million in 2027 and $7.2 billion over the next decade.

Currently, Medicare pays up to 670% more for identical services provided by hospital-owned clinics compared to independent physician offices. Seniors directly bear the cost through a 20% coinsurance for outpatient care; for example, an epidural injection would cost $148.17 at a hospital-owned clinic versus $51.17 at a freestanding physician's office.

This payment disparity incentivizes hospital systems to acquire independent practices, turning them into hospital outpatient departments and charging higher rates for the same care. As of 2024, 7.4 million Medicare beneficiaries spend more than 10% of their income on Part B premiums, and Medicare trustees project this cost to rise by 77.7% from $2,434 to $4,327 between 2026 and 2035.

Although Congress has provided tools to address this issue, such as equalizing payments for clinic visits at off-campus hospital facilities and extending site-neutral payments to drug administration services, more action is needed. Specifically, HHS should extend site-neutral payments to nuclear cardiology imaging, which currently sees hospital-owned facilities charge an average of 313.2% more than independent offices.

Applying site-neutral payments across all on- and off-campus hospital outpatient departments, as proposed by President Trump in his fiscal year 2021 budget, could save taxpayers $156.9 billion over 10 years and lead to $137 billion in lower costs for beneficiaries. The goal should be to end Medicare's preferential payments to hospital-owned facilities, thus eliminating one of the biggest incentives for hospital consolidation.