Medicare Modernization

Medicare Modernization: Critical to Assuring Access to Air Medical Services

Air medical services are necessary for saving the lives of the most critically injured and gravely ill patients. To ensure continued patient access to air medical services, policymakers must update and modernize Medicare’s reimbursement rates to reflect the actual costs of service.

Equally important, elected officials must reject efforts by commercial health insurers to implement price controls on air medical services by indexing private insurance rates to current Medicare rates. Insurers’ proposal to tie reimbursements to 125% of Medicare will decimate the industry and leave as many as 87 million rural Americans without access to Level 1 & 2 hospital-based trauma care.

Overview of Current Medicare Rates

Current Medicare rates are based on costs from 1998, which were enacted in 2002 and, today, more than 20 years since they were last re-indexed, the rates have not been updated to account for increased costs, including personnel and training, advances in equipment, new safety regulations, medical supplies, insurance, fuel and other critical components of providing air medical services.

Responding to a lack of recent government data on the air medical services industry, in 2017, the Association of Air Medical Services and Members (AAMS) contracted Xcenda, a health care analytics company owned by AmerisourceBergen to develop the most up to date database of air medical costs.

The study, reporting 2015 data, found:

  • The median cost per emergency air medical transport (for both rotor and fixed wing aircraft) was $10,199 with the median reimbursement per transport from Medicare equaling $5,998.
  • The median revenue loss on each Medicare transport is $4,201.
    • This means Medicare payments cover less than 60% of Medicare transport costs, including flight charges and the cost of readiness to help patients 24/7/365.
  • 61% of flight reimbursements do not meet the cost of transports because of low reimbursement rates from Medicaid, Medicare, and Veteran’s Benefits.

Payor Mix

The current payor mix, as detailed in the Xcenda study (and confirmed in the 2017 Government Accountability Office Report, Air Ambulance: Data Collection and Transparency Needed to Enhance DOT Oversight (GAO-17-637), shows air medical services to be overwhelmingly reliant on government sources. Between Medicare payments (37% of all transports), Medicaid (26% of transports) and Veterans’ benefits (approximately 2% of transports), air medical providers are underfunded on 63% of all flights.

Another 10% of flights are uncompensated because of a patients’ lack of insurance or inability to pay, totaling to 73% of all air medical services being undercompensated or non-compensated.

Remedies to Chronic Medicare Underpayment

Government’s chronic under-payment of costs for air medical services and non-compensated flight costs put significant burden on commercial insurers to shoulder a majority of costs for the 87 million Americans whose only access to a Level 1 or 2 trauma, stroke or cardiac center, is through air medical services. This is particularly true in rural areas as 90% of patients transported by air medical services are from a rural zip code.

Failure to remedy the chronic underpayments for air medical services is putting extensive strain on the industry. Since the beginning of 2019, 24 air medical bases have closed, which contributes to the expanding medical desert that is growing across the country. Since 2010, 106 of America’s 1,700 rural hospitals closed and a 2019 report found that 21% of rural hospitals are at high risk of closing unless their financial situation improves. These sobering numbers reinforce the need for emergent air services to fill the care gap left behind.

According to the Xcenda study, Medicare base rates need to be increased by 263% and per mileage charges increased by 102% to cover the cost of air medical services.

Medicare’s Low Reimbursement Rates Create a Payment Gap

Medicare’s failure to re-index cost for air medical services has created an unsustainable payment gap between the costs of providing air medical services and Medicare reimbursement rates.

Since Medicare is the basis for which Medicaid and Veteran’s benefits determine their reimbursement rates, the payment gap to providers extends across all government payers and even to private insurance. Medicare’s failure to adequately compensate providers for the cost of their care puts significant, and unnecessary, burdens on commercial insurers to bear the costs of sustaining air medical services.

Indexing Insurance Companies’ Reimbursement Rates to Medicare Will Harm Millions of Americans

Insurance companies are proposing to enact legislation that ties, or indexes, their reimbursement rates to 125% of Medicare’s rates. These proposals are an effort to implement price controls by an industry that is notorious for routinely declining claims, erecting unnecessary barriers to patient care, and avoiding caring for individuals with complex, high cost conditions.

If insurance companies’ efforts are successful, the air ambulance industry—the only emergent care option for 87 million rural Americans— will be decimated. Air medical bases will close, and critical health services will be eliminated.

Insurers proposals to index reimbursements to current Medicare rates are a non-starter meant to harm rural patients and help insurers avoid paying their fair share of critical emergency care for seriously injured and gravely ill individuals.