Document Type


Publication Date

January 2016


An increase in Medicare reimbursement rates in 2002 caused the number of helicopter air ambulances in the United States to increase threefold. The vast majority of air ambulance flights are ultimately paid for through Medicare or private insurance reimbursement, although the patient often remains legally responsible for the cost of a flight. Average costs for helicopter air ambulance (HEMS) operators have increased much more rapidly than the reimbursement rate, mostly due to low utilization of the helicopters. New safety requirements imposed by the FAA, after a ten-year period of much higher accident rates for helicopter air ambulances than for the rest of helicopter aviation, have only partially brought HEMS accident rates to an acceptable level. To assess arguments for adjusting reimbursement rates and FAA safety rides, one must understand the different types of missions that helicopter air ambulances fly, the kinds of helicopters available, labor markets for the necessary personnel, the economics of helicopter ambulance operation, and the data on fixed and variable costs. Several policy options exist for resolving the funding controversy. The best is to keep the existing Medicare reimbursement formula, expecting private insurance to continue to model their policies on Medicare. This will encourage further consolidation and shrinkage of the fleet to a more sustainable level. State and local governments can support noncompensatory HEMS operations in areas where population density is insufficient to support breakeven flight frequencies. The FAA should complete the task of promoting safety by requiring autopilots on all HEMS aircraft, collecting complete safety data, and abandoning the position that air ambulance operators are "airlines, " which interferes with state health care regulation.