(The writer is a Reuters columnist. The opinions expressed are
By Mark Miller
CHICAGO, Sept 29 You are in the hospital for
tests after experiencing dizziness. You are nervous about what
the tests will show, but at least you do not have to worry about
hospital bills - you have Medicare, so you can relax about
healthcare coverage. Or can you?
Not if you are in the hospital under "observation status" -
a Medicare designation applied to patients deemed insufficiently
ill for formal admission, but still too sick to be allowed to go
home. Observation status can result in thousands of dollars in
higher costs - especially if you need post-hospital nursing
Medicare covers care in skilled nursing facilities, but only
for patients who were first formally admitted to a hospital for
three consecutive days.
Federal data shows that the number of Medicare patients
classified as under observation has jumped sharply in recent
years, and it has stirred a great deal of pushback from Medicare
enrollees and advocacy groups. A new law - the Notice Act -
requires hospitals to at least notify patients if they stay in
the hospital more than 24 hours without being formally admitted.
Patients will receive the warnings starting in January, but
advocates argue the new protection does not go far enough.
"It does half of what we would like to see," said Toby
Edelman, senior policy attorney at the Center for Medicare
Advocacy. "The notice should also allow patients to appeal their
Hospitals have been motivated to use the status to avoid
costly penalties from Medicare for improper admissions under a
well-intentioned effort by Medicare to control costs through a
program that audits hospitals for possible overpayments. The
program began during the George W. Bush administration.
The number of patients cared for under observation status
doubled to nearly 1.9 million in 2014 compared with 2006,
according to figures from the Centers for Medicare & Medicaid
Services (CMS). The majority (54 percent) were for observation
stays of less than 24 hours; another 38 percent of the stays
were 48 hours or less, CMS reports.
FACING HIGHER COSTS
The new notifications will require hospitals to inform
patients orally and in writing if they are on observation status
for more than 24 hours. The written notification, developed by
CMS, is called the Medicare Outpatient Observation Notice
(MOON). The MOON also explains the cost implications of
receiving hospital services as an outpatient.
The costs of observation status can affect any enrollee on
traditional fee-for-service Medicare. (Beneficiaries using
Medicare Advantage, which provide all-in-one care, will also
receive the MOON, but some Medicare Advantage plans will cover a
stay in a skilled nursing facility without first requiring that
patients have a three-day inpatient hospital stay.)
Medicare normally covers up to a maximum of 100 days of care
in a skilled nursing facility following a hospital admission -
it pays 100 percent for the first 20 days, and patients are
responsible for a daily $161 co-pay for the next 80 days. But
patients leaving the hospital for a nursing facility after an
observation pay the full cost out of pocket.
RISING NURSING HOME COSTS
The cost of skilled nursing care is substantial, and rising
quickly. This year, the national median monthly cost of a
private nursing room is $7,698, according to a Genworth survey,
and it runs much higher in states such as New York ($11,330 per
month) and California ($9,338).
Medicaid would cover the stay if the patient meets the
program's low-income requirements (a status called
"dual-eligible"). A commercial long-term care policy might
provide some coverage, although many of these policies have
"elimination" features (deductibles) that require patients to
pay the first 90 days out of pocket.
Observation status also affects coverage of drug usage in
the hospital. Medicare Part B would cover drug usage for the
specific problem related to the hospitalization, subject to Part
B's typical 20 percent copay); for routine drugs that you take
at home (say, a statin for high cholesterol), practices vary.
Some hospitals allow patients to bring their own drugs from
home, others do not, and charge much more than you would pay at
a typical pharmacy.
Some - but not all - Part D drug plans will cover some of
these prescription drug costs.
A broader fix to the observation status has garnered broad
support from organizations ranging from AARP to the American
Medical Association, elder law groups and Medicare advocacy
groups. Legislation that has bipartisan support has been
introduced in the U.S. House and Senate that would require that
time spent in observation be counted toward meeting the
three-day prior inpatient stay that is necessary to qualify for
"The bill is simple," said Edelman of the Center for
Medicare Advocacy. "Count the time in hospital, no matter what.
If you are in the hospital for three midnights, you have met
(Editing by Matthew Lewis)