By Rosanne Rogé, CSA, RFG, CFP®
Managing Director
Health insurance can be confusing, and unfortunately, it doesn’t get easier as we age. In fact, there’s a new dispute under the Medicare system that seniors need to be aware of when seeking medical attention.
Medicare claims that inpatient status begins when you are formally admitted to the hospital under a doctor’s order. Outpatient status is when the doctor has not ordered to admit you as an inpatient, and can include emergency department services, observation services, outpatient surgery, lab tests, X-rays, and other various hospital services.
If you receive three consecutive days of medical treatment as a hospital inpatient, you would be covered under Medicare Part A. This covers the full cost of skilled nursing for the first 20 days, and other associated costs up to 100 days. However, if you do not spend 3 consecutive days as an inpatient, and are instead treated as an outpatient – including something called being on “observation status,” you would be covered under Medicare Part B. This scenario could mean out of pocket expenses – and unfortunately if you are on observation for a long period of time without realizing, it could be a very expensive stay.
According to an AARP Public Policy Institute report, two thirds of observation patients are obligated to pay substantial costs out of pocket, and ten percent of observation patients paid more than if they had been admitted as an inpatient. 2
A recent New York Times article stated, “patients can be hospitalized for days, can undergo exams and tests, can receive drugs — without ever officially being admitted to the hospital. Instead, they’re “under observation,” which means they’re outpatients, not inpatients. That can bring financial hardships — including lack of coverage for subsequent nursing home care.”1
In 2016 the NOTICE Act (Notice of Observation Treatment and Implication for Care Eligibility) was passed, requiring hospitals to notify patients both orally and in writing when they are not inpatients but are instead under observation. Hospitals are obligated to inform patients no later than 36 hours after they begin to receive observation services, and the written notice must explain that the patient is not an inpatient.
Although currently there is no way to appeal observation status, there is some light at the end of the tunnel for anyone who has already encountered this financial predicament. In July 2017, a class action law suit developed to appeal observation charges incurred to hundreds of thousands of Medicare beneficiaries after January 1, 2009. The Center for Medicare Advocacy, Inc., and the law firm of Wilson Sonsini Goodrich & Rosati will act as the class action counsel.
In addition, as a Medicare beneficiary, you do have specific rights regarding your care, including the right to:
- Have your questions about Medicare answered
- Understand all of your treatment choices
- Make a decision about, obtain a review, or appeal health care payment, services, or prescription drug coverage
- File complaints or grievances about the quality of your care
At this time, the best course of action is to be informed. If you or a loved one seeks medical attention at a hospital, being aware of the observation status and understanding what financial implications it could encompass is half the battle. For more information about Medicare Part A and Part B coverage you can contact 1-800-MEDICARE (1-800-633-4227), or visit the Center for Medicare Advocacy Web site, which offers resources like a Fact Sheet and FAQ section.
1 https://www.nytimes.com/2017/09/01/health/medicare-observation-hospitals.html 2 https://www.aarp.org/ppi/info-2015/observation-status-financial-implications-for-medicare-beneficiaries.html
