Indeed it is. And it is one big "gotcha" you need to know.
Here is how it works:
Say you are taken by your wife to the hospital (after passing out in the flower garden) with a case of the dizzies due to too much yard work and too little hydration.
The doctor checks you over and decides to keep you in the hospital under “observation status.”
This is a Medicare designation applied to patients deemed insufficiently ill for formal admission, but still too sick to be allowed to go home.
Then you have some "complications" and your overly cautious doctor decides you need to go to a nursing home for some rehabilitation.
Why?
"Observation status" can mean thousands of dollars in higher costs, particularly if you require post-hospital nursing care.
As the recent Money article “The Medicare Quirk That Can Cost You Thousands” explains, Medicare covers care in skilled nursing facilities. Unfortunately, that is only for patients who are first admitted to a hospital for three consecutive days.
Hospitals have applied this status to avoid costly penalties from Medicare for improper admissions.
The number of Medicare patients classified as under observation has skyrocketed and has created push back from Medicare enrollees and advocacy groups.
A new law, “the Notice Act,” requires hospitals to notify patients if they stay in the hospital more than 24 hours without being formally admitted.
Patients will begin to get this notice beginning in January 2017.
In addition, hospitals will be required to inform patients verbally and in writing if they are on observation status for more than 24 hours.
The written notification is called the Medicare Outpatient Observation Notice (“MOON”) and it also must explain the cost implications of receiving hospital services as an outpatient.
The costs of observation status can impact any enrollee on traditional fee-for-service Medicare.
The program typically covers up to a maximum of 100 days of care in a skilled nursing facility following a hospital admission. It will pay 100% for the first 20 days; patients are responsible for a daily $161 co-pay for the next 80 days.
However, patients who leave the hospital for a nursing facility after an observation will pay the full cost out of pocket.
And skilled nursing care costs are substantial and continue to rise.
Observation status also has an impact on the coverage of drug usage in the hospital. Medicare Part B would cover drug usage for the specific problem related to the hospitalization, subject to the Part B 20% co-pay.
For routine drugs taken at home, the practices vary. Some hospitals let patients bring their own drugs from home, others do not, and charge much more than you would pay at your pharmacy.
A broader solution to the observation status has had a lot of support.
Bipartisan legislation has been introduced in the U.S. House and Senate. The legislation would require time spent in observation to be counted towards meeting the three-day prior inpatient stay necessary to qualify for Medicare coverage.
Bottom line: The bill counts the time in hospital, no matter what. Accordingly, if you are in the hospital for three midnights, you have met the requirement.
Stay tuned.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Money (September 29, 2016) “The Medicare Quirk That Can Cost You Thousands”
