Medicare and the observation status trap
This article represents the third and final installment in a series on the general topic of what Medicare does and does not cover in terms of long term care services. One the thorniest problems in this area is what is known as observation status. As promised, I will devote this month’s column to the confusing issue.
When you enter the hospital, you are either admitted as an inpatient or an outpatient. If you are admitted as an inpatient there will be few if any problems at the time of discharge.
If you are recovering from joint replacement or other types of surgery or need cardiac rehab following a heart attack or stroke, you will almost certainly be covered by Medicare. However, if you are admitted as an outpatient, you are listed as being on observation status by the hospital.
To clarify this situation, Medicare has issued a “two-midnight” rule. There are some major financial implications for patients who are on observation status at the time of discharge and need some type of rehabilitation services in a skilled care facility.
First, let’s discuss how most of us expect Medicare to work if we are hospitalized. When we enter a hospital, either by a prearranged schedule or through an emergency room, we assume that we will be admitted as an inpatient.
As an inpatient, your care will be covered by Medicare Part A and you will pay a one-time deductible. But, just because you have been admitted to the hospital it does not automatically follow that you will be considered as an inpatient. For short term stays, you may be admitted as an outpatient and placed on observation status.
If you are on observation status, because you are regarded as an outpatient by both the hospital and Medicare your charges will be covered by Medicare Part B and not Medicare Part A. This means that you will be subjected to co-pays and deductibles similar to what you would pay when you visit your physician in her or his office.
Many people are shocked when they are discharged from the hospital after being admitted from the Emergency Department for a short stay and receive a bill for numerous unexpected charges.
If you are on observation status and you are transferred from the hospital to a nursing home (SNF) to complete your care, because you were only an outpatient in the hospital you will not have met the qualifying hospital requirement.
So, Medicare will not pay for the majority of the services you will receive from the SNF. This can result in your being responsible for thousands of dollars in charges prior to being discharged back to your home. But, the complications do not end there. You also may be responsible for more of the costs of care at home than would normally be covered under Medicare if you had been on inpatient status.
Since March 8 of this year, New York has required hospitals to notify you within 24 of your entering the hospital that you have been placed on observation status. This change was implemented to give you and your caregivers an opportunity to appeal and make sure that if you discharged into an SNF, you will have been listed as an inpatient so the Medicare will pay for your rehabilitation services. This rule is stricter than a 36-hour notification rule that has been implemented by Medicare.
Part of the reason why New York officials have become so concerned about the observation status is the dramatic increase in its use. According to an August 2016 report in the Kaiser Health News, more Medicare beneficiaries are entering hospitals as observation patients every year. In fact, they report that the number has doubled since 2006 to nearly 1.9 million in 2014. During the same period, enrollment in traditional Medicare grew by only 5 percent.
A second reason is the increased cost to patients and their families. In addition to the increase costs discussed above, the Kaiser Heath News also found that Medicare does pay for routine drugs while you are on observation status. Some hospitals allow patients to bring these medications from home. However many, citing safety concerns, do not allow this practice.
If you have original Medicare and a Part D drug plan, the coverage of drugs while you are on observation status will be up to the insurer.
If you have a Medicare Advantage Plan, it will depend on what the Plan has negotiated with the hospital. You should be aware that most hospital pharmacies are out-of-network. So even if your plan covers these drugs, you may be left paying most of the bill.
What should patients do? First, when you enter the hospital ask your entry status. If you are being admitted under observation status, speak to your regular physician. The best argument to change your status is a medical one and your doctor is in the best position to make your case.
If this does not work, there are other appeals that you can make but they generally involve getting outside help. Several groups, such as NYS Statewide Senior Action and the Medicare Rights Centers, offer such assistance.
Even if you are entering the hospital for a scheduled procedure, do not assume that you will be admitted as an inpatient.
Who do I contact in Oneida County if I have questions about observation status, my Medicare Part D plan or any other health insurance (HIICAP) related issues? The Oneida County Office for the Aging/Continuing Care/NY Connects Health Insurance Information, Counseling and Assistance program (HIICAP) offices provide their services at no cost to Medicare beneficiaries. HIICAP offices are found at the following locations:
Ava Dorfman Senior Citizens Civic Center, 305 E. Locust St. with hours of operation on Tuesday and Thursday from 10 a.m. to 2 p.m. Again, while consumers are seen on a “first come, first served” basis you may call the Dorfman Center at 315-337-1648 to see if there are long wait times.
North Utica Senior Citizens Community Center, 50 Riverside Drive, Utica with hours of operation on Monday, Wednesday and Friday from 10 a.m. to 2 p.m. Consumers are counseled on a “first come, first served” basis. However, if you want to call ahead to see how busy the office is you may call the Center’s HIICAP program at 315-724-8680.
HIICAP services are provided by Oneida County Office for Aging and Continuing Care/NY Connects. Anyone with questions about HIICAP, including issues with your Medicare Advantage Plan, should call the program directly at 315-798-5456 and press 4 in the choice list. It will direct you to someone who can assist you.
Dr. William Lane is the owner of William Lane Associates, a gerontological firm which located in Homer, NY. He writes a monthly column on HIICAP related issues for the OFA. Dr. Lane does not sell insurance, work for any insurance company or recommend any insurance products.
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