2019! And Medicare Observation Stay Loophole Remains Open

You have Medicare and you are in the staying in the hospital. So you are admitted? Right?  Let’s define “stay” and how it relates to the Medicare Observation Stay Loophole. The financial implications can be dire when a Medicare patient encounters the loophole when staying in a hospital under “observation.”

I first wrote about the Medicare Observation Stay Loophole in 2016. I am with disappointment and frankly bureaucratic dismay updating this information for 2019 with little progress to report.

Medicare beneficiaries need to take note of their admittance status when receiving care in a hospital. The Medicare Observation Stay loophole has come to the forefront in the last few years as Medicare recipients and their families were shocked to receive large hospital bills due the loophole few knew existed.

Difference Between Medicare In Patient Status And Medicare Observation Status

In two words. Money and Care. Patients admitted to the hospital versus being classified under Medicare observation status are billed quite differently under the rules of Medicare and your classification status will affect the type of additional care you are entitled under Medicare.

Under Medicare if you are admitted for three nights, additional skilled care for the first 20 days at 100% payment by Medicare is available under Medicare Part A. Observational status is not classified as inpatient care and puts patients into Medicare Part B which equals a bill you are responsible for while classified as observational/outpatient status versus Medicare in patient status.

A very detailed article by an eldercare attorney details the financial and additional care implications of inpatient/admitted status versus observational/outpatient status. The American Association of Retired People (AARP) reported in 2018 the loophole continues on and details a real life example of a families cost emotionally and financially with the loophole.

Government Fails To  Close The Medicare Observation Status Loophole

It has been a long road in the attempts to modify or close the loophole. The Improving Access to Medicare Coverage Act of 2013, (H.R. 1179) introduced by Joe Courtney (D-CT) and Tom Latham (R-IA) in 2013 failed to garner enough support and failed in 2014. H.R. 1179 would require that the three day hospital stay for patients under observational status would count toward the Medicare insurance requirement to receive additional skilled care post hospitalization.

On March 8, 2017 Senate Bill 568, The Improving Access to Medicare Coverage Act of 2017 was introduced by Senator Sherrod Brown of Ohio and referred to the Committee on Finance.

And so The Improving Access to Medicare Coverage Act of 2017 is apparently floundering in the Committee on Finance and the Medicare law remains unchanged with the Medicare Observation Stay Loophole intact. This minor language tweak with major implications for the Medicare “observation/inpatient/outpatient” is marooned. The Improving Access to Medicare Coverage Act of 2017 would require hospitals to include the “observation” days in the Medicare formula to count toward the three day inpatient hospital stay rule so the patient would qualify for  Medicare to pay for skilled nursing care if needed.

While the The Improving Access to Medicare Coverage Act of 2017 went legislatively nowhere in 2017 the hospitals are required to notify patients of the observation status via the NOTICE Act which was implemented in 2016.

The NOTICE Act

While the Medicare Observation Stay Loophole remains the transparency of the loophole was addressed in 2015 by adding a notification requirement. The Notice of Observation Treatment and Implication for Care Eligibility Act (NOTICE) requires hospitals to notify Medicare patients after 24 hours, but within 36 hours of their hospital stay of their admittance status.

What Is The Future Of The Medicare Observation Stay Loophole ?

Currently and for the immediate future Medicare patients, their families and caregivers are forewarned to keep the observation status on their radar.

When A Medicare Patient Is In The Hospital

1. Ask and confirm with hospital personnel the admittance status? Inpatient, outpatient or observation?
2. Do #1 daily at the very minimum and ask for written confirmation.
3. Do not count on the hospital to follow the NOTICE Act, be proactive.
4.  Document and detail all conversations with personnel.
5. Ask to see the Medicare codes assigned to the patient to determine admittance status if needed.
6. Ask the patient’s doctor to change the status (if medically warranted) within the first 2 three days/2 nights from observation to admitted. If the patient needs rehab it is critical the status is changed so access to skilled nursing facilities is paid by Medicare for the first 20 days.

It is truly unfortunate that patients and their families must deal with the observation status loophole in the midst of a medical crisis. However, the financial reality can be stark if the patient lands in the loophole.

Additional Medicare Information:

Medicare Codes And How They Affect Your Care

Do Medicare Lump Sum Payments Determine Your Hospital Discharge?