In February of last year I wrote about the problems Medicare beneficiaries needing rehabilitative care face when hospitals provide services under observation status rather than actually admitting the patient into the hospital. At a recent national gathering of Life Care Planning Law Firm Association providers, Elder Care Coordinators recounted case after case where clients have been denied Medicare coverage for rehabilitation services or have been saddled with expenses from their hospital stay that were not covered due to only being under observation. This March it became clear that some legislators have heard the voices of their constituents and are working to improve the Medicare rules for providing coverage after a hospitalization – regardless of the patient’s hospitalization status.

The Improving Access to Medicare Act, H.R. 1179, was introduced on March 14, 2013 in both the House of Representatives and the Senate. It is a bipartisan bill with sponsorship from a wide variety of health care related organizations. If passed, this legislation will change how the Medicare Act determines a patient’s qualification for “post-hospital extended care services.” Under the proposed amendment, time spent in the hospital in observation status would count toward the three-day hospitalization required to receive Medicare coverage for care in a skilled nursing facility.

At present, observation status in a hospital is considered outpatient care, even if it continues over the course of days or even weeks. Under the current rules, fees for outpatient care, including extended observation, are billed under Medicare Part B. But those individuals who have opted out of Part B coverage would be responsible for the total cost of care during their observation stay. Furthermore, those individuals who have Part B coverage but who do not have Medigap or Medicare supplemental insurance might also suffer financial damage because even the 20 percent which Medicare does not cover can be quite high. And in cases where a patient requires care in a skilled nursing facility following a hospitalization, that care is only covered by Medicare if the patient was admitted to the hospital for a minimum of three days.

You may wonder what motivates hospitals to place patients under observation status rather than fully admitting them. Sometimes the tests necessary to determine if in-patient treatment is needed can take a long time to process. Other times no reason is found to admit the individual, yet the hospital is legally prohibited from doing an “unsafe discharge” due to insufficient support at home. Some sources believe that the financial penalties imposed on hospitals when a patient is readmitted too soon after a recent discharge is the primary reason for the steep rise in the use of observation status care.

CMS guidelines (not rules) define observation status to be a 24 to 48 hour period. Nowhere in the guidelines does it say that a patient must be made aware of his or her status (observation or fully admitted). The burden is on the patient to ask. Perhaps it is beyond the authority of the CMS to impose any accountability or restriction on hospitals who keep patients under observation status beyond the CMS guidelines. But regardless of the hospital’s justification, there seems to be no reason for denying coverage to any Medicare beneficiary for whom the doctor has recommended treatment in a skilled nursing facility just because their requisite 72-hour hospital stay was only classified as “observation.” That is why the proposed bill is such good news: it makes good sense to change the Medicare requirement for post-hospitalization skilled nursing coverage to include any type of hospitalization, whether the patient is admitted or under observation, as long as the three-day requirement is met.

Organizations which support H.R. 1179 include the AARP, American Medical Association (AMA), American Health Care Association (AHCA), the Center for Medicare Advocacy, American Case Management Association, American Medical Directors Association (AMDA), American Nurses Association (ANA), Leading Age, National Association of Professional Geriatric Care Managers, National Committee to Preserve Social Security and Medicare, Society of Hospital Medicine. We hope that you will use your individual or organization’s voice to insure this bill passes. We at Elder Law of East Tennessee will also be supporting H.R. 1179 and will keep you informed of the outcome in future blog posts.

In the meantime, remember to be an advocate for yourself and your loved ones. Ask questions about hospital admission status. You can also try to change hospital status from observation to a full admission, though the process is not for the faint of heart. The Center for Medicare Advocacy has also put together a self-help packet for appealing Medicare denials. Get in touch with us if you need help understanding the ins and outs of Medicare coverage or if you need help making an appeal. We will be happy to guide you through the process.