Be Aware of Observation Care

No one wants to be admitted to a hospital, but for Medicare beneficiaries the distinction between inpatient and outpatient treatment can be confusing and potentially expensive. The key issue is observation care (also called observation status), during which a patient spends time being evaluated in a hospital — and may be in a hospital room with hospital services — but is not admitted as an inpatient. Hospitals keep patients under outpatient observation to help control costs, but the growing use of observation care has raised concerns for both patients and providers.

To help clarify patient status and Medicare reimbursement, the Centers for Medicare & Medicaid Services implemented a two-midnights policy that directs hospitals to admit patients if they are expected to be under care for at least two midnights. Hospitals must provide detailed oral and written notice to any patient who receives outpatient observation services for more than 24 hours.

IMAGE

SNF Eligibility

The most significant impact of observation status is typically on patients who require post-hospital care in a skilled nursing facility (SNF). To qualify for up to 20 days of SNF rehabilitation under Medicare, a beneficiary must first spend three consecutive nights in a hospital as an inpatient, and a doctor must recommend SNF treatment. Nights under observation do not count toward the three-day minimum, so a patient who spends one night under observation and two nights as an inpatient would not qualify for SNF care.

A law requiring that observation stays be counted toward the three-day minimum was introduced in the U.S. Congress in March 2017, but as of early 2019 has not received further action. If you need rehabilitation in a skilled nursing facility, your doctor may be able to change your status before you are discharged from the hospital, but doctors must follow Medicare guidelines, and changes are not easily made. Medicare patients cannot appeal observation status, but a pending class-action lawsuit might change that.1

Part A or Part B?

Medicare Part A pays inpatient hospital charges, including prescription drugs, above the annual deductible ($1,364 in 2019), with no coinsurance for the first 60 days. Outpatient services, including observation care and physician services, are covered under Medicare Part B after meeting the annual deductible ($185 in 2019), with 20% coinsurance for each service and no cap on total expenditures. Drugs administered during observation care are not covered under Part B but may be covered under Medicare Part D, which typically requires a separate deductible and copayment. (Medicare Advantage plans may have different costs and coverages.)

Although the deductible is higher for Medicare Part A than for Part B, the coinsurance and copays under Part B can add up. One study found that two-thirds of patients under outpatient observation care paid substantial out-of-pocket costs, and another 10% paid more than they would have if they had been admitted as inpatients.2

 
Twin Cities Retirement Income Planning | Financial Planning Associates
5201 Duncraig Road Edina, MN 55436
Phone: 952-929-2577 Fax: 952-928-3799

Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC. Cetera is under separate ownership from any other named entity.

5201 Duncraig Road, Edina MN 55436

We are licensed to sell Insurance Products in the following states:  Minnesota, Indiana, Wisconsin

 

 

Financial Planning Associates and RE/MAX Results are not affiliated with Cetera Advisors LLC.

This site is published for residents of the United States only. Registered Representatives of Cetera Advisors LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every advisor listed. For additional information please contact the advisor(s) listed on the site, visit the Cetera Advisors LLC site at www.ceteraadvisors.com

The registered representative(s) and/or investment adviser representative(s) listed on this website are licensed and registered in the following states:

We are licensed to sell Insurance Products in IN,MN.

[ Online Privacy Policy | Important Disclosures | Business Continuity | Privacy Promise | Order Routing Disclosure | Cetera Advisors ]