“Observation Status” is a growing problem for Medicare beneficiaries.
George was having more and more pain in his belly. He called his doctor, who, upon hearing about the severity of his pain, told him to go to the emergency room. Following triage, lab tests, and doctors’ exams, the hospital admitted George. Since there was no available room, he had to wait three hours before a registrar informed him that he had been “admitted under observation.” Should he or should he not agree to be admitted?
What exactly is “Observation Status” and why should Medicare recipients be wary of it?
Observation is a way to keep someone in the hospital while doctors decide if the patient is sick enough to need inpatient treatment. When you are admitted under “Observation Status,” you are admitted as an outpatient rather than inpatient. With this designation, the hospital can keep you for a short time (less than two midnights). However, there is no outside limit to how long you can stay in the hospital under observation.
If you have original Medicare (part A & B) and Medicare part D for drugs, and you are admitted as an inpatient, the following applies:
- Medicare A pays for all hospital costs (without co-pays or co-insurance),
- Medicare B pays for all in-hospital doctors and labs (with copays and coinsurance as appropriate), and
- Remaining costs are often paid for by a supplementary policy.
If you are admitted under observation, i.e. as an outpatient, the following applies:
- Medicare A is no longer in effect, and
- Medicare B is still in effect, but the hospital bills will mount up the longer the patient is in the hospital.
Furthermore, many seniors who have taken health coverage from a former employer or are still working, do not have Medicare part B. In that case, coverage would be dependent on the individual policies and could result in huge financial costs.
Observation Status could continue to affect you even after you have been released from the hospital.
In order for Medicare to pay for any skilled nursing care, a patient must spend three consecutive days in a hospital as an inpatient. Any time spent under observation does not count towards that threshold. So, even if the Observation Status is changed during the patient’s stay, those first days will not count and, depending on the length of his stay, he could be responsible for the full market cost of any inhouse rehabilitation or any outpatient therapy the patient might need, even if prescribed by the doctor. In a serious case, a patient could be out tens of thousands of dollars.
Medicare created the “Observation Status” to try to cut back on unnecessary hospital admissions and consequent unnecessary skilled nursing facility use. Unfortunately, due to a 150% increase in use by hospitals since 2006, many seniors find themselves in these unfortunate financial situations. In 2006, hospitals were not even required to notify the patient that they had been admitted under “Observation Status.” Due to a law passed by Congress a in 2015, this is no longer the case. Today, the hospital must notify the patient in writing that they have been admitted under “Observation Status.” A patient has the right to refuse Observation Status, but the hospital or ER is not required to change that status.
We hope this information will allow for an informed discussion with admitting physicians.