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New Law Helps Elders Avoid Medicare Loophole

Your elder loved one is in the hospital in a bed, but is she an inpatient or an outpatient under observation? It matters. One of the anomalies in our sprawling healthcare system can unexpectedly cost patients and their families thousands of dollars. Here’s how it happens:

Medicare covers subsequent care in a skilled nursing facility only if the patient has been a hospital inpatient for three nights before transfer to the nursing home. However, because hospitals are being carefully scrutinized and penalized for unnecessary admissions (deemed unnecessary by a 3rd party agency who gets a bonus for finding fraud), it is in their interest to avoid inpatient admission and keep patients ‘under observation’ as outpatients. Patients and their families may be unaware of the difference in status as the patient undergoes testing and treatment and may receive extensive hospital services over many days. Their first realization may come when the patient is subsequently transferred to a skilled nursing facility, Medicare rejects the claim, and the bills roll in.

A new law, called the NOTICE Act, went into effect on August 6, 2016 and ensures that patients and their families are made aware of their hospital status. It requires hospitals to notify patients who are in observational status for more than 24 hours that they may incur out-of-pocket costs if subsequently transferred to a nursing home.

Elders and their families who are familiar with Medicare benefits would expect coverage for up to 100 days of care in a skilled nursing facility after discharge from the hospital, but they may not realize that if they have been ‘under observation,’ their hospital stay – no matter the number of days, nor care in the intensive care units – does not count toward the required three nights needed for coverage and they will be responsible for all nursing home charges. This legislation will prevent the shock of that discovery. The notice to beneficiaries will inform them that they are not inpatients but outpatients receiving observational services and will explain that Medicare will cover nursing home care only if they have had a three-day inpatient stay

The legislation was prompted by a steady increase in the number of Medicare beneficiaries who have been kept in observational status by hospitals and were then surprised to learn that they were never formally admitted.

Tips on what you can do:

  • Make sure you know the status for any hospital stay.
  • If you or a loved one is notified by the hospital that you have been “under observation” for more than 24 hours, talk to the doctor about being admitted and reclassified to inpatient status.

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