Medicare is set to apply a new rule in April that would require doctors to admit people they expect to stay more than two midnights, and to classify anyone else as an observation patient. But the change is getting blowback from a large coalition of healthcare providers and advocacy groups, who are seeking a delay in its implementation. They argue that it will be very difficult to comply with the rule, and that it would arbitrarily reward patients who happen to arrive at the hospital at certain times of day. And it doesn't alter the three-day rule.
"The new rule doesn't really fix the problem," says Joe Baker, president of the Medicare Rights Center, a non-profit consumer advocacy group.
HIgh Stakes
Observation status can affect any senior using traditional fee-for-service Medicare; patients using managed-care Medicare Advantage programs, which provide all-in-one care, are subject to whatever rules are set by their insurance plan providers. But for seniors vulnerable to the observation status problem, the stakes are high.
When a patient who meets Medicare's three-day formal admission requirement moves to a skilled nursing facility, the program covers 100 percent of the first 20 days. Patients are responsible for $152 daily co-pays for the remaining 80 days, if necessary.
Patients leaving the hospital for a nursing facility after an observation stay pay the full cost out of pocket. The daily rate for skilled care in a private room averaged $230 last year, according to an annual survey conducted by Genworth Financial, although the cost can go much higher––$344 in New York state, for example. At that rate, a New York patient covered under admission status who needed a 100-day stay in a skilled facility would pay $12,160 out of pocket, compared with $34,440 for an observation-status patient.
Medicaid would cover the stay if the patient met the program's low-income requirements. The only other option would be private long-term care coverage, although private policies often have "elimination" features (deductibles) that require patients to pay the first 90 days out of pocket, according to the American Association for Long-Term Care Insurance.
It's difficult for seniors and their families to protect themselves against this risk. Hospitals generally aren't required to notify patients that they're on observation status, although the state of New York recently passed legislation requiring notification of patients. It's hardly something most families would think to check during a health crisis, and it makes no sense that a patient spending multiple days in the hospital hasn't been admitted.
Toby Edelman, senior policy attorney for the Center for Medicare Advocacy, urges families to ask their doctors about admission status, although she cautions that physicians also may not know whether the patient is on observation status. "If you do find out that the person is on observation status, do what you can to get it changed at the time. Get your doctor to go to bat for you."
Patients who arrive at a nursing home after an observation-status hospital stay will have to appeal to Medicare later. That can be done through Medicare's standard appeals process, but it's not easy. "The process is lengthy, and it doesn't make a lot of sense to people," Edelman says.