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Medicare’s Catch 22: "Observation" Days

You’ve likely heard the uproar over hospital stays that are classified as observation days instead of inpatient days.  An overnight stay in a hospital in a hospital bed seems the same to the patient whether the hospital refers to it as “observation” or “inpatient” but the difference can be economically catastrophic for the patient.

Many people who are hospitalized, whether for observation or as an inpatient, subsequently need transitional (or longer) care in a skilled nursing facility.  What’s called Original Medicare, i.e. the default government program, will cover 100 days of such skilled nursing (20 days at full coverage and 80 more days with a hefty copayment) but only if the patient spent at least THREE consecutive days in a hospital as an inpatient.  That’s in the statute and it would take Congressional action to change it.

Medicare began as a single payer government program for those over age 65.  As such it is a statutory plan and it can only pay the benefits included in legislation.  Unfortunately, that means that, if your hospital stay was classed as “observation,” you’re out of luck and you will have to pay the full cost of your skilled nursing yourself.  That is likely to cost you $200 to $300 per day.  Consider just that first 20 days which Medicare covers in full.  At the low end your out-of-pocket cost penalty as a result of being an “observation day victim” would be $4,000 while at the top end it could be $6,000.

Congress is considering a change to eliminate this inequity but it’s taking longer than you might imagine despite the political uproar that has ensued since this incongruity has become well known.  You can see a link to the right to a Senate bill.  It’s no secret that Congress is more dysfunctional today than it once was.

Many older people have Medicare Advantage plans such as those offered by Kaiser Permanente and others.  The discussion above applies to the statutorily constrained Original Medicare.  Medicare Advantage plans are private offerings which are required to offer at least what is available under Original Medicare but which are usually more generous.  For instance, many Medicare Advantage plans do not have the three-day inpatient stay requirement.  If you already have such a plan, check the terms to see what applies to you.  If you are under Original Medicare, you may want to consider a Medicare Advantage plan as a competitive alternative to Original Medicare.

 

Reference Materials

Centers for Medicare and Medicaid (CMS) official description of the inpatient requirement

CMS official description of Skilled Nursing Facility benefits and eligibility

CANHR (California Advocates for Nursing Home Reform) description of 2016 Medicare rate increases, plus info for California Medicaid eligibles

A Senate bill to correct the benefit inequity

   

 

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