We’ve written about the problem of what hospitals and doctors call “observation care” multiple times before here on the AgingOptions blog. When most people hear about this Medicare rule, they respond with angry disbelief – but in spite of new regs designed to curb the practice, the problems associated with what amounts to a giant loophole in Medicare coverage continue to grow. Now at last, according to this article from Kaiser Health News, a class-action lawsuit to force the government to eliminate the observation care exception is underway, and if the plaintiffs prevail, Medicare could be required to pay billions in retroactive reimbursements.
“Observation Care” Means Medicare Won’t Pay for Short-Stay Rehab
Susan Jaffe, writer of the Kaiser article, explains the practice (you can also read our 2017 blog article on observation care by clicking here). “Patients…receive observation care in the hospital when their doctors think they are too sick to go home but not sick enough to be admitted,” she writes. “They stay overnight or longer, usually in regular hospital rooms, getting some of the same services and treatment (often for the same problems) as an admitted patient — intravenous fluids, medications and other treatment, diagnostic tests and round-the-clock care they can get only in a hospital.” So far, so good, but here’s the catch. “Observation care is considered an outpatient service under Medicare rules, like a doctor’s appointment or a lab test. Observation patients may have to pay a larger share of the hospital bill than if they were officially admitted to the hospital. Plus, they have to pick up the tab for any nursing home care.”
That’s what happened to one woman whose case was described in the Kaiser article (even though she is not party to the lawsuit against Medicare). She had knee replacement surgery, after which she spent three days recovering in the hospital. She was then sent for “short-stay rehab” in a nursing home. But Medicare refused to pay for the nursing home stay because the woman had been kept under “observation care” while hospitalized and never formally admitted, leaving her frustrated and angry – and stuck with a $7,000 bill she can’t afford. According to the government’s rules, “Medicare’s nursing home benefit is available only to those admitted to the hospital for three consecutive days. [This woman] spent three days in the hospital after her surgery, but because she was getting observation care, that time didn’t count.”
Oh, and by the way, there’s one added “Catch-22” indignity: normally patients can appeal Medicare’s decisions. But in disputes involving observation care, no appeal is allowed.
“Observation Care” Lawsuit Finally Moving Forward After an 8-Year Wait
According to Kaiser Health News, the class-action lawsuit was originally filed clear back in 2011 and now involves 14 plaintiffs. Trial opened in Hartford, Connecticut, in mid-August, with an ambitious goal: force the government to eliminate the observation care loophole. Billions of dollars’ worth of denied Medicare claims are at stake. “A victory would clear the way for appeals from hundreds of thousands of people,” writes Jaffe. “If they win, people with traditional Medicare who received observation care services for three days or longer since Jan. 1, 2009, could file appeals seeking reimbursement for bills Medicare would have paid had they been admitted to the hospital. More than 1.3 million observation claims meet these criteria for the 10-year period through 2017, according to the most recently available government data.”
It’s not as if the feds have been unaware of this problem, says the article. In order to stem the growing number of people affected by observation care, back in 2013 Medicare created what Kaiser refers to as a “two-midnight” rule: if a doctor determines that a patient will be sick enough to stay in the hospital through two midnights, then generally the patient should be admitted and not kept under observation care. (Here’s a link to a fact sheet from CMS about this rule.) “Yet observation claims have increased by about 70 percent since 2008, to more than 2 million in 2017,” says Jaffe. Claims from Medicare beneficiaries kept in the hospital longer than 48 hours under observation care rose by 159 percent at a time when traditional Medicare enrollment only grew by 9 percent. About 2 million Medicare beneficiaries filed claims related to observation care in 2017, and some of these are the patients whose nursing home coverage claims would probably have been refused.
Fixing the “Observation Care” Loophole Tops the IG’s List of Needed Medicare Reforms
The Office of the Inspector General in the Department of Health and Human Services issued a 68-page report a few months ago listing 25 changes they say CMS (the Center for Medicare and Medicaid Services) should make. Number one on the list of recommendations CMS has refused so far to implement: change the rules to allow all hospital days, regardless of status, to count in determining reimbursement for short-stay nursing care. Perhaps it will take a court case like the one that finally began in August to mandate a long-overdue reform to the regulations. We’ll keep a close watch on this case as it moves through trial and potential appeal.
Until the courts issue their rulings, we urge you to be on guard should you or a loved one face a hospital stay. Find out whether you are being held for observation care, and if so, why you are not being admitted. Be informed of your rights as a patient and, if necessary, be prepared to demand an answer. This is also an appropriate time to repeat our common recommendation that seniors in search of a primary care physician should put themselves under the care of a geriatrician, a board-certified doctor who is fully trained in issues related to senior care. He or she can be your first line of defense should hospitalization be required.
The Critical Element: A Comprehensive Retirement Plan
AgingOptions is the only firm we know of that offers a unique type of retirement planning strategy called a LifePlan. Too many so-called retirement plans treat all the pieces of the retirement puzzle as disconnected elements independent of one another. But Rajiv Nagaich and his team understand that, in a successful retirement, all the parts – financial, housing, medical, legal and family – have to work together. That’s the genius of a LifePlan. We encourage you to accept Rajiv’s invitation and join him soon at a free LifePlanning Seminar, which we present several times each month in locations throughout the area. There’s a current calendar of LifePlanning Seminars here on our Live Events page, and once you’ve found the date that works for you, you can register online or call us this coming week. The recipe for true peace of mind in retirement starts with an AgingOptions LifePlan. Age on!
(originally reported at www.khn.org)