Here at AgingOptions we’ve written several times about the trap of being hospitalized under what’s called “observation care” status, or just “observation status.” Many unwitting beneficiaries have been discharged from the hospital and sent to a rehabilitation facility for recovery, only to discover that Medicare has declined to pay the rehab cost. The reason: the patient was never technically admitted to the hospital. Their entire stay was coded as “observation status.”
Observation Care Court Ruling Fixes a Classic “Catch-22”
Until now – in a classic Catch-22 – those angry beneficiaries had no right to appeal Medicare’s decision because (you guessed it) they had only been hospitalized under “observation status.” But now, according to this recent Kaiser Health News article by reporter Susan Jaffe, that frustrating situation may be about to change. She writes, “Hundreds of thousands of Medicare beneficiaries who have been denied coverage for nursing home stays because their time in the hospital was changed from ‘inpatient’ to ‘observation care’ can now appeal to Medicare for reimbursement, a federal judge in Hartford, Connecticut, ruled last week.”
The federal government has until May 25th to decide whether to challenge the decision. But according to Kaiser, if the patients win their appeals, “Medicare could pay them millions of dollars for staggeringly high nursing home bills.”
Observation Care Court Ruling Was the Result of Class Action Lawsuit
The problem, as Jaffe explains, lies in Medicare’s rules concerning who qualifies for government-paid nursing home rehab following a hospital stay. “To receive coverage for nursing home care, patients must first be admitted to the hospital as inpatients for three consecutive days.” (This is sometimes referred to as the “two-midnight rule.”) According to Jaffe, even though a patient stays overnight and receives many of the same treatments and services provided to other patients, if that time spent in the hospital is coded as “observation,” it doesn’t count in Medicare’s calculation.
“And there’s another big difference,” says Jaffe: “While inpatients can file an appeal with Medicare if they question any other coverage denial, observation patients cannot.” For that reason, seven Medicare beneficiaries and their families filed suit against the Department of Health and Human Services back in 2011, in what became a nationwide class action lawsuit. Just a few weeks ago, U.S. District Judge Michael Shea ruled in their favor.
Observation Care Court Ruling: Hospitals Overruled Doctors and Changed Patient Status
As explained by Kaiser Health News, the ruling only applies in cases where patients were admitted to the hospital by their doctor as inpatients, but their status was later switched by the hospital to observation care status. Patients whose doctors admitted them in observation care cannot appeal. As the judge ruled, doctors are required to use their medical judgment. “If the doctor determines that a patient’s stay is unlikely to stretch over two midnights, the patient would most likely receive observation care, though there are exceptions,” the article states.
Kaiser reports that the judge’s decision (which you can read here – all 114 pages of it) “applies to all traditional Medicare beneficiaries who experienced such a switch [to observation care status] since January 1, 2009, spent at least three days in the hospital and were enrolled in Medicare’s Part A hospital benefit. If they win their appeal, most hospital expenses and any nursing home bills they paid would be reimbursed under Part A.” The expectation is that hundreds of thousands of beneficiaries will be able to seek repayment under the ruling.
Observation Care Court Ruling: One Plaintiff’s Story
One of the plaintiffs in the case, a 94-year-old Philadelphia man, spent five days in the hospital as an admitted patient after fracturing his shoulder. “When he was about to leave, a hospital official told him his status had changed to observation,” Kaiser reports. “He had to pay $9,145 for a month-long stay in the nursing home that Medicare refused to cover.” The patient, Ervin Kanefsky, told Kaiser that he urgently needed rehab care following hospitalization. “If I had gone home, I would have died,” he said.
Kanefsky said that, when he got the news from the hospital, he had one arm in a sling and the other full of stitches, and he lacked the strength to hold onto his walker. “I had to pay $2,000 just to get in the door,” he said. He says “he called Medicare numerous times, wrote a letter to the hospital’s president and contacted his congressman for help, [all] to no avail.”
Fortunately, according to Kaiser Health News, Medicare has temporarily suspended the three-day inpatient admission requirement during the coronavirus emergency. As we said above, the government has until May 25th to file an appeal to the judge’s ruling. We’ll keep a close eye on future developments in this long-running controversy.
Two Important Retirement-Planning Announcements from AgingOptions
At AgingOptions our chief desire is to help you prepare for the kind of retirement you’ve always dreamed of having. Toward that end, we want to share two important announcements that are designed to facilitate your LifePlanning process even during this period when most of us are required to avoid gathering in groups.
First, Rajiv Nagaich has scheduled several of his popular, free LifePlanning Seminars in the form of webinars that you can watch conveniently at home. Simply visit our Events Page and register for the webinar of your choice.
Our second announcement: in cooperation with our partners at LifePoint Law, we are excited to launch a ground-breaking new service called the LifePoint Law Emergency Legal Kit. Without leaving your home, you can now consult with a LifePoint Law attorney who will work with you to prepare and sign a complete set of vitally important legal documents including both Financial and Healthcare Powers of Attorney, a Living Will/Advance Directive, a Will or Trust, and much more. Click on the link or call us at AgingOptions and we’ll explain this excellent service to you.
Reliable information has never been more important – and that’s our promise to you at AgingOptions and LifePoint Law. Age on!
(originally reported at www.khn.org)