Surprise Hospital Charges

In the United States, Medicare — the federal government’s health insurance program for seniors and certain people with disabilities — is widely accepted and generally well liked. As most enrollees are well aware, though, it contains certain gaps in its coverage of hospital and rehabilitative care — some of which are easier to predict, and plan for, than others.

One gap in coverage that has taken many seniors by surprise concerns rehabilitative care (also known as skilled nursing care) following a stay in the hospital. Generally, Medicare covers most or all of the costs of staying in a rehabilitative care center for up to 100 days at a time, if such care is needed after being discharged from a hospital. But there’s a catch: You need to have been formally discharged from the hospital, after being formally admitted. Some patients who stay at a hospital before being transferred to a nursing facility aren’t actually admitted — instead, they’re kept for “observation,” sometimes for several days. And often, these people aren’t aware of the consequences that “observation” status has on their Medicare coverage.

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A law that Congress passed last year, called the Notice Act, aims to make seniors aware of what being held in a hospital for “observation” could mean for their benefits. As noted in an article in The New York Times, the law requires hospitals to notify patients that they may face large out-of-pocket costs if they stay for longer than 24 hours without being formally admitted. While rehabilitative care after a hospital stay may end up being the largest of these potential costs — to the tune of $40,000 for one person mentioned in the Times article — there may also be extra costs related to the hospital stay itself.

While the Notice Act technically went into effect earlier this month, hospital patients won’t actually begin to receive the required notices until January of next year — assuming that there are no delays in the law’s implementation. In the meantime, it’s a good idea to ask lots of questions about your status if you end up needing to stay in a hospital.

You may be wondering, of course, why hospitals don’t just formally admit everyone who stays there for a given period of time. The answer is that Medicare pays more for inpatient hospital stays, which means that its auditors — private companies hired by Medicare — often closely scrutinize whether hospitals are improperly admitting patients, rather than giving them cheaper outpatient care. So while the Notice Act will give patients an opportunity to ask to be reclassified as inpatients so that they can have more services covered by Medicare, it’s not a given that hospitals will grant them this status, since auditors may challenge their decisions.

A new bill in Congress — which, if it became law, would let “observation” status in a hospital count toward Medicare coverage for rehabilitative care — has the bipartisan support of 24 senators and over 120 House members, according to the Times article. It remains far from clear, however, that this bill will even advance to a vote, let alone pass both houses of Congress.

What’s your reaction to the Notice Act — are you surprised that seniors didn’t already have to be notified about the consequences of “observation” hospital stays? Have you ever been kept in a hospital for observation? If so, did you encounter any unexpected charges as a result? Should Congress change the law so that people kept for observation are eligible for rehabilitative care afterward? Leave a comment below!