Inpatient v. Observation Status and Medicare Coverage

Apr 19, 2018

If you have ever attended one of our seminars, you heard us speak of the difference between being “admitted” to a hospital as opposed to just being there “under observation”. This discussion arises in the Medicare context for a very important reason.

As things currently stand, if a person is ill or injured and winds up in the hospital and then needs rehabilitation in a nursing facility, whether they were “admitted” to the hospital as an inpatient or were simply classified as being there “under observation” as an outpatient will determine whether they will be privately responsible for the nursing home cost or whether Medicare will cover the stay. There is also a temporal element to this equation; the person must have been admitted as an inpatient for at least three nights. Let’s look at an example.

Mary feels poorly and her doctor sends her to the hospital. She spends four days there and it is determined that she had a stroke that has impeded her walking. She needs nursing home rehabilitation for two months. Mary does well, returns home, and resumes normal life. A month later, Mary receives a bill from the nursing home for $20,000. Incredibly confused, Mary inquires as to why she is receiving this bill when her understanding was that Medicare would cover up to 100 days in the nursing home, which Mary knows is well beyond the time she spent there. Mary eventually discovers that Medicare will not cover her nursing home stay because she was never admitted as an inpatient at the hospital. Mary is not happy.

Clearly, the difference between inpatient and outpatient stays in the hospital can have significant financial consequences. At our seminars, we emphasize the importance of advocating on your own behalf, or on someone else’s behalf, if something like this should occur. Insist on being admitted as an inpatient! We are not alone in feeling this way. Congress has recently been presented with legislation on this very issue.

Congressman Jim Renacci of Ohio has introduced the Creating Access to Rehabilitation for Every Senior (CARES) Act (H.R. 290). It was most recently introduced to the House Ways and Means Committee and is summarized as legislation “to amend title XVIII of the Social Security Act to eliminate the 3-day prior hospitalization requirement for Medicare coverage of skilled nursing facility services in qualified skilled nursing facilities…” The legislation would eliminate altogether the requirement of a hospitalization stay prior to nursing home care.

In a recent article written by the Congressman himself, Mr. Renacci refers to a report by the Office of the Inspector General showing that over 617,000 individuals who experienced hospital stays of three nights or more were nevertheless denied reimbursement for a subsequent nursing home stay because they had not been admitted at the hospital. Mr. Renacci also points out that eliminating the hospital stay requirement would potentially lower overall health care costs.

This legislation will likely be in limbo for some time. We will follow up if there are any developments. In the meantime, remain vigilant for yourselves and those you care about if this situation arises.

Attorney Michael Coleman earned his Juris Doctor degree from Hofstra School of Law. He is also a member of the American Academy of Estate Planning Attorneys and the National Academy of Elder Law Attorneys, Inc. Attorney Coleman focuses his practice on various estate planning, estate administration, probate, retirement planning, and real estate matters. Lantz Law, Inc. has served the communities of Southcoast, South Shore, Cape Cod, and the Islands since 1969.

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