Hospital “observation status” is a growing problem for Medicare beneficiaries.
“Observation status” means that a hospital patient is classified as an “outpatient” even though he may spend many days and nights while in a hospital bed receiving medical care and tests and treatments. Being classified as an “outpatient” rather than as an “inpatient’ can end up costing the patient thousands of dollars.
Observation status means you get no coverage under Medicare Part A. This can mean substantial co-payments and lack of drug coverage while you are in the hospital.
And if an outpatient is subsequently transferred to a skilled nursing facility (i.e. a nursing home) Medicare Part A coverage will be unavailable. Unless they were given inpatient status while hospitalized, the patient will have to pay privately for their nursing home stay. With nursing home average daily rates in Pennsylvania approaching $300 a day, the difference between having Medicare Part A coverage or not can add up quickly.
I’ve written before about the observation status problem. See my posting, Beware of Hospital "Observation Status” Marshall Elder and Estate Planning Blog, May 2, 2013 to learn more about it.
As an added insult, hospitalized patients are typically unaware of whether they are being classified as inpatient or outpatient. If you have spent three or four days and nights in the hospital it seems rational to assume that you are an inpatient. But it is becoming more and more likely that you are not.
State legislation can do little to remedy the observation status problem because it is a result of federal Medicare regulations. But, at the least, hospital outpatients should be made aware of their financially precarious status.
In Pennsylvania House Bill 1907 (The Hospital Observation Status Consumer Notification Act) has recently been introduced by House Majority Whip Stan Saylor (R. York). It would require a hospital to provide notice to a patient of the patient's outpatient status, billing implications and the impact of the outpatient status on insurance coverage. To understand more about HB 1907 you can read its Co-Sponsorship Memorandum.
An informational hearing on HB 1907 was held on February 5th by the Pennsylvania House Aging and Older Adult Services Committee. Testimony in support of the bill was received from representatives of The Hospital and Healthsystem Association of Pennsylvania, AARP, and the Pennsylvania Health Care Association. Also testifying in support was Brad Jacobs, Register of Wills and Clerk of Orphan's Court in York County, who shared his personal story of the difficulties encountered due his mother’s observation status hospitalization.
HB 1907 is a step in the right direction, and Representative Saylor is to be commended for recognizing the problem and trying to address it. But, a state requirement regarding notification of patients won’t solve the basic problem. This isn’t a state problem. It resides with the Medicare program. What is really needed is federal legislation that changes the Medicare rules.
Legislation has been introduced in Congress to address the observation status problem. Senate bill (S569) and House bill (HR 1179) would amend the law to provide that time spent under observation in a hospital counts as inpatient time under Medicare. HR 1179 currently has 135 bipartisan cosponsors.
The ball is in the court of our Congressmen and women. Let’s hope they address the observation status problem soon.