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Seniors beware of the “under observation” status on your patient chart

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“Under observation” status on your patient chart can have lasting consequences. These two words can be the difference between spending thousands of dollars out of pocket vs. having Medicare cover the entire bill.

Staying in the hospital without being formally admitted can spike your hospital costs and can cost you thousands of dollars.

Under the rules, Medicare picks up the whole tab for the first 20 days in an approved skilled nursing facility for rehab or other care, but only if someone has spent at least three full days in the hospital as an admitted patient (not counting the day of discharge). If instead a patient has been under observation — for all or part of that time — he or she is responsible for the entire cost of rehab.

[Note that this situation applies only to Medicare coverage in skilled nursing facilities — which are usually nursing homes — and not to rehabilitation hospitals or inpatient rehabilitation facilities. Such places have different rules to qualify for Medicare coverage, but coverage is not affected by previous observation status while in a regular hospital.]

But for seniors vulnerable to the observation status problem, the stakes are high. When a patient who meets Medicare's three-day formal admission requirement moves to a skilled nursing facility, the program covers 100 percent of the first 20 days. Patients are responsible for $152 daily co-pays for the remaining 80 days, if necessary.

Patients leaving the hospital for a nursing facility after an observation stay pay the full cost out of pocket. The daily rate for skilled care in a private room averaged $230 last year, according to an annual survey conducted by Genworth Financial, although the cost can go much higher - $344 in New York state, for example. At that rate, a New York patient covered under admission status who needed a 100-day stay in a skilled facility would pay $12,160 out of pocket, compared with $34,440 for an observation-status patient.

Over the past several years, hospitals throughout the country have increasingly classified Medicare beneficiaries as observation patients instead of admitting them, according to researchers at Brown University, who recently published a nationwide analysis of Medicare claims in the journal Health Affairs. The results showed that in just three years, 2007 through 2009, the ratio of Medicare observation patients to those admitted as inpatients rose by 34 percent.

Beware of these two words, “under observation” before you leave the hospital– make as much noise as you can, because it’s much easier to change your status while you’re still in the hospital than to go through Medicare’s appeals process later.”

If the situation isn’t resolved while you’re in the hospital and you require follow-up care at a nursing home, you’ll have to pay the bill of often thousands of dollars up front.

The Center for Medicare Advocacy has a self-help packet on its website that explains the observation-status issue in detail, and provides detailed guidance for filing appeals (bit.ly/KTa5LJ).

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