When
you go into the hospital, this rule can prove to be a financial trap
by Phil Moeller | April 9, 2019
Surprise medical
bills—for procedures that people later learn are not covered by insurance—are
drawing increased government scrutiny in Washington, with the House of Representatives planning hearings on ways to curb
such charges.
In a rare show of
bipartisanship, Republicans have promised to work with their Democratic
counterparts to find solutions. “Workers and families deserve certainty about
their health care coverage,” Rep. Tim Walberg, R-Mich., said during a recent
hearing on surprise medical bills.
When you’re on Medicare,
federal rules generally prevent you from being hit with such surprise charges.
However, you need to be aware of a major hole in Medicare’s safety net. It
concerns patients who need skilled nursing care after being hospitalized for a
health issue.
Such care is covered
by Medicare, but only if you have been formally admitted to the hospital as an
inpatient for at least three days. The problem is that hospitals are free to
admit people as outpatients for what is technically called observational care.
Outpatients, it turns
out, are not covered by Medicare for subsequent nursing needs. And in recent
years, more people have
been classified by hospitals as outpatients.
Outpatient vs.
inpatient care: how coverage differs
Outpatient care
involves treatment that is identical in some cases to inpatient care. But it is
generally covered under Part B of Medicare, whereas inpatient care is covered
by Part A. This difference sometimes has a huge impact on your ultimate
out-of-pocket expenses, as noted in a previous Ask Phil column.
For example, a person
on original
Medicare is responsible for paying 20% of all covered Part B
expenses. This exposure is the main reason many people with original Medicare
also buy private Medigap
supplemental insurance plans that pay the Part B expenses not paid
by Medicare.
Part A, by contrast,
pays 100% of expenses for inpatient care after a person has satisfied Part A’s
annual deductible ($1,364 in 2019).
In addition, roughly
3 million Medicare beneficiaries have only Part A of Medicare and not Part B,
and thus would be responsible for all outpatient hospital expenses.
Why the problem
persists
The Centers for
Medicare & Medicaid Services (CMS), which sets coverage rules, tried to
ease this problem by imposing limits in 2016 on what hospitals can charge for
outpatient services. It also has tried to limit the use of observational stays.
However, the problem
has not gone away, and people admitted to hospitals as outpatients will not be
covered by Medicare if they need to be transferred to a skilled nursing
facility. The costs of extended nursing home stays can be enormous.
In the past, patients
often did not even know if their hospital care was being handled on an
inpatient or outpatient basis. Some patients did not learn their subsequent
nursing care would not be covered until they arrived at a nursing home for
admission and were given the bad news.
Hospital care can be
physically and emotionally taxing. Many patients are older and frail, and few
are equipped to tangle with their doctors or hospital administrators about the
ground rules for their care. They look to hospital staff to take care of them
and help them get better, not to expose them to additional health and financial
problems.
Some
patients did not learn their nursing care would not be covered until they
arrived at a nursing home and were given the bad news.
Currently, patients
have no formal right to appeal the hospital’s decision to classify them as
outpatients. Hospitals, however, are free to ask Medicare to reconsider whether
they should be compensated for care under Part A or B of Medicare and are successful
in more than 60% of such appeals, according to testimony in an ongoing lawsuit
concerning the issue.
What’s being done to
change the system
Patient advocacy
groups have long complained about the implications of being treated as an
outpatient. Congress responded to such concerns by enacting a law that took
effect last year requiring hospitals to formally tell patients if they had been
admitted as outpatients.
This is a good first
step, but it does not eliminate the problem.
As part of ongoing
litigation—a class-action suit filed more than seven years ago—the Center
for Medicare Advocacy is seeking to give Medicare enrollees the right to appeal
hospital outpatient admission decisions and to strengthen consumer rights.
Patient advocacy
groups have long complained about the implications of being treated as an
outpatient.
CMS has repeatedly
tried to get the case dismissed, but in March a U.S. district court once again
rebuffed that effort and kept the case alive. A CMS spokesman said the agency
was actively reviewing the court decision to determine an appropriate response.
One patient’s
experience, cited by the judge in his ruling, involved a man with a shoulder
injury who spent six days in a hospital but was later billed for his subsequent
nursing home care. “He contacted the hospital,” Judge Michael P. Shea wrote in his opinion, “and was told that ‘the powers that be’
had placed him on observation status. He testified that his treating physician
appeared ‘aghast’ upon learning that his inpatient order has been overridden.”
In another case, a
physician caring for a woman admitted as an outpatient felt she needed skilled
nursing care. He understood Medicare would not pay for such care but was still
able to keep her in the hospital on observation status for 40 days.
After nearly eight
years, and after all of the named plaintiffs have passed away, it looks like
the case is finally headed for trial.
This column
previously appeared on the PBS NewsHour Making Sen$e
website.
Got a question about
Medicare or Social Security? Send it to askphil@considerable.com.
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