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New Law Addresses Medicare Hospital Admission Controversy, but Questions & Confusion Remain

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It’s an all too common scenario: a senior citizen is admitted to the hospital. The patient spends a few days getting tests and care, but when it’s time for discharge he or she is not well enough to go home, so the patient is sent to a rehabilitation facility. Imagine the shock for the patient and his or her family if they later discover that Medicare is refusing to pay the costs of rehabilitative care because the hospital had only kept the patient “for observation.” The patient was never actually admitted, even after a stay of several days.

If this sounds far-fetched, it’s not, as this extremely timely article from Kaiser Health News reveals. Seniors are sometimes kept in “observation” status for extended periods. Observation status is supposed to give doctors a reasonable length of time to determine the patient’s condition and establish a treatment protocol but some hospitals, for various reasons, seem to stretch that definition. The real problem is that Medicare treats “observation” patients differently from patients who are “admitted.” Observation is considered to be outpatient care, so Medicare charges observation patients more for the treatment they receive and – worst of all – refuses to pay for rehabilitative care for patients who were not “admitted” to a hospital.   “For years,” says the article, “seniors often found out (about this) only when they got surprise bills for the services Medicare doesn’t cover for observation patients, including some drugs and expensive nursing home care.”

So here’s a bit of good news in the Kaiser Health News article. A new federal law requires that hospitals across the country must alert Medicare patients (who make up 42 percent of hospital admissions) when they are being held for observation and why they are not being formally admitted. The notice requires notification after the patient has received observation care for 24 hours, and that notice has to be given after no more than 36 hours of care. This new mandate, says Kaiser, is “one of the conditions hospitals must meet in order to get paid for treating Medicare beneficiaries.”

Unfortunately, the article asserts, the new law doesn’t solve the biggest problem: Medicare’s policy concerning payment for rehabilitative care. Kaiser Health News quotes Stacy Sanders of the Medicare Rights Center who says, “The observation care notice is a step in the right direction, but it doesn’t fix the conundrum some people find themselves in when they need nursing home care following an observation stay.” In other words, if you or your loved one is held in observation status only, any subsequent stay in a rehab center could cost you plenty. Even with the new rule, the old policy remains in force: in order for Medicare to pay for nursing home care in a rehabilitation facility, a patient has to have had a prior hospital admission for at least three consecutive days. Observation time, says Kaiser Health News, doesn’t count.

The Kaiser article says that hospitals are trying to adjust to the new notification requirements even as Medicare keeps revising their billing codes and related policies, so the landscape keeps shifting. But here at AgingOptions we share this article as part of our commitment to keep you informed. If you or a loved one is on Medicare and facing hospitalization make sure you insist on being informed after no more than 24 hours whether you are being held in observation status or being admitted. This is also an excellent reason for you to hire a geriatric physician to be the “quarterback” of your health care team. A geriatric physician, or geriatrician, understands the physical and emotional needs of aging patients better than any standard physician and can do more than any other health care professional to help seniors maintain vibrant good health for as long as possible. If a hospital stay should be needed, your geriatrician can become your health care advocate. Contact us at AgingOptions and we will refer you to a geriatrician in your area.

We also invite you to call our office if we can answer specific questions for you about Medicare and Medicaid. We have specialists on our staff who will explain these vitally important programs to you and help you with your particular situation.

But perhaps the best single recommendation we can make for those getting serious about retirement planning is for you to invest just a few hours and attend one of our free LifePlanning Seminars. These events, held at locations throughout the area, are highly popular and information-packed. You’ll discover the power of a process we call LifePlanning, a unique approach to retirement planning that blends all the separate “puzzle pieces” of retirement into one seamless whole: your finances, legal affairs, housing options, medical coverage and family communication. A LifePlan, individualized to meet your particular situation, will help ensure that you enjoy a retirement that’s fruitful and secure.

The next step is simple. Because LifePlanning Seminars tend to fill up quickly, you can register online for the seminar of your choice by clicking here. You can also contact us for assistance during the week. Bring your retirement questions and come prepared to learn valuable answers at a LifePlanning Seminar near you.

(originally reported at

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