Medicare Recipients Will Be Less Vulnerable to Sticker Shock in Hospitals

Over the course of a day or so, Karen’s right arm began feeling weak and her speech began to slur. She was convinced she was having a stroke, so she called 911 and was rushed to the nearest emergency room. She remained in the hospital for nearly 48 hours to undergo testing, since it was unclear whether she had a stroke, a fainting spell, or something else. She assumed she was admitted, due to the longevity of the stay, the tests that were run, and the attention from physicians. It turns out she was in “observation status,” or an outpatient designation used to monitor patients during periods of medical uncertainty. She found this out the hard way, when she received a hefty bill in the mail (none of which was covered by Medicare).

For Medicare beneficiaries such as Karen, hospitals are “observing” without admitting – sometimes for more than 48 hours. In the past, beneficiaries may subsequently receive short-term rehabilitative care in a skilled nursing facility, without realizing that Medicare will not pay for it and get stuck with out-of-pocket costs that can amount to many thousands of dollars. However, starting on August 7, a new law will go into effect that makes it mandatory for hospitals to notify patients whether they are in “observation status.”

The NOTICE Act Officially Goes into Effect in Less than a Month

Last year, President Obama signed the NOTICE Act into law, requiring hospitals to inform Medicare patients who are in the hospital under outpatient observation status that they haven’t actually been “admitted” to the hospital and what that means in terms of cost-sharing requirements and subsequent coverage eligibility.
The law aims to eliminate the confusion and surprise of out-of-pocket costs for Medicare beneficiaries who might not realize that simply spending the night in the hospital doesn’t make one an inpatient—and may leave one vulnerable to unexpected charges.

As a reminder, under the Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act:

• Medicare patients who have been in the hospital for more than 24 hours are required to be notified of their status within 36 hours of when they start receiving services as an outpatient;

• Hospitals are required to provide patients with verbal and written notification of their status and will have one year to comply with the law from the date it is enacted;

• Hospitals must explain the individual’s status as an outpatient and not as an inpatient and the reasons why;

• Hospitals are required to explain the implications of that status on services furnished (including those furnished as an inpatient), in particular the implications for cost-sharing requirements and subsequent coverage eligibility for services furnished by a skilled nursing facility;

• Notices must be written and formatted using plain language and made available in appropriate languages;

• Notices must be signed by the individual or a person acting on the individual’s behalf (representative) to acknowledge receipt of the notification, or if the individual or representative refuses to sign, the written notification is signed by the hospital staff who presented it; and

• Clinicians will also have to explain how Medicare covers people under observation and clarify that a “non-inpatient” status may have personal cost implications. The law leaves out non-observation outpatients such as emergency room patients.

Although the federal law is set to go into effect next month, a handful of states have already written laws of their own requiring hospitals to notify patients of their outpatient status.

Be Advised: The Form Might Not Tell You All You Need to Know

When it comes to providing notice to patients, the newly required form is crucially important, as it should help observation patients avoid ugly financial surprises. However, according to AARP, the form that was recently unveiled by Medicare officials does not tell patients what they really need to know.

This is why AARP says the form falls short:

• It’s confusing: Most people will have an extremely hard time understanding the form- especially explanations of Medicare’s observation coverage rules.

• No personalized explanation of status: The cookie-cutter form requires only a generic statement on why doctors are not formally admitting the patient.

• Limited usage: Non-observation outpatients do not get the form, despite facing similar financial consequences as observation patients.

Fortunately, Medicare can still fix the form to give people under observation and other outpatients clear and meaningful information before the law goes into effect, and AARP is advocating for them to do so.

You Should Still Inquire About Your Status

Remember, form or no form, if you or a loved one are in the hospital for more than a day, be sure to ask hospital personnel what your status is. Keep asking because it can be changed from day to day. If you are told you are in the hospital under observation status, you can ask the hospital doctor to be admitted as an inpatient and explain the medical reasons that you need to be admitted. This will not guarantee anything, but it can’t hurt.

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