Observation Status

June 11, 2018     About this blog:  click here

Observation Status

What is Observation Status?   It’s one of the most important pitfalls there are, if you are on Medicare.  It can cost you thousands of dollars.

Observation Status refers to when you stay in a hospital overnight, but instead of it being a Medicare Part A service, it is a Medicare Part B service.

What difference does that make?  First, let’s talk about Medicare Part A and Part B.

Part A is for what they call Hospital In-Patient care.  That means you are staying overnight in the hospital, AND you have been officially admitted as an In-Patient.

Part B is for doctor services, and for everything a hospital does which is NOT In-Patient Care.

Now, getting back to Part A: To be an In-Patient, you have to stay in a bed overnight, and:  You also have to be given a medical diagnosis that has been identified, and needs to be treated in a hospital.

If the doctors think something might be seriously wrong with you, but they don’t know for sure what it is, then they’re not supposed to admit you as an In-Patient just yet.  They haven’t figured out your diagnosis, or a treatment plan.

So instead, they put you on Observation Status.  You’re being “observed” because they’re trying to decide what’s wrong.   Put another way, you’re too sick for them to let you go home, but you’re not specifically sick enough to admit you as an In-Patient.

Decades ago, there often was a need to stay overnight on Observation Status,  because if they ran some tests, it could take a long time — like up to a day — to get the results.

Today, however, those same kinds of results are usually received in a few hours or less.  That means there should be less use of Observation Status than there had been.

But – Nope.   It’s just the opposite:  Use of Observation Status has been increasing a lot.  More people have been spending nights in the hospital while being on Observation Status, instead of being admitted as In-Patients.   Why?  Because the hospitals get paid more this way.

People on Medicare who are in Observation Status, as mentioned earlier, are in the Part B category, not Part A.   What happens as a result of that?

Observation Status and Medicare Part B

Part B has, besides a $183 Annual Deductible, a 20% Co-Insurance.  For example, if the Medicare rate for a service is $1,000, then the 20% portion not paid by Medicare is $200.

Most people have some kind of insurance that pays most of what Medicare doesn’t, but the insurance companies think up their own deductibles and co-pays that you have to pay.

Bottom line is that if you’re in a hospital under Part B, there’s a good chance you will have higher amounts to pay than if you had been under Part A instead.

Prescription Drugs

The second thing to be concerned about is, if you normally take some prescription medications every day, what happens with those when you’re in the hospital overnight?

If you’re admitted as a Part A In-Patient, the cost of those meds is rolled into the overall cost.

If you’re overnight on Observation Status instead, that means you’re on Part B.  That, in turn, means the meds you get are NOT paid by Medicare Part B.

The hospital might not let you take your own daily medications, even if you bring them with you They might insist that they have to provide those exact same meds to you.

Problem is, if they do that, they’ll usually charge you several, even 10-12 times what those pills cost  at your pharmacy.  If you have a number of meds, and are in for a few days, this bill could amount to $500 – $600, easy.

If you have Part D drug insurance, then you can submit the hospital’s bill for those meds to the insurance company.  You might – or might not – get reimbursed.

Nursing Home Rehab

Last but not least is the question of temporary rehabilitation in a nursing home following a hospital stay.  The good news is that Medicare will pay for it — in full up to 20 days.  The bad news is that Medicare will only pay for it if you had first been in a hospital as an admitted In-Patient for at least three nights.   Otherwise, no go.  Zip.  It could easily cost you several thousand dollars.

What can I do about Observation Status?

Not a lot, but there are a few things you can try:

  1. Insist that the hospital tell you whether you are on observation, or admitted as an inpatient.
  2. Insist that you will bring and take your own regular medications. You may need your doctor’s written permission ahead of time to do this.
  3. If you expect to need recovery in a nursing home after your hospital stay, tell your doctor that you need to be admitted as a hospital in-patient and stay at least three nights. But, the hospital can overrule your doctor’s wish.

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