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In or out?An August 7, 2016 New York Times article once again highlighted the problem of hospital Observation Status, including issues with the NOTICE Act, which is supposed to help Medicare beneficiaries understand their status. The article, New Medicare Law to Notify Patients of Loophole in Nursing Home Coverage, featured a Center For Medicare Advocacy client's story. In the piece, Center Executive Director Judith Stein stated “the new law is an important first step, but Congress and the administration need to do more to protect beneficiaries.”

"Observation Status" is a designation used by hospitals to bill Medicare. People who receive medical treatment and skilled care in hospitals, even overnight and for several days, may learn they have not actually been admitted as inpatients. Instead, the hospital has classified them as "outpatients," or in Observation Status. The NOTICE Act requires notice to patients in Observation Status.  However, the law does not give Observation patients a right to appeal.  So, unfortunately, this status will continue to harm patients who rely on Medicare for their health care coverage.

When hospital patients are classified as outpatients on Observation Status, they may be charged for services that Medicare would have paid if they were properly admitted as inpatients. For example, patients may be charged for their medications.  Most significantly, patients will not be able to obtain any Medicare coverage if they need nursing home care after their hospital stay. Medicare only covers nursing home care for patients who have a 3-day inpatient hospital stay.  Thus, "outpatient" Observation Status doesn’t count toward the 3-day stay.  Finally, outpatient Observation Status services are paid by Medicare Part B, while inpatient hospital admissions are paid by Part A. As a result, Medicare beneficiaries who are enrolled in Part A but not Part B will be responsible for their entire hospital bill if they are classified as Observation Status.

The Center is working with the John A. Hartford Foundation to try to end the problem of Observation Status. Over the two-year grant period, CMA, will gather existing resources and collect stories from beneficiaries, produce and update advocacy materials, and conduct outreach and education.  We hope to reduce the impact of Observation Status on patients.

We need YOUR Outpatient Observation stories.  Submit them to Observation@MedicareAdvocacy.org

Please include:

  • Your Contact info
  • Beneficiary Name
  • State and Zip Code
  • Number of days spent in Observation
  • Out-of-Pocket costs incurred (for Drugs, SNF stay, services not covered due to lack of Part B, etc.)
  • Summary of Observation Status story
  • And let us know if we can use your story for outreach (without identifying information) with: Media, Policy Makers and/or other Advocacy Organizations

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