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  1. Improve Medicare: Correct Medicare Hospital Observation Status
  2. Legal Memorandum: Statutory Authority Exists for Medicare to Cover Medically Necessary Oral Health Care
  3. Joint Statement on Turmoil in the Nursing Home Industry

Improve Medicare: Correct Medicare Hospital Observation Status

Recently, the Center for Medicare Advocacy laid out our Medicare Platform for the New Congress. One of the core considerations to improve Medicare for all beneficiaries, now and in the future, is the need to reduce ongoing barriers to coverage and care. One of the key issues impeding access to Medicare coverage is the continued, and growing, use of “outpatient” observation status.

Hospital patients in “outpatient” observation status often receive care in acute care hospitals that is indistinguishable from the care patients receive when they are formally admitted to hospitals as inpatients.[1] The consequences of outpatient status are considerable, however, especially for patients who need post-hospital care in a skilled nursing facility (SNF). Since Medicare was enacted more than 50 years ago, Medicare Part A has covered SNF care only for patients who were hospitalized as inpatients for at least three consecutive days, not counting the day of discharge (since Medicare counts days by midnights, not by 24-hour periods, a shorthand for this statutory requirement is three inpatient midnights). Unless covered by Medicaid, hospital patients who were in observation or other outpatient status must pay for their SNF stay entirely out-of-pocket, or forego this necessary care.

A recent analysis of Medicare spending on post-acute care documents the steep decline in inpatient hospital admissions since 2010.[2] Many of these patients actually were in the hospital, but in “outpatient” observation (rather than inpatient) status. Declining inpatient stays covered by Medicare has resulted in a decline in Medicare-covered SNF stays – and in a parallel reduction in access to necessary SNF care.

Legislation introduced in the 113th, 114th, and 115th Congresses would have counted all time in the hospital, whether called inpatient or outpatient, for purposes of satisfying Medicare’s three-day inpatient requirement for SNF coverage. Although a broad coalition of organizations[3] supported the legislation, the legislation has not been enacted. 

For the 116th Congress, there are several alternative approaches to address the issue of observation status and reduce the harm it causes beneficiaries. Congress could:

  • Reintroduce S.568/H.R. 1421, The Improving Access to Medicare Coverage Act of 2017,[4] as is.
  • Reintroduce the 2017 legislation, but add a right to appeal a patient’s classification as observation or other outpatient status. (As a result of the Notice of Observation in Treatment and Implications for Care Eligibility (NOTICE) Act,[5] hospitals must inform patients, orally and in writing (using the Medicare Outpatient Observation Notice, MOON[6]) that they are in observation status if that status continues for 24 hours. However, the federal regulations implementing the NOTICE Act explicitly deny patients the right to appeal their classification as observation status patients.[7])
  • Amend the Medicare statute to authorize patient appeals of observation status. (All Medicare notices except the MOON authorize patient appeals, as a matter of due process.)
  • Amend the Medicare statute to allow for Part A coverage of SNF care if a patient is hospitalized as an inpatient for one day. (The Medicare Payment Advisory Commission made this recommendation in January 2015 as a less costly proposal than either counting all time in the hospital or waiving the three-day requirement entirely.[8])
  • Amend the Medicare statute to allow for Part A coverage of SNF care if a patient is hospitalized, as an inpatient or outpatient, for one day. 
  • Amend the Medicare statute to eliminate the 3-day inpatient requirement for Part A coverage of a stay in a SNF. (Multiple reasons support this approach, although it may be the most expensive approach.  Medical practice is different today than it was in 1965; many procedures are now performed on an outpatient basis that required extended periods of hospitalization in 1965. When Medicare was enacted, the average length of stay in a hospital for patients age 65 and over was 13 days; the average length of stay for all patients now is five days.  Medicare Shared Savings Program, such as Accountable Care Organizations, may waive the three-day inpatient requirement.[9]  Medicare Advantage plans may also waive the three-day requirement, and most do.[10])


Observation status has created an enormous hardship for Medicare patients who need post-hospital care in a SNF. It also creates unwanted and unnecessary conflicts between patients and providers. One or more of the alternatives identified above could help reduce the harm of observation status and help Medicare patients get the care they need. 

[1] See the Center for Medicare Advocacy’s materials on observation status, at
[2] Laura M. Keohane, Salama Freed, David G. Stevenson, Sunita Thapa, Lucas Stewart, Melinda B. Buntin, “Trends in Postacute Care Spending Growth During the Medicare Spending Slowdown,” The Commonwealth Fund, Issue Brief (Dec. 2018),
[3] See the coalition’s Fact Sheet at: 
[4] S. 568,; H.R. 1421,
[5]  42 U.S.C. §1395cc(a)(1)(Y).
[7] 42 C.F.R. §405.926(u).
[8] Kim Neuman, Zach Gaumer, Stephanie Cameron and Craig Lisk, Medicare Payment Advisory Commission, “Hospital Short Stay Policy Issues,” slide 10 (Jan. 16, 2015),
[9] CMS, Medicare Shared Savings Program; Skilled Nursing Facility 3-Day Rule Waiver, Guidance (Jan. 2019),
[10] 42 C.F.R. §422.101(c).


Legal Memorandum: Statutory Authority Exists for Medicare to Cover Medically Necessary Oral Health Care

The following is the Center for Medicare Advocacy’s legal analysis and does not represent the federal Medicare agency’s (CMS') position or interpretation of its dental coverage policy.

Medicare coverage for medically necessary oral health care is supported by the Medicare statute, its legislative history, Centers for Medicare and Medicaid Services (CMS) policy, and precedent established by podiatry coverage.  For this purpose, “medically necessary oral health care” refers to care that, according to accepted standards of practice, is reasonable, necessary, integral, and prudent to the management and/or treatment of a covered medical condition, and/or for prevention of a medical complication from oral/dental pathologies.

The Medicare Dental Exclusion is Limited and Should be Interpreted Narrowly

The Medicare statute excludes payment for services “in connection with the care, treatment, filling, removal, or replacement of teeth or structures directly supporting teeth…” Section 1862(a)(12) of the Social Security Act [42 U.S.C. § 1395y(a)(12)].  The provision bars payment when the primary purpose of the dental work is to address the teeth and supporting structures.

Importantly, the plain language of the statutory provision does not prohibit payment for dental services needed “in connection with” treatment of medical issues that extend beyond the teeth and supporting structures. For example, clinical standards and protocols for certain covered medical procedures (e.g., some organ transplants, cardiac surgeries, chemotherapies) require that dental infections be treated to reduce the risk of serious and costly complications.      

Moreover, the legislative history reflects Congress’ intent to limit the dental exclusion to routine dental care.  Medicare Part B covers “medical and other health services,” 42 U.S.C. § 1395k(a)(2)(B), including “services and supplies … furnished as an incident to a physician’s professional service,” id. § 1395x(s)(2)(A), and that are “reasonable and necessary,” id. § 1395y(a)(1)(A).  Under this governing framework, coverage would only be available for items and services associated with the diagnosis and treatment of medical illness, injury, and disease. Hence, the coverage exclusions listed under § 1395y(a) are items and services generally considered routine, cosmetic, supportive, preventive, comfort-related, or associated with the normal course of aging. 

The Senate Report accompanying the legislation, however, expressly qualifies the scope of these exclusions:

“Payments would not be made for routine physical examinations or for eyeglasses, hearing aids, or the fitting expenses or other costs incurred in connection with their purchase.  The committee bill provides a specific exclusion of routine dental care to make clear that the services of dental surgeons covered under the bill are restricted to complex surgical procedures.  Thus, payment would be made under the supplementary plan for the physician’s services connected with the diagnosis of a specific complaint and the treatment of the ailment, but a routine annual or semiannual checkup would not be covered. Similarly, the diagnosis and treatment by an ophthalmologist of, say, cataracts would be covered but the expenses of an eye examination to determine the need for eyeglasses and charges for prescribing and fitting eyeglasses or contact lenses would not be covered. Similarly, too, routine dental treatment — filling, removal, or replacement of teeth or treatment of structures directly supporting teeth – would not be covered.”  S. Rep. No. 89-404 (1965), reprinted in 1965 U.S.C.C.A.N. 1943, 1989-90. Emphasis added.

The full section of the Senate Report repeatedly acknowledges there could be clinical situations in which an excluded item or service is medically necessary (i.e., not merely routine, cosmetic, comfort-related, etc.) and clarifies firmly that coverage would be available in those instances. 

Medicare coverage for medically necessary oral procedures is further supported by the fact that the statute has always defined “physician” to include dentists. See 42 U.S.C. § 1395x(r)(2).[1]  Later, Congress even expanded that definition, “when used in connection with the performance of any function or action, [to mean] … (2) a doctor of dental surgery or of dental medicine … who is acting within the scope of his license when he performs such functions.”[2] Notably, the House Report to that amendment reinforced that the dental exclusion only applies to “routine dental services.”[3]

Accordingly, the dental exclusion should not be broadly construed to preclude coverage for dental procedures in all circumstances, as this was not the legislative intent.[4]  A narrower interpretation also aligns with Medicare’s fundamental, remedial purpose to help beneficiaries access and afford treatment for major medical problems.[5]

CMS Recognizes But Significantly Limits Coverage for Medically Necessary Dental Services.

Dispelling any concern that CMS lacks authority to cover medically necessary dental services, the Agency has already exercised such authority by permitting Medicare payment for an oral or dental examination prior to kidney transplant surgery.  As explained, the statutory exclusion does not prohibit coverage in this instance since the “purpose of the examination is not for the care of the teeth or structures directly supporting the teeth.  Rather, the examination is for the identification, prior to a complex surgical procedure, of existing medical problems where the increased possibility of infection would not only reduce the chances for successful surgery but would also expose the patient to additional risks in undergoing such surgery.” Medicare National Coverage Determination Manual (MNCDM) Pub. 100-03, Ch. 1, Part 4, § 260.6. 

Consistent with this, the agency also construes the general dental exclusion as reserving payment for the services of dentists “to those procedures which are not primarily provided for the care, treatment, removal, or replacement of teeth or structures directly supporting the teeth.”(Emphasis added). Medicare General Information, Eligibility and Entitlement Manual, Pub. 100-01, Ch. 5, §70.2.  Based on this accurate understanding of the exclusion’s limited scope, the agency could authorize coverage in a broader range of clinical contexts where dental treatment is medically required.

Finally, the statute allows payment for dental services “furnished as an incident to a physician’s professional services” 42 U.S.C. § 1395x(s)(2)(A). CMS has interpreted the provision in conjunction with the dental exclusion to cover a dental procedure performed incident to and as an integral part of a primary, covered non-dental procedure. MBPM (Medicare Benefits Policy Manual), CMS Pub. 100-02, Ch. 15, § 150.

However, the Agency has also adopted a policy that requires the dental service to be performed at the same time as and by the same dentist who performs the non-dental procedure. Id. Under this exacting test, coverage for the dental service is granted in very limited circumstances (i.e., contemporaneous with covered jaw surgery or tumor removal).  The “same time/same dentist rule” is viewed by many as unduly restrictive, as well as flawed from a clinical perspective.  The rule hinges coverage on the timing of the dental procedure, who administers it, and the anatomical location of the primary covered procedure, rather than taking into account clinical standards and protocols and whether the procedure is, medically-speaking, incident to and an integral part of a covered medical procedure or course of treatment.[6]  

CMS correctly discerned the need to depart from its own rule when it exercised its authority to cover tooth extractions to prepare the jaw for radiation treatment of neoplastic disease. MBPM, Ch. 15, § 150. The logical justification for this coverage is that the tooth extractions are incident and integral to the covered radiotherapy, notwithstanding that the procedures are performed at separate times and by different types of practitioners.  The Agency could similarly recognize and authorize coverage in other instances where dental services are unequivocally integral to a covered medical treatment or procedure.

CMS Precedent for Coverage of Medically Necessary Oral and Dental Care Exists in the Coverage of Medically Necessary Routine Foot Care

As set forth in 42 U.S.C. § 1395y(a)(13) – a provision listed directly after the dental exclusion in the Act– the Medicare program expressly bars payment for “routine foot care (including the cutting or removal of corns or calluses, the trimming of nails, and other routine hygienic care)[.]”  However, CMS does not interpret this statutory exclusion as preventing its coverage of medically-necessary routine foot care.

In its implementing regulation, CMS permitted exceptions for the treatment of warts and mycotic toenails, and for routine foot care if furnished “[a]s an incident to, at the same time as, or as a necessary integral part of a primary covered procedure performed on the foot” or “[a]s initial diagnostic services (regardless of the resulting diagnosis) in connection with a specific symptom or complaint that might arise from a condition whose treatment would be covered.” 42 C.F.R. § 411.15(l)(2).

In interpreting its regulation, the agency’s policy guidance goes even further to authorize Medicare payment for routine foot care when “[t]he presence of a systemic condition such as a metabolic, neurologic, or peripheral vascular disease may require scrupulous foot care by a professional that in the absence of such condition(s) would be considered routine (and therefore, excluded from coverage).” MBPM, Ch. 15, § 290. The policy thus establishes a presumption of coverage when there is documented evidence that a patient has an underlying systemic condition with severe peripheral involvement. Such clinical findings would validate the administration of medically reasonable and necessary, and therefore reimbursable, foot care.

Similar to the exceptions carved out for foot care, CMS could duly establish exceptions to the dental exclusion based on substantiated medical need.  As with the foot care exceptions, the policy could provide a non-comprehensive list of underlying conditions that might justify coverage, and include a rubric of pertinent clinical findings that would support medical necessity.


Medicare can be improved by providing medically necessary coverage to address oral and dental conditions that pose a serious risk to a patient’s health or medical treatment. This includes instances where a physician has determined that a patient’s oral infection or disease will delay or prevent the receipt of, or otherwise complicate the outcome of, a covered treatment for an underlying medical condition.  For example, clinical standards and protocol may strongly recommend or absolutely require the resolution of oral infections for certain patients with diabetes, or pulmonary disease, or who need an organ transplant, immunotherapy, joint replacement, or heart surgery.  Untreated dental conditions in such contexts can prove to be not only medically hazardous to patients, but also very costly for the health care system.

As discussed above, CMS has already exercised its authority to cover medically necessary oral and dental services in a few instances as a matter of policy.  The agency does not view the statutory dental exclusion as a barrier to coverage in these instances because the services are not primarily to care for the teeth, but incident and integral to a covered medical procedure. By the same regard, the agency could authorize meaningful coverage for dental services in a broader range of clinical circumstances, much like it did for foot care. Revising CMS policy to define coverage for medically necessary oral and dental therapies would not expand coverage beyond what the Medicare statute allows. To the contrary, it would uphold the general statutory exclusion of basic, routine dental care while fulfilling Congress’ goal of ensuring access to and coverage of medically necessary treatment for major health problems.

1/3/2019 – W. Kwok

A version of this memorandum is being used by a coalition of organizations seeking to expand Medicare coverage for medically necessary dental therapies.

[1] Of note, although this subsection qualifies the scope of actions performed by doctors of podiatry, optometry, and chiropractor, see 42 U.S.C. § 1395x(r)(3)-(5), it places no similar restrictions on the actions of dentists that may be covered. Id., § 1395x(r)(2).
[2] Pub. L. No. 96-499, § 936(a), 94 Stat. 2599, 2639-2640 (1980) (amending 42 U.S.C. § 1395x(r)).
[3] H.R. Rep. No. 96-1167 at 372 (1980), reprinted at 1980 U.S.C.C.A.N. 5526, 5735.
[4] It is noteworthy that the agency’s original regulation barred payment for “Routine dental services in connection with the care, treatment, filling, removal, or replacement of teeth, or structures directly supporting the teeth.” 20 C.F.R. § 405.310(i), added 31 F.R. 13534, 13535 (Oct. 20, 1966). 
[5] “The Medicare statute, remedial in nature, is to be broadly construed.”  Hirsch v. Bowen, 655 F. Supp. 342, 344 (S.D.N.Y., 1987) (citing Gartman v. Secretary of U.S. Depart. Of Health and Human Services, 633 F. Supp. 671, 679 (E.D.N.Y., 1986).  Moreover, “exclusions from coverage should be narrowly construed lest they inadvertently encompass the qualifications for benefits.”  Westgard v Weinberger, 391 F. Supp. 1011, 1019 (NDND 1975) (citing Coe v. Secretary of Health, Educ. and Welfare, 502 F.2nd 1337, 1340 (4th Cir. 1974).
[6] See Lodge v. Burwell, 2016 WL 7493954 (D. Conn. 2016) (cautioning against “a too-literal application” of the incident-and-integral exception to require that services be performed by the same doctor and on the same occasion.  The decision states that a strict application of the same-time/same-dentist rule “is not compelled by the language of the Act and could under certain circumstances lead to results at odds with the purpose of the Act…”  It further suggests that the strict requirements of this rule “stand in tension” with the remedial ends of the Act, which would “permit payment for dental services whose primary purpose is not merely the care or treatment of teeth.”).


Joint Statement on Turmoil in the Nursing Home Industry

January 2019 – The nursing home industry is facing tremendous turmoil because some operators are undertaking risky financial deals in an attempt to squeeze out larger profits from their nursing homes, even when these deals could potentially harm residents. The recent collapse of several nursing home chains around the country also raises serious concerns about the quality of states’ licensure processes and the industry’s ability to meet the care needs of a vulnerable population.

In a recently published article, The Washington Post examined the impact that a private-equity firm had on one nursing home chain. After the Carlyle Group bought HCR ManorCare, the number of health deficiencies at the chain “each year rose 26 percent between 2013 and 2017.” During this period, the Carlyle Group sold ManorCare’s real estate empire for about $6.1 billion dollars, in an arrangement which then required to the chain to pay rent to the new owners. Unable to pay the escalating rent, the chain was forced into bankruptcy in 2018.

ManorCare’s financial troubles are not isolated. Other nursing home chains have collapsed as a result of risky financial decisions and poor management. Skyline Healthcare’s nursing homes in several states were taken over through receiverships and rapid-fire sales after poor management placed residents in danger. The Kansas City Star noted that “[a]nalysts and industry insiders say state regulators should have known Skyline was biting off more than it could chew . . . the company was struggling to pay its bills in other states even before it moved into Kansas . . .” Skyline acquired many of its facilities from Golden Living, another nursing home chain that was sued by the Pennsylvania Attorney General in 2015. According to The Philadelphia Inquirer, the lawsuit stated that “Golden Living was guilty of deceptive advertising in Pennsylvania in that it promised decent care but did not deliver it.”

Such examples of risky financial arrangements and poor management are in addition to cases of related-party transactions which can siphon money away from resident care. The New York Times explained that “owners of nursing homes outsource a wide variety of goods and services to companies in which they have a financial interest or that they control.” The article added that nearly three-quarters of nursing homes in the U.S. employ such practices and that these nursing homes tend to “have fewer nurses and aides per patient, they have higher rates of patient injuries and unsafe practices, and they are the subject of complaints almost twice as often as independent homes.”

Nursing home residents need to be protected from bad actors who place their lives in danger. States must develop, implement, and enforce better policies and procedures for reviewing operating licenses to make sure existing operators with a history of providing poor care cannot expand their operations and that new operators are thoroughly vetted. Additionally, medical loss ratios should be implemented across the industry to limit profits and administrative costs. Without proper oversight and accountability, resident care will continue to take a backseat to “profits.”   

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