Medicare Part A Hospital Inpatient or Under Observation? A Costly Difference

The decision for hospital admission or
hospital observation is not always an easy one. It’s based on your doctor’s
judgment and your need for medically necessary hospital care. So, in this video
I’m going to share with you the difference between being in the hospital
as an inpatient and being in the hospital under observation. They are
completely different and also treated differently in how Medicare pays for
your care based on your situation. Now, if you are wondering if you should pay
attention to this topic – I will answer that for you. Absolutely! Many Medicare
beneficiaries have been blindsided by unexpected out-of-pocket costs due to
their hospital situation. Now, how do I know this? Well, when I do a video for you,
I do a lot of research. And that’s because many of my videos come to life
due to conversations, suggestions, questions from you. So it’s a tremendous
amount of responsibility to make sure I provide accurate information for you, and
I’m always happy to take on that challenge.
So let’s get started with this video. So the first thing we’re going to do is
start with the definition for what it means to be a hospital inpatient.
According to Medicare inpatient admission is generally appropriate when
you’re expected to need two or more Midnight’s not just nights but
Midnight’s of medically necessary hospital care. But your doctor must order
such admission and the hospital must formally admit you in order for you to
become an inpatient. And by contrast if you were in the hospital under
observation, then you are classified as an outpatient. When you’re under
observation you’re in the hospital but haven’t formally been admitted with a
doctor’s order. Instead the doctor is keeping you under observation to monitor
your progress. For example, let’s say you visit the emergency room and then you
are moved to ICU. You stay in ICU overnight where you are being closely
monitored – your progress is being watched and then the next day you are released
to go home. What do you think? Were you admitted as an inpatient or were you
under observation? Well, if you listen closely,
you’re being closely monitored so that kind of indicates right there that you
were under observation. So, if you chose under observation, you are correct.
So even if you are in the hospital and you spent one night in a regular
hospital room in a regular hospital bed that doesn’t necessarily mean that you
are a hospital inpatient, you could be under observation and the same is true
if you spend several nights in the hospital in a regular hospital room in a
regular hospital bed it could mean you are still under
observation – even if it’s several nights. So, here’s where it gets a bit sticky. If
you are moved to a skilled nursing facility for rehabilitation care after
your hospital stay, you need a certain number of inpatient days to qualify for
skilled nursing facility care. So a qualified stay is key here. And, what’s a
qualified stay? It’s when you have stayed in the hospital as an inpatient for
three days. Remember, if you are in the hospital under observation you are
considered an outpatient, and that does not qualify as inpatient hospital status.
According to Medicare an inpatient stay begins on the day you are formally
admitted to a hospital with a doctor’s order. That’s your first inpatient day,
and the day of discharge doesn’t count as an inpatient day. So if the hospital
recommends rehabilitation care at a skilled nursing facility, but you didn’t
have a qualified hospital stay guess who’s responsible for the bill at
the skilled nursing facility? Well, it’s not Medicare. It’s not even your Medigap
Medicare supplement insurance because remember Medigap Medicare supplement
coverage only pays for what Medicare approves, and Medicare does not approve your
stay at a skilled nursing facility if you did not have a qualified hospital
stay. Now, I don’t want to sound like a negative Nancy here but please don’t
take this information lightly and assume that this will never happen
to you. I came across plenty of stories of individuals who were surprised by
out-of-pocket expenses once they left a skilled nursing facility, because they
didn’t know they were under observation at the hospital. And one of the most
popular cases is Mr. Verdini who was in a car accident – fractured his neck and
was in the hospital for five days and then moved to a skilled nursing facility
for rehabilitation. Once he left that facility and went home he received a
bill…a rather large bill. He did not expect to receive it. He thought he would
be covered under Medicare. He didn’t know he was under observation the entire time
he was at the hospital. To him it felt like regular hospital care as if he was
an inpatient. But let me let you listen in to Mr. Verdini’s own words about
how he felt about his stay. “The trouble is I wasn’t aware that Medicare was not
going to be paying for my stay at the rehab which was was a little over a $400 a day fee. In the end, he was
stuck with a bill for $7,700 for the weeks he spent in a rehabilitation
center after a car accident left him with a neck fracture.
By all accounts, did it feel like you had been admitted to the hospital? Absolutely, absolutely
you know I couldn’t tell the difference and I don’t know anybody else
who ever experienced it could tell the difference. But there was a huge
difference. He later discovered that he was under observation and not admitted
and as a result Medicare did not cover post hospital care. So what’s being done
to protect you from not having the same thing happen that happened to Mr. Verdini
and many other Medicare recipients? Well, there’s not a whole lot but if you
do go into the hospital, right now hospitals and critical access hospitals
are required to provide you a notice it’s called the Medicare Outpatient
Observation Notice also known as MOON They must give you this form if you have
been in the hospital under observation for a certain amount of time. And this
notice of course is provided to you such you know where you stand when
you’re at the hospital. This is a great notice to have, and I was reading through
it and at the bottom of the notice it is recommended that you call Medicare if
you have any questions – which is great except when you are in the hospital you
may not feel like getting on the phone with Medicare or anyone else for that
matter. Which brings me to my Bonus Tip. If you haven’t set up an authorized
representative – someone to talk to Medicare on your behalf, you may want to
go ahead and do so now, and if you already have a representative, please
consider adding a secondary person to speak to Medicare for you. That first
person (the first representative) that you signed up may be a primary caregiver, so
someone who is at the hospital taking care of you, handling other affairs, may
be just preoccupied and not in the right frame of mind to speak to Medicare for you.
So if you have a secondary person that can step in and handle that
responsibility it may be a good idea to put someone in place. But please make
sure that you reach out to them and ask for their permission, and make sure that
they are on board with it before you sign them up. And to sign them up, I
have a video on how to do it…simple steps on getting an authorized
representative in place. There’s a link somewhere around here for that video and,
of course, I always put a link in the post or description below. And, I’ll close
with some promising news. In March of 2017, a bill was introduced to amend the
Title XVIII Social Security Act to deem an individual receiving outpatient
observation services in a hospital to be an inpatient for purposes of satisfying
the three-day inpatient hospital stay requirement with respect to Medicare
coverage of skilled nursing facility services. So, basically the bill wants to
include those outpatient services at the hospital when you are under observation
towards a qualified hospital stay. Which would be helpful if you are moved to
a skilled nursing facility for rehabilitation care. And, hopefully there
will be some action on this bill and I can give you a report in the near future.
And, speaking of future, if you want to subscribe for
more video topics, please feel free to do so. If you’re already subscribed, thank
you, and you can click on the little bell icon to receive instant notification
when a video is uploaded. Thank you for being here, and if you liked this video
please click the like button, don’t forget to share it. And, please comment on
your thoughts about this topic. My name is Joann Quinn. I’m an Independent
Insurance Agent. Thanks for being here today. I’ll see you next time. Bye Bye BLOOPERS BLOOPERS

13 thoughts on “Medicare Part A Hospital Inpatient or Under Observation? A Costly Difference

  1. Ms. Quinn, once again thanks for super valuable information. I had no idea. Do you know when the notice requirement was implemented. Did the gentlemen in the video get the required notice? If not, why?

    Others may find this helpful:

  2. Joann, Thank you. Another very important video. I think this is one of your most important messages. The subject you just covered is the most confusing for medicare patients and as seen in your video can be the most costly.
    The following is quoted from a article by Benjamin Pearce.

    "Families need to inquire in regards to their loved one's status – inpatient or outpatient. Families should check daily and see IN WRITING that they are actually ADMITTED to the hospital and that they have INPATIENT STATUS"

  3. Thanks, great video and important. I had no idea. Is their value to requesting actual admission or is the hospital telling the doctor what to do?

  4. Another informative video – thank you. My wife is currently going through some testing which cold lead to hospital care. I wasn't aware of the difference between "observation" and "inpatient". Could prove to be invaluable info.

  5. Once again you capture and share very informative information to help us seniors navigate the Medicare system, thanks!

  6. One thing new Medicare members may find confusing is the "Annual Wellness Visit." Can you do a video explaining what is free under the wellness visit and what comes under Part B? I know that each year prior to Medicare I had an annual physical with lab tests from my doctor. Now I learn that the wellness visit is not really an exam at.

  7. As a Hospitalist this is probably the biggest nightmare in current hospital medicine. Many older patients and their families have not thought realistically about the future. So when patients can no longer live independently, their homes are refuse dumps, they live with cat's, thing's are growing in the fridge, etc; they are often brought to the ED by concerned family whose major concern is that they can't live alone anymore and family sure can't stay with them. The ED does a evaluation, can't really find anything but a weak, slightly cognitively impaired 87 year old female, then does the usual ED trick, gets a UA and calls asymptomatic bacturia a " UTI " and plops them in observation. It is left to the Hospitalist and social workers to explain that inpatient requires at least 2 Midnight's of real hospital care; taking pills, getting a PT evaluation, and basic nursing care AIN'T REAL INPATIENT HOSPITAL CARE and if you fib a bit and admit for three days to get their SNF stay payed, ( which requires three midnights of real Hospital care + an ongoing need for PT ), well, that's Medicare fraud, folks! In our town, the SNF requires up front payment of $7,000 before accepting such a patient. Welcome to Insanity.

  8. How would someone know if they were under observation vs admitted? I feel the discharging doctor and social worker at the hospital involved in setting up the transfer to SNF ought to know this 3 midnight rule.

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