Medicare patients, whose hospital stays would normally be covered under the program, are being hit with surprise bills once they return home, bills that can reach into the tens of thousands of dollars. The loophole stems from the manner in which the patients are being classified during their hospital stays.
If a patient is formally admitted to the hospital, the hospital submits the bill to Medicare for reimbursement. However, if a patient is given the “observation” classification, used in cases lacking an immediate diagnosis, the patient may be billed for services without even realizing that his or her care is not covered. Under Medicare rules, patients under observation face a 20 percent copayment. Furthermore, the burden of paying for rehabilitation following an observational hospital stay would fall entirely on the patient.