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Life Health > Health Insurance > Medicare Planning

Medicare's Latest Hurdle - and Why You Can't Get Involved

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In early July, one of NAMSA‘s members sent me a Philadelphia Inquirer article written by Michael Vitez. The topic is “hospital admission” versus “observation status” – and a topic that I once viewed as somewhat insignificant is becoming very big news.

This story really nothing new, but 2010 applications of certain CMS rules are creating mounting problems. The basic premise is that Medicare will pay 20 days of skilled care in a skilled care facility after a three-day hospital stay. But wait – there’s more. Our Medicare clients go to the hospital because they’re sick or injured. If they’re there for a few hours and their situation is attended to on an outpatient basis, they don’t expect to need skilled care. We all do the same thing — go to the hospital when we’re sick or injured, receive outpatient treatments, go home, and everything’s fine.

But, here’s the catch: If the patient goes to the hospital with something serious, they won’t think to ask if they’re being admitted. They’ll just feel that they need to be attended to and expect that their physical ailment will be addressed. Yet, on an ever-increasing basis, the hospitals are not admitting patients because they’re afraid of miscoding the event and violating Medicare rules.

According to a Sept. 7 article from Kaiser Health News: “Claims from hospitals for observation care have grown steadily and so has the length of that care, says Jonathan Blum, deputy administrator at the Centers for Medicare and Medicaid Services (CMS), the federal agency that runs Medicare. The most recent data show claims for observation care rose from 828,000 in 2006 to more than 1.1 million in 2009. At that time, claims for observation care lasting more than 48 hours tripled to 83,183.”

A patient’s woes

The Inquirer story refers to an 86-year-old lady, Fran Bogom, who broke her arm and went to the hospital; as a side note, she also suffers from dementia and imbalance and was eventually placed in custodial care. Bogom wasn’t admitted as an inpatient, and through a series of gaffes, indecision, and confusion, she eventually made a hospital appeal (QIO), which every Medicare beneficiary has the right to do.

The appeal turned the three-day observation status into a four-day “admittance stay,” but only after her daughter Rachael, a social worker, intervened. Without the intervention, Bogom would not have known that she had only been admitted for observation, and not for a “medically necessary” inpatient stay, which covered the three-day rule for transfer to a skilled care facility for skilled care.

For the skilled care, Medicare and the Med Supp policy paid a rehab bill of $37,776.

A possible solution in legislation
There are a few updates to this situation. First, as expected, MedPAC defended itself by making a statement on Sept. 20 that its RAC program is not at fault.

“Because observational care is classified as outpatient care, this hospital status does not count toward the three-day hospital stay policy that qualifies patients for Medicare-reimbursed skilled nursing care. Provider groups had argued that the increased use of observational care was due to hospital concerns over potential claims rejections from Medicare Recovery Audit contractors,” according to McKnight’s Long-Term Care News and Assisted Living.

So, after 1.1 million “non-admissions” because the patients were under observational care and didn’t know the difference, a change is in order – and on Sept. 13, McKnight’s reported that such a change may be under way in Congress. H.R. 5950, introduced by Rep. Joe Courtney, would allow hospital “observation status” to count toward the requisite three-day hospital stay for Medicare-funded nursing home care. Medicare will cover the first 20 days of nursing home stays, but only if residents have first been admitted to the hospital for three days as an inpatient.

What this means for you

Now, why is this very important to you? And what can you do about the problem?

There’s one simple statement that you need to make every time you discuss Medicare and Medicare supplements or Medicare Advantage: Tell your clients that “a Medicare supplement policy only supplements what Medicare pays.” It’s a simple statement, but one that you need to deliver to every Medicare supplement policyholder, both during and after a sales delivery. The same goes for Medicare Advantage, with the exception of additional benefits outside of Medicare.

It’s too tempting to pick up the phone, hear a complaint, and tell a client, “I’ll look into it for you and get some help on getting this paid.” A Medicare Advantage producer can’t do that anyway, but an Medicare supplement producer may find that a claim got in sideways, and might be able to solve a small, normally clerical matter. But an agent is asking for trouble if they pursue a claims coverage decision and lead the client to believe that they have some magic power to override a Medicare or Medicare supplement decision.

Some will go so far as to tell the client, “I’ll get this covered for you,” thereby exposing themselves to an E&O claim and client alienation. Recently, I had a discussion with an agent who was trying to do an incredible amount of additional outside work to help a prospect work around some group health rules and get a 75-year-old man with end-stage kidney disease onto a guaranteed issue Medicare supplement. I couldn’t believe what I was hearing, and had to tell her that she was setting herself up for big trouble.

So no matter how much you value your clients, you must tell them that a Medicare supplement only covers what Medicare pays and that you cannot interfere with a hospital’s or Medicare’s decision to address the 72-hour rule. Should this come up in your agency, you need to head it off at the beginning of the conversation. And since the situation seems to be growing from 1.1 million cases in the last year, this might get much worse before it gets better.

Perhaps you’ve already encountered such a dilemma. If you have, we’d like to hear about it — and how you handled it. I’m willing to bet that nobody else has bothered to tell the hundreds of thousands of Medicare supplement and Advantage producers about this problem and how to cope with it.

Ron Iverson is president of the National Association of Medicare Supplement Advisors Inc. He can be reached at 406-442-4016. This article was adapted from a piece that ran in the Oct. 4 edition of the NAMSA newsletter.


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