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July 24, 2017 at 07:14 AM
Even if you don’t sell many, or any, Medicare plans, it’s important for financial professionals like you to stay abreast of the big issues.
Perhaps the most pressing issue in Medicare circles right now is the confusion surrounding Medicare observation status.
(Related: Planning for Dental Care Costs in Retirement)
Despite a recent attempt to fix the problem, many seniors still don’t fully understand how it works until it hits them in the wallet. It can affect not only your older clients—or perhaps your clients’ parents—but own senior family members as well.
Observation Status v. Hospital Admittance
Here’s the root of the problem. Medicare requires a patient to be admitted to the hospital and spend at least three days as an inpatient in order for follow-up care in a nursing home to be covered.
However, more ER doctors are categorizing seniors for observation, not admittance. Seniors under observation status not only experience unexpected costs (observation status is covered under Medicare Part B, not Part A), but worst of all, are ineligible for Medicare’s nursing home benefit.
What’s driving this? As you might suspect: money. These days, hospitals are using observation status to avoid Medicare penalties that are incurred when patients are readmitted within 30 days. (This is due to the Hospital Readmissions Reduction Program (HRRP), an Affordable Care Act provision intended to discourage excess readmissions.)
In some cases, Medicare considers readmission evidence that the hospital discharged a patient prematurely and can withhold reimbursement for the initial hospitalization.
But there’s no penalty for observation stays. Which is why, according to one Kaiser Health study, the number of patients under observation status has increased 69% within just five years.
Observation patients sleep in the exact same bed that they would if they were admitted. They receive the exact same care. Which is why, until a recent change, many patients had no way to know whether they were admitted as an inpatient or for observation only.
