Observation vs Inpatient
When the doctor tells you that they will admit your loved one to the hospital, you need to ask, “Are they being admitted as an inpatient or Observation?” If the answer is inpatient, there is nothing else you need to do. If your loved one is being admitted under “Observation,” you must be aware of potential problems.
Observation Status is paid by Medicare Part B, while inpatient status is paid by Medicare Part A. Individuals enrolled in Medicare Part A but not Part B will be responsible for paying the entire hospital bill if they are listed as “Observation” status.
Since March 2017, federal law has required hospitals to provide both oral and written notification to patients that they are being admitted as an observation status if they have been admitted for more than 24 hours and are not admitted as an inpatient. This is called the “Medicare Outpatient Observation Notice” or MOON, and notice must be given to the patient within 36 hours of admission to the hospital.
When an individual’s status is “Observation,” they may be charged for services that Medicare normally pays for, such as a copayment for each outpatient service they receive or 20% of the Medicare-approved amount for most doctor services after the Part B deductible.
To get Medicare to pay for rehab in a long-term care facility, the individual must be listed as an inpatient for three (3) midnights. If your loved one’s status is “Observation,” Medicare will NOT pay for their rehab; it will be an out-of-pocket expense.
What Options do you have if your loved one is admitted under “Observation?”
1. If the individual is still in the hospital:
a. Ask the doctor to help change their status to inpatient.
b. Use Medicare’s “two-midnight rule.” (Not to be confused with the (3) three-midnight rule above). This states that if their doctor expects the individual to require hospital care for at least two midnights, the hospital should be able to admit the individual as an inpatient. Understand that if your loved one's status is changed to inpatient, the clock starts then, and they must be listed as "inpatient" for three midnights.
Consider other care resources, such as an inpatient rehabilitation hospital, home health care, or outpatient therapy. These do not require a three- (3) midnight inpatient stay. If the individual is no longer in the hospital, Medicare does not currently have an official method for appealing the Observation status.
Note: This information applies to Traditional Medicare. Many Medicare Advantage Plans don’t require the “three midnights” to receive skilled care in a long-term care community. You need to check with your Advantage Plan to make sure you are covered in the event you are sent to the hospital.
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