President Barack Obama has signed a bill that requires hospitals to notify Medicare patients when they are receiving observation care but have not been admitted.
The bill is meant to help address a recurring problem for beneficiaries who face sticker shock when they go to a skilled-nursing or rehab facility after leaving the hospital and find that Medicare won't cover the tab. That's because to qualify for skilled-nursing facility coverage, beneficiaries must first spend three consecutive midnights as an admitted patient in a hospital; observation days don't count.
Another common issue is beneficiaries facing unexpected Medicare Part B copays for drugs received during hospital care, since they were never actually admitted into the hospital and the drugs therefore are not covered under Part A.
The Notice of Observation Treatment and Implication for Care Eligibility Act would require hospitals to notify beneficiaries receiving observation services for more than 24 hours of their status as an outpatient under observation. The written notification would have to explain that because the beneficiary is receiving outpatient rather than inpatient services, they will be subject to cost-sharing requirements that apply to outpatient services. The notice also must say that the beneficiary's outpatient stay will not count toward the three-day inpatient stay required for a beneficiary to be eligible for Medicare coverage of subsequent skilled-nursing facility services.
Legal experts remain incredulous the bill will actually help address these scenarios, as it gives beneficiaries no formal recourse to change their status once they find out they're at a hospital on an observational basis.
“The new law will not cure these problems, but will at least give patients a warning before they spend thousands of dollars on care that will not be covered by Medicare,” Jeff Marshall, an elder law attorney in Pennsylvania, said in an analysis. “Some beneficiaries will likely decide to receive a different set of medical services after being notified of their observation status.”
Still, advocates are pleased despite the bill lacking a formal recourse path. “Medicare beneficiaries need to know what their hospital admission status is and how it affects their out-of-pocket expenses,” said Andrew Scholnick, a senior legislative representative at AARP.
“While this does not address all the issues associated with observation care, such as counting time in observation toward the three-day rule for receiving skilled-nursing care, it helps educate consumers and protects individuals from surprise hospital bills,” Scholnick added.
Provider groups such as the American Hospital Association and the American Academy of Family Physicians have also expressed support for the law.
The next step is that the CMS must begin the rule-making cycle and release the rule for public comment. The agency has released no timeline for when this process will occur.