No More Closed Eyes on Medicare Observation Stays Issue

Both chambers are working towards a small yet important Medicare fix

One of the most dreaded calls a personal office to a House member can receive is a constituent panicked about being denied Medicare coverage. Front office staffers worry that could be the beginning of a long string of complaints and cries for their boss to “do something!” to make the problem go away.

For a growing number across the country, that’s exactly what’s happening to seniors who find themselves leaving a hospital, preparing for a short stay in a skilled nursing center, and then being told the bill could run as much as thousands of dollars  in out-of-pocket costs.  Those on fixed incomes fully expect Medicare to cover such a stay, only to be told that’s not the case.

The increasingly familiar scene is known as the observation stays issue.  The observation dilemma is becoming a growing problem which policymakers must address now so our nation’s seniors have access to the care they need.

Some quick background: Hospital patients under observation are considered outpatients despite the fact that they may stay in a hospital bed for many days and nights, typically receiving the same medical care that is provided to inpatients.  However, there is one big difference: outpatient stays at a hospital – even when the services provided may be identical to an inpatient stay – leave the patient in a bad situation when it comes to post-hospital care in a skilled nursing center. Before Medicare will pay for skilled nursing care, a patient must first spend three days in an inpatient hospital stay. Currently, time spent under “observation” in a hospital will not count toward that three-day minimum.

Patients are forced to choose between receiving the care they need or cutting their recovery and rehabilitation short.  This financial burden alone on seniors and their families can accelerate the time frame in which seniors must turn to programs such as Medicaid to pay for their care. Often times, patients have no idea what their status is in a hospital or the importance of it.

Hospitals’ use of observation stays and the amount of time patients spend in observation status is on the rise.  According to an AARP report from September 2013, the use of Medicare hospital observation services grew by over 100 percent from 2001 to 2009.

Fortunately, many members of Congress are on the case, and working to address the issue.

In fact, Representatives Joseph Courtney (D-CT) and Tom Latham (R-IA) introduced H.R. 1179, while Senator Sherrod Brown (D-OH) introduced a companion bill, S. 569, cosponsored by Senator Susan Collins (R-ME).  This bipartisan legislation seeks to count all hospital days spent in observation towards the three-day inpatient stay required for Medicare coverage of Part A skilled nursing care benefits.

Some members of Congress support eliminating the three-day stay requirement all together, which effectively solves the related issue of observation stays.  Representative Renacci’s bipartisan H.R. 3531 eliminates the three-day inpatient stay requirement by allowing centers that meet particular criteria to automatically qualify to waive the prior hospitalization requirement.  The criteria are based on the CMS Nursing Home Compare program.  In addition, a similar bill was introduced by Representative McDermott, H.R. 3144, which also seeks to eliminate the three-day stay requirement.

The Senate Aging Committee is also investigating this topic, promising to hold a hearing on the impact of observation stays the afternoon of July 30th.

So while the idea of Medicare “reform” is anathema to many in Washington, there is one aspect of Medicare on which both parties are coming to agree that needs reform – observation status.  The intensity is rising; the will to change the law is equally impressive.  2014 – an election year, even – could be the year we see a true policy solution enacted to benefit hundreds of thousands of Medicare beneficiaries.  Let’s hope for the benefit of our nation’s seniors that we are almost there.

Clifton J. Porter II is the Senior Vice President of Government Affairs of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL).

Morning Consult