Medicare Patients to be MOONed Soon
When a Medicare beneficiary is admitted to a hospital as an inpatient most of the cost of the stay is paid under Part A, which covers the cost of a hospital stay. In 2017, the only cost the beneficiary must pay for stays of 60 days or fewer is the $1,316 deductible.
Most beneficiaries do not realize that they can also be admitted to a hospital as an outpatient. Your status as an outpatient has nothing to do with where you receive care or the type of care received. You may not even be aware of your status. You can be admitted to the hospital, be assigned a room and receive services as if you were an inpatient, all the while having been admitted as an outpatient by your doctor. Observation status gives the doctor time to decide if he or she should write an order to admit you into the hospital as an inpatient.
If you are classified as an outpatient while staying at the hospital, here is what happens:
- If you did not elect to participate in Part B (recall that Part B is elective, Part A is not) all hospital costs incurred as an outpatient will be your responsibility.
- If you elected to participate in Part B, 20% of the cost of your hospital stay will be your responsibility, unless you purchased coverage under a Medicare Supplement plan.
- Most hospitals do not allow you to use the Part D prescription drug plan while in the hospital. The hospital will provide the drugs, and you will be charged the full balance on the hospital bill. In this case, you are paying the hospital for the drugs and then are responsible for requesting reimbursement from your drug plan. Good luck with that!
- Admittance as an outpatient does not count toward the minimum three consecutive inpatient days necessary for Medicare to pay for a subsequent stay in a skilled nursing facility (SNF). For Medicare to pay for a SNF stay, the stay must be preceded by three inpatient days at a hospital. If you enter the SNF after three days in observation status, Medicare Part A will not pay for the SNF stay. Many Medicare beneficiaries have been unpleasantly surprised to find that they are responsible for the cost of the SNF stay, which can easily total thousands of dollars, as a result of their outpatient status. If you do not meet the 3-day rule, the SNF must inform you that Medicare will not pay for your stay by providing you with an Advance Beneficiary Notice of Non-Coverage (ABN) which you must sign. Absent the ABN, you will not be responsible for the costs of the SNF stay.
Medicare pays for only a limited stay in a SNF.
During a benefit period, Medicare will pay for 100% of the cost of a SNF stay for up to 20 days and for the next 80 days pay for the full cost minus a daily copayment ($164.50 in 2017). For Medicare to pay for a SNF stay, the stay must be preceded by three inpatient days at a hospital. If there is a break of more than 30 days in skilled care, you need a new 3-day hospital stay to qualify for additional SNF care. A “benefit period” ends 60 consecutive days in which you have not been in a hospital or in a SNF. A new benefit period will begin following another 3-day minimum inpatient stay in a hospital.
What should you expect if you are MOONed (given a standard Medicare Outpatient Observation Notice) by your hospital?
Per the Center for Medicare Advocacy hospitals will be required “…to provide oral and written notification to patients who are classified as outpatients or observation status patients for more than 24 hours. Notice of non-inpatient status must be provided within 36 hours.”
A standard notice has been issued by the Centers for Medicare & Medicaid Services (CMS) for use by all hospitals. After listing your name and patient number, the notice will provide the reason you are receiving observation services and why you are not classified as an inpatient. The consequences of your status are explained including:
- Payment for care costs under Medicare Part B rather than Part A.
- Impact on your Part D prescription drug costs.
- Impact on the 3-day minimum inpatient stay requirement for payment for any subsequent SNF stay.
For any hospital stays before March 8, 2017, make sure you ask your doctor if you are being admitted as an inpatient or an outpatient. If you are being admitted as an outpatient, ask for the reason and if there is any way you can be admitted as an inpatient.
Note that the 3-day rule only covers SNF. If you are released to a facility for specific care – such as a rehabilitation hospital – Medicare will provide coverage under a separate set of rules. Finally, if you are in a Medicare Advantage plan (typically an HMO or PPO) the rules regarding a stay in the SNF are different – make sure you check with your plan to understand its particular rules.
For more in-depth information on Medicare planning and how to help clients plan for healthcare expenses, you can read The CPA’s Guide to Financing Retirement Healthcare.
James Sullivan, CPA/PFS, MedicareAware. Jim has been a personal financial planner for almost 30 years. His practice focuses on clients who are chronically ill and their families. He has written over 70 articles on planning and paying for health care in retirement. He has also authored several books, including The CPA’s Guide to Financing Retirement Healthcare, and can be reached at email@example.com.
Signing medical form image courtesy of Shutterstock.