Understanding Medicare’s Hospital Rules: the Perils and Pitfalls for Patients – by Vivienne Duncan

For most people, being admitted to a hospital will probably raise some level of anxiety, especially if it involves a serious health crisis and likely extended stay. However, the experience may be even more complicated if the patient is on Medicare. The regulations that govern Medicare payments are many and detailed; hospitals and skilled nursing facilities (SNFs) must familiarize themselves with the rules or risk being denied payment. Clearly, this would be a problem for the facility, but can also have serious ramifications for patients.

An important element of Medicare hospital coverage (Medicare Part A) is the ‘hospital benefit period.’ When a patient is admitted to the hospital as an inpatient, the benefit period ‘clock’ will begin ticking. Once the patient’s deductible has been met ($1,216 in 2013), Medicare will cover most of the costs of the hospital stay for up to 60 days. Beyond that, the patient begins to incur more of the costs: $304 a day for days 61 to 90 and, from day 91, the patient is responsible for the full costs of their care. Clearly, this is not sustainable for most seniors living on fixed incomes, especially those without Medicare Supplemental Insurance (Medigap).

The ‘deadlines’ that arise within the system undoubtedly factor into the care-planning decisions made at many facilities. Some patients are eligible for Medicaid, the primary source of funding in these cases, which relieves much of the financial burden. For those who are not eligible, but have only modest resources, a balance must be found between the patient’s medical condition and needs, the feasibility of a home discharge, possibly supplemented by home care, and transfer to a skilled nursing facility. In any event, in order to trigger a new benefit period, the patient must stay out of the hospital or SNF for at least 60 days. Clearly, non-Medicaid/Medigap patients requiring long-term hospital or SNF care could find themselves with substantial medical bills.

Another concern for patients is the risk that the hospital will classify them as being under ‘observation status.’ Although, by all appearances, the patient receives the usual medical care as would be expected, hospitals are aware that Medicare could suspect that the patient’s admission is an attempt by a skilled nursing facility to restart the clock for Medicare payments. The regulations require that the patient must first have been admitted to the hospital for at least three days for Medicare to pay for post-acute care or rehabilitation services. While under observation status, Medicare does not cover the medical expenses incurred during the patient’s stay. Therefore, it may come as a shock to patients to discover that their ‘hospital stay’ was not covered as expected, and they are responsible for the full costs that have accrued.

Thus, patients and their families must ask pointed questions about their care before signing any discharge papers, as well as understand how Medicare limits on benefits may play a role in a patient’s care while in the hospital.

First, any patient on Medicare must understand the Medicare limits and how they may affect their options as ‘deadlines’ approach. Once the patient is aware of these limits, he or she can inquire whether the same treatment available at the time of admission will continue to be available once a benefit limit is reached. Finally, the patient should also question whether he or she will be required to privately pay for any part of the care provided because Medicare coverage has either not begun or has run out. These inquires will go a long way in helping patients and their families understand the process and identify any hidden costs they may need to consider when deciding the course of treatment and the options available for an extended hospital stay.

Vivienne Duncan is Director of the Elderlaw and Cancer Advocacy Projects at the City Bar Justice Center