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Medicare Coverage and Hospital Care

Know your Rights

care_manager_newHaving a loved one in the hospital is already a stressful event, as caregivers find themselves wanting to be at the hospital to advocate for their loved one while juggling other responsibilities. It is important for caregivers and Medicare recipients to know their rights under traditional Medicare or Medicare Advantage Programs and how their hospital patient status may impact the out of pocket expenses and discharge plans after their hospital stay.

The “two-midnight rule”

According to the Centers for Medicare and Medicaid Services (CMS), Medicare reimburses different payment rates for inpatient and outpatient hospital services. In 2013, in an effort to protect Medicare A trust funds, CMS implemented the controversial “two-midnight rule,” that stated for inpatient admissions that Medicare Part A (hospital insurance) could be billed if the hospital staff expected the patient to require a hospital stay that crossed two midnights and their medical record supported that expectation.  

CMS ruled that Medicare Part A (hospital insurance) was not to be billed for hospital stays expected to last less than two midnights.

These patients were then never admitted and were kept under “observation” status and their Medicare Part B (medical insurance) would be billed by the hospital.

In 2015, CMS reported that this rule led to more patients not being admitted and being kept in “observation” status. This might be due to hospitals fearing financial penalties or additional audits. This would have negatively impacted patients’ out of pocket expenses for their hospital stay and their discharge plans. As with new policies, the pendulum swung too far in one direction and starting in 2016 after reviewing the rule and feedback from stake holders, CMS decided to maintain the “two-midnight rule,” but they are allowing more flexibility for hospital staff to determine a patient’s status, updating billing policies and how this rule is enforced. However, to qualify for Medicare A payment for skilled nursing facility care after a hospitalization, CMS still requires that your loved one be formally admitted as an inpatient for a three day minimum stay in the hospital.

Importance in 2017

According to the Centers for Medicare and Medicaid Services (CMS), beginning no later than March 8, 2017, all hospitals are required to provide verbal notification and a copy of the Medicare Outpatient Observation Notice (MOON), to patients informing them of being an outpatient and not being formally admitted to the hospital.

Your loved one’s hospital status is important. According to the Medicare Outpatient Observation Notice (MOON), being an outpatient may effect what you pay in a hospital:

  • When you are a hospital outpatient, your observation stay is covered under Medicare Part B.
  • For Part B services, you generally pay:
    • A copayment for each outpatient hospital service you get. Part B copayments may vary by type of service.
    • 20% of the Medicare-approved amount for most doctor services, after the Part B deductible.

Observation services may effect coverage and payment of your care after you leave the hospital:

  • If you need skilled nursing facility (SNF) care after you leave the hospital, Medicare Part A will only cover SNF care if you have had a 3-day minimum, medically necessary, inpatient hospital stay for a related illness or injury. An inpatient hospital stay begins the day the hospital admits you as an inpatient based on a doctor’s order and does not include the day you’re discharged.
  • If you have Medicaid, a Medicare Advantage plan or other health plan, Medicaid or the plan may have different rules for SNF coverage after you leave the hospital. Check with Medicaid or your plan.

Resources for help

CMS directs patients to talk to the hospital staff member giving them the MOON notice or to talk to the doctor providing their hospital care. They also direct patients to talk to someone from the hospital’s utilization or discharge planning department.

Heather Nelson, MGS, LSW

Phone: 513.868.9281
Toll Free: 888.597.2751