Beware of “Observational Care” in Medicare

Many people on Medicare are getting surprised by big bills after what they thought was an in-patient hospital stay. What they are discovering is a situation known as Observational Care. This is a weird occurrence that is happening due to certain Medicare rules.

Under Medicare, in order for your doctor to admit you to the hospital, he or she must verify that your condition requires at least two days (known as the “two midnights” rule) in the hospital. If the doctor is not certain but feels you are too sick to go home, then you may still stay at the hospital under “observational care”. In this case you are considered too sick to go home but not sick enough to be admitted to the hospital. Yes, it sounds odd and it is.

In this circumstance, you may not only be observed, buy may also receive short-term treatment and tests. The key, with regard to Medicare, is that since you are not an inpatient, the costs are considered outpatient care which is paid at a different rate under Part B of Medicare instead of Part A. Depending on your Supplement or Medicare Advantage plan, you may be looking at significantly higher copays and coinsurance than you would if it were actually a hospital stay.

In addition, any days spent in Observational Care do not count toward the three days (three-midnight rule) hospitalization necessary to make a stay in a Skilled Nursing Facility eligible for Medicare coverage. That can be a huge surprise if you end up having to pay out of pocket for a few days recuperating in such a facility.

Because many people were unaware of the difference between being an in-patient and observational status, the US Congress did take some action. Now a person must be notified within 36 hours of being under observational care that this is their status and what the ramifications of that status might be.

As always, you are your own best advocate. If you find yourself headed to the hospital under your doctor’s direction, make sure you know whether it is as an in-patient or for observational purposes. The difference can be expensive!


Author: Mike Mahoney

After over 30 years of helping North Idaho individuals and businesses select all types of insurance coverage, I am now focusing primarily on the Over 65 population. My specialty areas include Medicare Supplements, Medicare Advantage Plans, Part D Drug Plans, Final Expense, Dental and Travel insurance. If you also need coverage for your home, autos or business, I have associates on the North Idaho Insurance team that can quickly assist you.

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