New Law Requiring Hospitals To Warn Patients of Observation Status Loophole

October 26th, 2015 by beasleyferber

A new law, the Notice of Observation Treatment and Implication for Care Eligibility Act, will go into effect on August 6, 2016. This law deals with “Observation Status.” Observation Status is a trap for the unwary. Most people know that if you are in the hospital for three overnights, and you then go into a nursing home for rehabilitation, then you will be covered by Medicare. Medicare pays in full for the first 20 days, and then from day 21 through 100, it pays subject to a deductible. Most people have Medicare Supplement policies which cover the deductible.
For the past few years, hospitals have (in our opinion) been pulling a “fast one.” Rather than admit a patient, in some cases they have placed the patient in a type of limbo known as “Observation Status.” If you are in a hospital under Observation Status, and you then to into a nursing home, Medicare will not pay. Rehab rates can easily be $300 to $400 per day, so even a short rehab stay can be very costly. This law does not end Observation Status. Rather, the law requires hospitals to notify patients who are under observation for more than 24 hours within 36 hours or upon discharge. The notice will warn people that their hospital stay will not count towards the three-day inpatient stay requirement. Congress, in our opinion, should have outlawed Observation Status, but at least this is a step in the right direction.

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