Medicare, Rehab, and Observation Status

Rehab is expensive.  No surprise there.  Under the right circumstances, the person getting rehab care sees little or no cost.  Under the wrong circumstances, the person getting rehab will get stuck with the entire cost.

Just to be sure we all understand, “rehab” is rehabilitation.  An example of rehab is the effort to strengthen the legs after a knee replacement.

In our discussion today, rehab follows a hospitalization.  Most often, rehab takes place in a nursing home or in a facility similar to a nursing home that has chosen to focus on rehab services.  (There is a trend to rehab at home, relieving the insurer from the room and board cost of a care facility.)

To have Medicare or an Advantage Plan cover rehab, the patient must be admitted to a hospital for a three-day period immediately before the start of rehab.  If such a hospitalization took place and the patient has Medicare, then Medicare will usually pick up the entire bill for the first 20 days of rehab and all but $165 of the costs for any additional days (up to 100.)  The patient or supplemental insurance picks up the $165.  If the patient has an Advantage Plan, the plan’s rules will control how the costs of rehab will be handled.  (Ed. Note:  The $165 amount was inserted on 3/20/2017 after receiving new information.)

Separate from rehab, hospitals have economic pressures to control who gets “admitted” to the hospital.  If a Medicare-covered person is re-admitted to the hospital within 30 days, Medicare will penalize the hospital for the first hospitalization for not treating the patient’s malady adequately enough the first time that another hospitalization was needed.  The penalty will be a reduction in the Medicare reimbursement for the first hospital stay.

Because the risk of this payment reduction, hospitals tend not to “admit” someone on Medicare if the hospital’s staff isn’t sure that the patient can be cured.  Many chronic illnesses of older adults can’t be cured.  Perhaps they can be treated, or perhaps the symptoms can be controlled, but the illness may not be curable.  The lack of a cure creates a stronger likelihood of the need for more hospital care for the same person for the same medical needs.  This risk of more care creates a high risk of a “readmission” for the patient.  So, the hospital has a reason to look for a way to avoid admitting someone with an uncurable chronic illness or with symptoms that can’t be completely diagnosed.

Hospitals have started to use “observation status.”  Observation status takes place in the hospital in a hospital bed in a hospital room and looks just like an admission to the hospital, but it’s not an admission.  A person on observation is “outpatient” for billing purposes.  Medicare is billed via Part B rather than Part A.  Advantage Plans are billed via outpatient billing codes.  But, the patient doesn’t see a difference.

If a patient goes from observation status to rehab, the rehab will NOT be covered by Medicare.  Rehab in a nursing home or rehab center can cost $10,000 per month.  Unfortunately, someone on observation status may not know that rehab won’t be covered by Medicare or an Advantage Plan until it’s too late.

So, a person on Medicare or an Advantage Plan who is in the hospital (or the person’s loved ones) needs to advocate for full admission to the hospital.  When the patient goes into a hospital room (i.e., not in the emergency room any more,) ask if the patient is admitted or on observation status.  (Just using the terminology will get the staff’s attention.)  If not admitted, demand to know why.  Demand to know how to get fully admitted  Demand to be fully admitted.  Talk to the hospital social worker.  Talk to the nurses.  Talk to the doctors.  Talk to the patient ombudsman.  Talk to anyone necessary to get a full admission.  (It may not happen, but if you don’t try, it definitely won’t happen.)

Check again everyday.  (Status can change at any time.)

Being an advocate isn’t fun (for most people,) but it may be necessary.

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