What is observation status?
In a nutshell, observation status is a term hospitals use to bill Medicare. Observation status is based on a doctor’s medical determination. Doctors place patients on observation status if their condition is not serious enough for inpatient admission status, but still requires monitoring in case health worsens.
The NOTICE Act is a step in the right direction because patients are often unaware of their observation status or its potential consequences. Prior to the NOTICE Act, the only way to know your status was to ask. Part of the reasoning behind the law is that beneficiaries get hit with serious financial consequences including higher than expected hospital bills and that Medicare won’t cover skilled nursing care needed after discharge from the hospital. However, the law could do better to prevent those consequences.
The issue for many patients is that being on observation status also means they are classified as an outpatient, not an inpatient. That means that rules for Medicare Part B (outpatient services) and D (prescription medication coverage) apply to their hospitalization rather than part A (inpatient).
To understand this better, here is a chart comparing estimated costs. Let’s say a patient stays at the hospital for 4 days, and the care provided ends up costing $10,000. Keep in mind that costs can vary greatly depending on the type of care provided during that time.
Oftentimes, Medicare beneficiaries learn about their observation status when arranging for the skilled nursing facility care they need after discharge. These patients make the very valid assumption that because they are wearing hospital gowns, in a hospital bed, eating hospital food, meeting with nurses and taking tests administered by doctors that they are an inpatient. They learn their actual status, and its consequences, too late and have little recourse.
How could the law be improved?
An appeal process is needed.
The NOTICE Act ensures people know about their observation status and the financial consequences of this determination. And that’s it. They don’t know the medical reasons a doctor made the decision and they aren’t given any avenues to appeal this determination. Patients will be informed of their observation status and the possibility of higher medical costs, but have no recourse to fight the decision.
Use plain-language in the notice to ensure comprehension.
The Medicare Outpatient Observation Notice, or MOON, used to inform patients about their observation status is not written using easy-to-understand language. In its current form, the MOON is written for a 12-grade reading level, a break from the common practice of writing consumer materials for no more than an 8th grade reading level.
Do you agree Medicare patients deserve more?
Tell the federal government. They are asking for your comments right now in response to the proposed rules. You can use this comment template or submit comments on your own. Submit your comments with these simple steps:
- Go to the website where comments are submitted. Enter the phrase "Medicare Program: Hospital Inpatient Prospective Payment Systems" in the search box. The first hit will be the rule you want to comment on. Click the "Comment Now!" blue box.
- Use our comment template to show how people you know have been hurt by observation status and why changes need to be made by including personal information where indicated with yellow highlights. Adding specific examples of real people makes your case more compelling.
- You can also write your own feedback directly in the comment box.
Go ahead, make your voice heard! The greater number of people that speak up, the more likely changes will be made.
How can you get ready?
While the law could be improved, it will be implemented August 6th. Prepare for the changes by getting informed:
- Learn the basics of the new rule and what to expect from hospitals.
- Familiarize yourself with words and terms often used when talking about observation status.
- Know how to obtain prescriptions for drugs you need to manage chronic conditions
- Read the notice, which will be standardized, before hospital staff hand it to you.
Health Policy Analyst
Health & Disability Advocates