Inpatient or Observation Status—A Significant Difference!

We work, we contribute, and when we turn 65, major medical expenses are covered by Medicare, right? Not always. Medicare beneficiaries can actually get stuck with huge hospital bills.

Maybe you heard about it on NPR (For Hospital Patients, Observation Status Can Prove Costly) or read about it in the New York Times (Two Kinds of Hospital Patients: Admitted, and Not). Current Medicare laws impose a financial burden on Medicare beneficiaries kept in a hospital under observation status.

Currently, hospitalized Medicare beneficiaries must have at least three consecutive days of "inpatient status" to qualify for recovery time in a skilled nursing facility (SNF). Some patients are unknowingly kept in the hospital with "observation status," which may prevent Medicare from paying for SNF care. Under observation, some medications, procedures, and tests may also be excluded from Medicare coverage.

State and Federal Legislative Action Needed

Advisory Council vice-chair George Dicks and members Kris Fredrickson and Suzanne Pak participated in the 2013 Senior Lobby Day in Olympia.

I am happy that Governor Inslee called the legislature back to Olympia last month for a special session, in part to pass a much-needed transportation package. As you may know, King County's Metro Transit is facing at least a 17 percent service cut next year, at a time when demand is increasing. Many older and disabled adults will be impacted by the looming Metro cuts. The funding shortfall is due in large part to the expiration of temporary funding measures and the inability of local transit districts to raise funds under current state law. At a minimum I hope the legislature gives transit districts the flexibility to raise revenues when needed.

I'm less thrilled about the news from the "other" Washington. After a pointless government shutdown and debt ceiling standoff, a new budget conference committee is looking to make a deal that includes cuts and some new revenue—and hopefully an end to the sequestration cuts that have hurt programs that support vulnerable adults. However, at this time most signs point to a failure to reach any significant agreement. Even worse, yet another sequestration of two to possibly 10 percent could take effect in January. For information about congressional and state legislative issues, visit the Washington Senior Lobby website at For information about advocacy, visit our Advisory Council's online toolkit.

Do what you can—for yourself, your loved ones, and your community!

—Tony Provine, Chair

What's more, you may not know the difference—you could spend several nights in the same ward as a patient with "inpatient status." Without asking whether you have been officially admitted, you won't know whether medical and nursing services, tests, medications, and food are covered or not.

You've probably heard that SNF beds are not always available. In addition to a shortage, a SNF may refuse to admit a patient in need of treatment who fails to meet the three-day inpatient requirement if they can't pay with other, non-Medicare, funds.

Why is this happening and what can be done?

As hospitals experience closer scrutiny on Medicare readmissions and the potential for reduced reimbursements from the Centers for Medicare & Medicaid Services (CMS), they have increased the number of patients who are not admitted but kept for observation. Last summer, one good thing happened: CMS now allows doctors to admit a patient—with inpatient status—if there is a "reasonable expectation" of a longer stay.

But some problems persist:

  • Hospitals are able to reclassify a patient from inpatient to outpatient, after the fact—which works against the patient.
  • If a patient is switched from observation to inpatient status, the initial hospitalization does not count towards the three-day SNF requirement.

The Seattle-King County Advisory Council on Aging and Disability Services supports legislation that would change the law to count the entire time spent in the hospital—whether inpatient or outpatient observation status—toward the three-day inpatient status necessary for SNF coverage (dubbed the Improving Access to Medicare Coverage Act of 2013). This bill is supported by the Bellevue Network on Aging and Kirkland Senior Council as well as national advocacy organizations.

What do I do in the meantime?

When hospitalized, Medicare beneficiaries should ask their hospital to document their status. The Center for Medicare Advocacy offers a Self Help Packet for Medicare "Observation Status" that may help.

Even CMS says you should ask: Are You a Hospital Inpatient or Outpatient? If you have Medicare, ask!

Tony Provine chairs the Seattle-King County Advisory Council on Aging & Disability Services, a 27-member body appointed by the City of Seattle, King County, and United Way that identifies the needs of older people and adults with disabilities in our community; advises the Area Agency on Aging and its sponsors on services to meet those needs; and advocates for local, state and national programs that promote quality of life for these populations.