Medicare's 3-day rule can cost you a pretty penny

Medicare's 3-day rule can cost you a pretty penny

In a health-care emergency it’s difficult to think about finances. But if you or a loved one who is a senior are ever rushed to the hospital, overlooking this one detail could devastate your finances.

It’s very simple: The Centers for Medicare and Medicaid Services has a three-day rule that says Medicare will not pay for care in a skilled nursing facility after a patient is discharged from a hospital unless the patient was admitted to the hospital as an inpatient for at least three days. Observation days do not count toward this three-day hospital stay.

Here’s where it gets confusing. There’s a big difference between “admission” and “observation.” Even if you’re moved out of the basic emergency room to another more private room, the hospital may not have actually admitted you. In fact, it’s growing more likely that the hospital will put you on “observation” status. A recent study showed that slightly more than 20% of hospital stays are not considered admissions but observations. And some of those “observations” have lasted a week or longer!

The reasons for this trend are pretty obvious. In 2012, Medicare started financially penalizing hospitals for “readmissions” — something that happens when a patient is sent home too early or has a relapse of some sort. The penalties are meant to be an incentive to good care. In October 2019, those penalties increased sharply for readmission of Medicare patients within a month of discharge.

Medicare expects to collect over $563 million in penalties this year, and last year 83% of hospitals had to pay some amount of readmission penalty.

Clearly the hospitals must deal with the expensive issue of readmission, and the easiest way to do that is not to admit patients in the first place! That explains the growing number of patients who are placed on observation status when they arrive at the emergency room.

The Impact of Observation

If you don’t meet the minimum requirement of having a three-night stay in the hospital as an admitted patient, Medicare will not pay for its promised 100 days of critical inpatient nursing care. This issue doesn’t just apply to emergency admissions. Medicare also pays for up to 100 days of inpatient rehabilitation services after you have had three overnight stays as an admitted patient. These days, many patients with hip or knee replacement go home the same day.

But if your situation is complicated, or if you are doing a double replacement, or if you have other health conditions — or if you have no one to help you at home — you’ll want the extended care coverage that Medicare provides. That requires a three-night stay as an admitted patient!

What Can You Do?

Once you are moved out of the emergency room it will be almost impossible to change the status to admitted. At the very least, you may lose one night to observation status. So don’t let the emergency room administrator move your mom out of the ER until she is officially admitted. Insist upon it. The administrator will assure you that your mom will get the same care as if she were admitted. That’s true, but you should object unless the papers read “admitted”.

You’re entitled to fight the observation status. And you can do that by refusing to sign the papers they bring you before they move the patient out of the emergency room. That will make them pay attention — and you will likely win this battle, especially if an IV is involved or an MRI or more sophisticated care is needed. But seniors who are alone and hurting often don’t know their rights.

Every ER has a direct connection to the financial services office and a case administrator. So if the physicians say they can’t change your status, you can talk directly to hospital administrators. Don’t let them force or threaten or promise that it will be done the next day. Every day is valuable — unless you are prepared to pay a fortune for home health-care or pay privately for a rehabilitation facility.

Medical costs are enough of a burden for seniors, even with the benefits of Medicare. Knowing your coverage, your rights and your hospital admission status can save you a fortune. And that’s The Savage Truth.

Terry Savage is a registered investment adviser and responds to questions on her blog at TerrySavage.com

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