Hospital observation or admitted as inpatient? Why it matters.

The distinction between inpatient and “under observation” is crucial for those covered by Medicare. Under Medicare nursing facility rehab services are covered only if the patient receives hospital care as an inpatient for three consecutive days.

As of March 8, 2017 a new law goes into effect that requires hospitals to tell people orally and in writing that they are “under observation,” effectively outpatients, and thus potentially liable for much larger bills that aren’t covered by Medicare. More than 1 million patients will get these MOONs (Medicare Outpatient Observation Notices) every year, according to federal estimates.

While requiring notification to patients is an important step it does not eliminate the potential significant financial impact being classified as “under observation” can have on out of pocket costs for nursing home care not covered by Medicare if the patient did not receive hospital care classified as inpatient for three consecutive days.

So how can Medicare beneficiaries mitigate this potential risk? One way is by purchasing recovery care insurance that covers all levels of nursing facility care – skilled, intermediate, custodial, assisted living or home care. The specifics of what is covered can depend on the product and insurance company you purchase a recovery care product from. If you are an insurance agent you should be talking to your clients about this potential financial exposure or as a Medicare beneficiary ask your insurance agent about the options available to you.