I just finished reading about a proposed rule change that Medicare made last week. If you are curious, you can read it yourself at, “Medicare Seeks To Limit Number Of Days In Hospital Care.”
The emphases of the article is about stays in a nursing home. Medicare will only pay part of nursing home bills if the stay is preceded by 3 days of being “admitted” to the hospital.
If a person is confined to the hospital only for “observation,” those days do not count. There is a fear that Medicare would not pay for confinement in a nursing home during that person’s recovery.
Since most Long Term Care policies that I see try to coordinate benefits with Medicare rule in order to hold the premium down, this practice could potentially cause people to have to pay for expensive nursing home fees out of their savings even if they have Long Term Care insurance.
If this proposed rule is adopted, it creates a good reason for Critical Illness insurance for people enrolled in Medicare.
Nursing homes are not the only reason why you should be attentive to how your hospital classifies you. If you have traditional health insurance, it probably will not make any difference, however, if you have Medicare as your primary Major Medical insurance, it does matter whether you are held of “observation” or officially “admitted.”
In this post I want to explain what the difference is to your wallet.
If your doctor officially “admits” you to the hospital, although your doctor’s charges will be processed under Medicare B, your hospital charges will be processed under Medicare A.
Hospital charges that are processed under Medicare A are only subject to the “per admission” deductible. After you have paid your deductible, Medicare will pay 100% of your hospital fees.
Your doctor’s fees will be paid under Medicare B, whether you are in the hospital or in his office. Regardless of your status with the hospital, you are going to pay 20% of your doctor’s fees even if he accepts Medicare.
If he does not accept Medicare you will need to pay his entire fee and file your own claim with Medicare. Even if you do eventually get reimbursed from Medicare, you will get somewhere between 20% and 35% less than what you paid your doctor.
If your doctor places you in the hospital for “observation,” Medicare will consider you an “out-patient.” When that happens, your hospital bill will be processed as a Medicare B claim.
What that means to you is that instead of just paying Medicare’s “per admission” deductible, you will be liable for 20% of the hospital’s charges in addition to the 20% of your doctor’s fees.
Since Medicare B does not have a “Maximum Out-of-Pocket” limit, you could be on the hook for thousands of dollars if you do not have a Medigap or Medicare Advantage plan.
WHAT THIS MEANS TO YOU
This proposed change to Medicare will impact your savings in the future if you are enrolled in Original Medicare. If you, or a loved one, has Original Medicare I propose you take the following steps to limit your potential liability.
- When you, or a loved one, goes to the hospital clarify if you are being “admitted” or held for “observation.”
- Review your options for Critical Illness insurance. Most companies will not even offer coverage to people over 65 or reduce plan benefits for people once they reach 65. Other companies will accept people on Medicare but limit coverage to cancer, heart attack or stroke.
- Consider a Long Term Care policy with a 0 day Elimination Period. They are significantly more expensive if you wait until you are enrolled in Medicare to apply but the cost of a nursing home is even more costly.
- Consider getting either Medicare Supplement or Medicare Advantage insurance. Neither one of them will help with potential nursing home costs if Medicare does not pay, however, they will limit your liabilities if you are held for “observation” at your local hospital and the hospital is paid under Medicare B.