Report Finds Rapid Growth in
Medicare Observation Services that Can Cost Seniors
Raises concerns about clinical
benefit and out-of-pocket costs for seniors, quality of care
Nov. 14, 2013 – AARP Public Policy
Institute released a new report today examining the use of hospital
"observation status" for Medicare patients. Hospital emergency rooms
sometimes hold patients for observation before admitting them or sending
them home. This observation status has grown rapidly and for Medicare
patients the distinction is important because it can affect
out-of-pocket costs. Use of observation status as a substitute for
admission also raises concerns about quality of care.
The report, “Rapid Growth in
Medicare Hospital Observation Services: What’s Going On?,” analyzed the
frequency and duration of the use of observation status for Medicare
beneficiaries between 2001 and 2009. It found a dramatic increase in
Medicare claims for observation status – more than 100 percent growth
over nine years – and an even greater percentage increase in the length
of time spent in observation, with visits longer than 48 hours
increasing the most.
“The dramatic increase in the use
of observation status for Medicare patients deserves a closer look,”
said Debra Whitman, AARP Executive Vice President for Policy, Strategy
and International Affairs. “The clinical benefit of long-term
observation remains questionable. And for Medicare patients who remain
in the hospital under observation, they may not realize the high
out-of-pocket costs they'll have to pay.”
Currently, Medicare requires a
patient have a three-day inpatient hospital stay before receiving
covered care in a skilled nursing facility, such as rehab for a knee
replacement or the like. However, a patient may spend three nights in
the hospital under observation and not meet that requirement,
potentially resulting in unexpectedly high out-of-pocket costs and lack
of coverage for needed care.
"In some cases, Medicare cost sharing for
outpatient services, including OS, may be greater than the inpatient
deductible that beneficiaries would incur when admitted ($1,184 in
2013)," according to the report.
"Unlike inpatient coverage, there is no cap on
beneficiary cost sharing for OS visits. In addition, some beneficiaries
may forego or be denied coverage for necessary care in a skilled nursing
facility (SNF) because time spent in OS does not count toward Medicare’s
3-day prior inpatient stay requirement for Part A SNF coverage. As a
result, some beneficiaries may incur out-of-pocket expenses for SNF care
that can amount to thousands of dollars."
The report explores the reasons for
growth in the use of observation services as well as potential policy
solutions, including counting time spent in observation toward the
three-day stay requirement.
Bipartisan legislation has been
introduced in both the House and Senate (sponsored by Representatives
Joe Courtney (D-Conn.) and Tom Latham (R-Iowa) and Senators Sherrod
Brown (D-Ohio) and Susan Collins (R-Maine)) to count the time spent in
observation toward the three-day stay requirement. The legislation, the
Improving Access to Medicare Coverage Act of 2013 (H.R. 1179/S. 569),
has been endorsed by AARP.
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