Understanding Hospital Observation Status & its Impact on Insurance Coverage

The admission status during hospitalization can significantly impact insurance coverage, so it is important to try to determine the status and advocate for the most favorable status.

Note: Medicare supplements and other insurance may cover costs that original Medicare does not, so be sure you understand your insurance coverage.

Note: Most long term care insurance policies don't pay reimbursements when the beneficiary is hospitalized. Read your long term care insurance policy carefully and consult your insurance advisor about the best options for your current circumstances.

If hospital admission occurs, find out if the admission is classified as “inpatient” or “outpatient” or “observation status” and urge the doctor for a formal inpatient (not “outpatient” or “observation”) admission. The doctor may not know the insurance impact of the classification.

This classification will not be apparent based on where the patient is, how much time they spend in the hospital or what services they receive, as it is only a hospital billing code. But the billing code is crucial, because, according to the Center for Medicare Advocacy in its Frequently Asked Questions about Observation Status:

When hospital patients are classified as outpatients on Observation Status, they may be charged for services that Medicare would have paid if they were formally and officially admitted as inpatients. For example, patients may be charged for their medications.
Patients will not be able to obtain any coverage under original Medicare if they need nursing home care after their hospital stay. Medicare only covers nursing home care for patients who have a 3-day inpatient hospital stay – Observation Status doesn’t count towards the 3-day stay.
Outpatient Observation Status is paid by Medicare Part B, while inpatient hospital admissions are paid by Part A. Thus, Medicare beneficiaries who are enrolled in Part A, but not Part B, will be responsible for their entire hospital bill if they are classified as Observation Status.
Even Medicare patients who have both Medicare Parts A and B may be responsible for 20% of their hospital bill, which is covered under Part B, if they are considered outpatients.

Note: time in the emergency room is considered as outpatient status and therefore is not covered by Medicare Part A and does not count toward the three day inpatient admission required to qualify the patient for coverage by Medicare of their subsequent stay in a skilled nursing facility for rehabilitation.

More information from Medicare about observation status is available here.

How Care is There can Help:

The status of an admission can sometimes be difficult to establish. It can also be changed after treatment. Therefore we cannot guarantee the admission status of your loved one but we can:

Inquire about the admission status
Advocate for formal admission vs outpatient or observation status
Inform you and your loved ones about the status that has been reported to us

Resources for Understanding Observation Status:

Next Steps

Will your loved one undergo a hospital admission in the near future?
Contact Care is There today for a free consultation!

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How Care is There can Help:

Resources for Understanding Observation Status:

Next Steps

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