An increasing number of seniors who spend time in the hospital are surprised to learn that they were not “admitted” patients – even though they may have stayed overnight in a bed and received treatment, tests and drugs.
Because they were not considered sick enough to require admission but weren’t healthy enough to go home, they were kept for observation care, a type of outpatient service.
The distinction between inpatient and outpatient status matters: Seniors must have three consecutive days as admitted patients to qualify for Medicare coverage for follow-up nursing home care, and observation time doesn’t count for that three-day tally. That leaves some observation patients with a tough choice: Pay the nursing home bill themselves – often tens of thousands of dollars – or go home without the care their doctor prescribed and recover as best they can.
Angry seniors have sued Medicare and appealed to Congress to change the rules they say make no sense, but the problem continues.
But most observation patients with private health insurance don’t face such tough choices. Private insurance policies generally pay for nursing home coverage whether a patient had been admitted or not.
Here’s a primer comparing how Medicare and private insurers handle observation care.
Medicare and most private insurers consider observation care an outpatient service – like a doctor’s visit or a lab test – even though observation patients may spend a night or more in a hospital room.
Like Medicare beneficiaries, privately insured patients are usually responsible for a share of the cost of each treatment or test they receive when hospitalized for observation.
Those bills can add up, according to a study by the Health Care Cost Institute, a nonprofit, nonpartisan research organization. Privately insured people receiving observation and other outpatient services in the hospital paid about four times as much out of pocket as admitted patients in 2012 – an average of $47 per admitted person compared with $199 for an outpatient.
That’s more than three times faster than the 18 percent increase among privately insured patients over the same period reported by the Health Care Cost Institute, which analyzed 5.7 billion claims from employer-sponsored insurance policies covering a representative sample of 40 million beneficiaries younger than 65.
The cost difference can be huge: In some parts of the country, a person without insurance coverage might pay more than $10,000 for a month in a nursing home. When insurance covers the bill, the out-of-pocket costs for consumers might be little or even none, depending on the type of plan.
Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy organization that is not affiliated with Kaiser Permanente.