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New law warns seniors of Medicare nursing home loophole

A new federal law will help many seniors with a costly Medicare loophole that often results in their not being covered for a stay in a nursing home. It won’t make the stay covered, but it will at least put seniors on notice if a stay isn’t covered, so they can plan accordingly and won’t be hit with a nasty surprise.

Here’s the problem: Medicare covers nursing home stays for the first 20 days, so long as the patient was first admitted to a hospital as an inpatient for at least three days. But a lot of people who spend three days in a hospital later discover that they were never actually “admitted.” Rather, they were merely kept in the hospital “under observation.” As a result, the nursing home stay afterward isn’t covered.

Hospitals have increasingly been choosing not to admit patients and to place them under observation instead due in part to pressure from Medicare to reduce costs. As of 2011, some 1.6 million seniors per year were being treated under observation, a dramatic increase from past years.

Frequently, patients have no idea that they haven’t actually been admitted. They’re given a bed and a wristband, nurses and doctors come to see them, they get treatment and tests, and they fill out a meal chart just as if there had been a formal admission.

Patients who discover after the fact that they have been denied Medicare because of this problem usually have little recourse. As long as Medicare pays for the hospital stay – which it usually does on an outpatient basis – there’s no way to appeal because there has been no denial of coverage. And the denial of coverage for the nursing home stay is technically proper if the patient wasn’t admitted to the hospital for three days.

The new federal law is called the NOTICE Act (which stands for Notice of Observation Treatment and Implication for Care Eligibility). It requires hospitals to notify patients who are under observation for more than 24 hours of their outpatient status within 36 hours, or upon discharge if that occurs sooner. The notification must explain that because the patient hasn’t been admitted, their hospital stay won’t count toward the three-day requirement, and so Medicare won’t pay for a subsequent nursing home stay.

The NOTICE Act will go into effect on August 6, 2016.

In the meantime, if you’re in the hospital and a nursing home stay is likely, it’s a good idea to ask whether or not you’ve been formally admitted.

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