HEALTH CARE ALERT: Medicare “Observation Status” Warning

Source from Bottom Line

When you go to the hospital as a Medicare patient with an acute condition that requires a stay of two or more nights, you are supposed to be admitted as an inpatient. However, more and more hospitals now will place you on “observation status” instead. Warning: This seemingly innocuous designation can leave you responsible for tens of thousands of dollars in bills.

Reason: Medicare treats “observation status” the same as being an outpatient. This type of visit isn’t covered under Medicare Part A, which pays for all inpatient hospital charges above your $1,184 deductible. Instead, you are billed under Medicare Part B, so you must pay 20% of the bill for each service after paying the Part B deductible.

You are also charged for the medications that you get in the hospital, and you are unlikely to be reimbursed unless your Medicare Part D prescription drug plan covers the medications.

Over the past six years, the use of observation status has doubled in US hospitals. That’s because if Medicare auditors decide later that an inpatient should have been called an outpatient, a hospital must return the Medicare payments it receives.

Self-defense: If your status is not immediately clear, have someone check with the hospital’s care-management department…ask your regular doctor to get your status changed if you are on observation status…and appeal your charges if you find that your stay at the hosptial or subsequent nursing facility is not covered under Medicare Part A. You can download a free appeals kit at