A new trend in hospital admissions practices is sticking some seniors with costly care charges that they may not even be aware of—until they get the bill.
Two hospitalized seniors may receive the exact same regimen of treatments and tests, but one of them could end up paying thousands more, all because of one simple three-word phrase: "held for observation."
Hospitals are increasingly categorizing elderly patients as being, "under observation," rather than admitting them as inpatients, according to a recent Brown University study of over 29 million Medicare beneficiary records.
Researchers found that the ratio of seniors being held for observation versus those who were officially admitted rose by 34 percent over a three year period.
This pattern could potentially have far-reaching consequences on the finances of many elderly Americans.
An important (and costly) distinction
When a senior is taken to the emergency room following a fall or to be treated for chest pain, they are initially evaluated by hospital medical staff members who are responsible for deciding whether they should be admitted as an inpatient, or to continue to be held for observation pending the outcome of further tests.
This inpatient-outpatient distinction is an important one for seniors because it impacts how their care costs will be covered by Medicare.
Elderly inpatients must pay a fixed deductible, after which Medicare Part A (hospital insurance) picks up the rest of the bill for their hospital stay. Additionally, Medicare Part B (medical insurance) will pay all but 20 percent of an inpatient's doctor's fees.
But Part A only kicks in when a doctor issues an order to officially admit an older adult.
When an elder is held for observation, he or she is considered to be an outpatient and thus are ineligible for hospital insurance coverage.
In these cases, Part B takes over to help a senior pay for medical services. This coverage is not nearly as comprehensive as the combined A and B coverage received by inpatients.
In addition to paying a Part B deductible, outpatients must shell out 20 percent of the cost of each individual test and treatment they receive. This includes things: x-rays, CAT scans, blood work, etc.
An elderly outpatient may also have to pay full-price for any prescriptions they receive while staying in the hospital. Seniors who pay out-of-pocket for hospital medications can submit a claim for a Medicare refund after the fact, but reimbursement requirements vary by plan and the Centers for Medicare and Medicaid Services (CMS) cautions seniors that full repayment isn't guaranteed.
The financial implications of outpatient status can also extend beyond the hospital.
Seniors who need follow-up care in a skilled nursing facility will only receive Medicare coverage if they have what the Medicare handbook refers to as a "qualifying hospital stay." Elders are only eligible for skilled nursing facility benefits if they were classified as a hospital inpatient for a minimum of three days (not counting the day of discharge).
The average cost of a skilled nursing facility stay ranges from $200 to $222 a day, according to statistics from a 2012 survey conducted by Genworth Financial. Even if a senior spends less than a week in a nursing facility, they could potentially face out-of-pocket care costs that creep into the thousands of dollars.
Double-check status to avoid surprise costs
Confusing policy lingo aside, the cost of being held for observation can add up for a senior on Medicare.
For dual-eligible seniors (those that qualify for both Medicare and Medicaid coverage) any extra out-of-pocket expenses would be paid for by Medicaid. But, those who rely on Medicare alone must figure out a way to pay the difference on their own.
Medicare Advantage plans can help, but their coverage varies from policy to policy.
The best way to avoid confusion and unexpected expenses is to keep tabs on a hospitalized loved one's status. If a senior's stay lasts more than a few hours, ask their doctor or a member of the hospital staff whether they've been admitted or not.
Bear in mind that a hospital can switch a senior's status even after they've been officially labeled as an inpatient. As long as an elder is in the hospital, their stay is subject to review and can be retroactively changed from inpatient to outpatient.