You’re Being Observed in the Hospital? Patients with Private Insurance Better Off Than Seniors
This headline comes from that notorious member of the right-wing conspiracy, Kaiser Health News. Here’s the story:
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 hospital bed and received treatment, diagnostic tests and drugs.
The distinction between inpatient status 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 no amount of observation time counts 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. Although Medicare officials recently began experimenting with limited exemptions, they have been unable to resolve the problem.
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.
Although the author does not use the term, in Medicare circles this is known as the “two-midnight rule”. How did it get that name? Doctors are not supposed to admit patients unless their condition makes it likely that they will stay two nights in the hospital. However, regulating reimbursement for post-discharge care, rather than the patients’ clinical condition, has led to some perverse behavior, according to other research:
The physicians found that patients admitted after 4:00 p.m. would have been admitted as inpatients 31.2% of the time, while patients arriving at the hospital before 8:00 a.m. would have been designated inpatients only13.6% of the time under the new rule. Similarly, patients arriving at the hospital on a weekend would have been admitted to inpatient status 26.5% of the time, compared to 22.6% of patients admitted on a weekday. The physicians concluded, “[non-clinical] external factors, such as the time of day and specific day (weekday vs. weekend) of hospitalization, impact the likelihood of achieving a ≥2-midnight stay.”
The best explanation is that hospitals do their best to admit patients for two midnights, even if it may not be necessary. So, why is it that Medicare cannot figure out how to fix this arbitrary rule, whereas private insurers have? Insurers would not be paying for nursing-home care unless they thought it was medically necessary, and cost less than keeping patients in hospitals unnecessarily. The only reasonable conclusion is that Medicare is incapable of doing a cost-benefit analysis of the two-midnight rule, and making the right decision based upon it.
Hospitals are quite good at figuring out how to maximize revenue against Medicare’s reimbursement formula. Years ago I worked for a hospital that, in response to DRGs, created an affiliate hospital in which to discharge sick patients who could not get well in the DRG’s allotted time. By moving these money-losing patients out of one hospital into a long-term acute care hospital, they became cost-reimbursed based on a TEFRA limit.
Sorry but Kaiser’s story mixes up the observed/admitted issue pretty badly and then you compound it a little. There are two separate issues at play here and all the news stories I read on the subject conflate them.
The first issue is which Medicare insurance company or companies pay — and how much they pay — if you are admitted vs if you are observed in an acute care hospital. The Part A company pays the former, the Part B company pays latter, and almost always a supplemental policy pays the difference in both cases. The supplemental insurer usually pays more and the Part A company (using Treasury money) less for the typical unscheduled admittance… But in less frequent but more complex and therefore more expensive observations, the Part B insurer on behalf of the government pays more of the total on a percentage basis, the supplemental insurer pays less, but the total the hospital gets from both insurers is less than if the person had been admitted… So you can guess where this is going.
How many days in which status is only tangentially involved in the issue. Increasingly all over the United States the same insurance company handles both A and B in your state so things are getting a little simpler. The two-midnight rule is part of a test to simplify things even more (see Note 1) by simply saying one = observation, two or more = admitted in terms of what will be audited and against what rules.
As for the second issue, none of this has anything directly to do with skilled nursing facility (SNF) admittance. And, as you say, it shouldn’t. It is true that “Seniors must have three consecutive days as admitted patients to qualify for Medicare coverage…” but that’s coverage for follow-up SNF care, which is not the same as nursing home care. In addition, there are five other criteria that Medicare beneficiaries (not all of whom are seniors by the way) must meet in order to qualify for 20 days of fully covered SNF services and 80 days further with a high co-pay. But other criteria also have to be met week by week in the SNF.
This hints at what the second issue really is about. You cannot use 100 days of Medicare SNF coverage to bridge to custodial care at a nursing home. Such transitioning is common and probably one of the most expensive forms of Medicare abuse.
Most important, as to the connection between skilled nursing facility (SNF) admission and acute care hospital admission, there should not be no connection. We defintely do not need a new law that bakes into Medicare the existing bad SNF admission rules. A person should be covered in a SNF by Medicare IF medically necessary and IF your doctor says you need the service. Period. A person should not have to go to an acute care facility even for a minute, never mind for three days. Eliminating the connection between the two types of medical services – which I believe only apply in situations where the hospital admission was unscheduled (see Note 2) — would not only decrease Medicare expense but it would get Washington DC out of the middle between me and my doctor.
(Note 1: The fact that Kaiser did not use the term “two-midnight rule” was correct on its part because the rule — which is really an auditing protocol not a rule — applies to the first issue, not the second issue.
(Note 2: Scheduled vs unscheduled admittance — I believe if you have — for example — a scheduled joint replacement to be followed by SNF-based rehab and you only need to be kept in the acute care facility for two days, your SNF-based rehab is still covered. I’m not positive of this.)