Hospital Indemnity Insurance Can Limit Medicare Observation Billing Effects
Hospital insurance can help fill gaps after Medicare observation billing
By Karla Walsh
A hospital stay is stressful enough without additional billing woes. But more seniors are facing unexpected expenses when Medicare’s observation billing doesn’t land in their favor.
Medicare laws state that inpatient stays, including short-term hospital care, must last three days or longer to qualify for Part A coverage. And more and more doctors are placing patients under “observation,” an outpatient status, instead of admitting them to the inpatient ward.
Does Medicare typically cover hospital observation?
In 2012, the average short-term inpatient stay cost Medicare $5,142, compared to $1,741 for a hospital observation stay. During fiscal year 2014, nearly 750,000 hospital stays were deemed outpatient — an 8% increase over the previous year. Medicare spending on hospital observation has jumped from $690 million in 2011 to $3.1 billion in 2016, according to a Forbes report.
“Medicare covers hospital observation under Part B because they consider it as outpatient coverage,” explains Erin Bueltel, product specialist for Medico Insurance Company, but Part A only covers hospital care when you’re admitted as an inpatient.
That means patients who don't have Part B Medicare coverage would be responsible for 100% of the observation bill.
Why do doctors place patients under hospital observation?
“A doctor may put a patient under hospital observation if their condition is serious enough to be monitored by medical professionals, but it is not critical enough for inpatient care,” Bueltel says.
Conditions that need monitoring through hospital observation may include, but are not limited to:
- Blood clots
- Severe shortness of breath
- Certain heart conditions
- High fever
“For the most part, observation should not exceed 24 hours, but in some cases, it can go up to 48 hours or even longer,” Bueltel says.
Doctors want to provide ample care to their patients, but many feel stuck. The hospitals they work for don’t enjoy placing patients under hospital observation because they make less money. Yet doctors must follow strict government guidelines about what is worthy of a hospital stay and what Medicare will cover, or they could face large penalties.
What are patient rights for Medicare gaps in hospital insurance?
Since hospital observation was becoming more common, laws changed in 2017 to ensure that patients have more rights. If you’re placed under observation for 24 hours or more, your hospital is required to provide a Medicare Outpatient Observation Notice (MOON) that defines why you’re being observed and what the status means financially.
As a patient, you are unable to appeal this MOON directly to Medicare, although you are allowed to:
- Ask your doctor to admit you with inpatient status.
- Ask for a written explanation of why you’re under observation.
- Remind your doctor of the difference between coverage in terms of Medicare observation billing.
How can Hospital Indemnity insurance help with Medicare gaps?
“Medico’s Hospital Indemnity insurance was designed to fill the coverage gaps that other plans create through copays and maximum out-of-pocket costs, as well as services not covered,” Bueltel says.
It’s important to find a Hospital Indemnity plan1 that will pay the same per-day benefit for observation and inpatient services, even when you receive observation care and leave the hospital without inpatient admission, Bueltel says.
“For instance, if you selected $300-a-day to meet your hospital copay on your Medicare Advantage, even if you are only in observation, Medico will pay you $300 for each day you are in observation.* This will help cover any copay costs associated with outpatient care,” Bueltel says. (Refer to your plan benefit summary to see what your Medicare Advantage plan pays for outpatient care.)
To learn how Medico’s Hospital Indemnity insurance plan can help fill your coverage gaps and if it’s available in your state,2 visit the Hospital Indemnity page. You may also request a personalized, free quote, or call 877-257-2663 to speak with an agent.
Medico Insurance Company disclosures
Policy provisions and benefits may vary from state to state. Please see the policy and riders for complete details.
*For costs and further details of the coverage, including exclusions, restrictions, or limitations and the terms under which the policy may be continued in force or discontinued, see your producer or contact Medico. The policyholder has 30 days after receiving the policy to examine it and return it to Medico or to the producer if they are dissatisfied. Medico will refund the premium, less any claims paid, and void the policy (may vary by state). This webpage is intended to provide a general description of the policy benefits. Pre-existing conditions are not covered during the first six months after the policy date (may vary by state). To be eligible for benefits, you must receive medically necessary covered care, as defined in the policy.
This is a solicitation of insurance, and a licensed agent/producer may contact you. THIS IS A LIMITED POLICY. If there is a discrepancy between the webpage and the contract, the contract language prevails.
This policy is not major medical insurance and is not a substitute for major medical insurance. It does not qualify as minimum essential health coverage under the Federal Affordable Care Act. If you purchase this policy only, you will not satisfy the federal requirement that you have health coverage, which has been in effect since Jan. 1, 2014.
1. This policy is called “Hospital Confinement Insurance” in AR, “Fixed Indemnity Insurance Policy” in CO, “Hospital Confinement Indemnity Insurance” in PA, “Hospital Limited Benefit Indemnity Insurance Policy” in UT, and “Limited Benefit Hospital Indemnity Insurance Policy” in VA.
2. Optional benefit riders may not be available in all states and benefits may vary by state. The rider names may vary by state.
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