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Medicare for years was switching patients from inpatient to observation care to avoid paying for nursing home services. This tactic was used to shift costs from Medicare to Elderly Individuals. Medicare covers the first 20 days of nursing home stay if the patient was first admitted to a hospital as an inpatient for at least three days, not including the day the patient was transferred. In addition, Medicare Part A covers inpatient services, but observation care is billed under Medicare Part B. Medicare Part B means an Elderly person has to pay for the co-payment which is more than the one-time deductible under Part A.
An Elderly individual's status as a patient in the hospital is based on the level of care he/she may need. Of course, there are no real clear-cut definitions for inpatient and observation care.
Admission for inpatient hospital care is a medical decision based on a doctor’s judgment and the medical necessity of hospital care. Usually, Inpatient admission is appropriate when a person needs 2 or more days of hospital care. To qualify a doctor must order such admission and the hospital must formally admit the person.
Observation status is when it is unclear that you need extended care. An easy way to think about it is a person is being observed to make sure they are taken care of.
Federal law requires that a hospital notify a patient that they are under observation status than inpatient. On January 25th, 2022, a federal appeals court decision allows patients the right to appeal Medicare finding that of observation care.
