MA No Comments

In August, President Obama signed into law the Notice of Observation Treatment and Implication for Care Eligibility Act (“NOTICE Act”).  This Act will greatly help families who transition from a hospital to a nursing home and are looking for Medicare payment while they can organize their affairs to move towards Medicaid qualification. The NOTICE Act requires hospitals to notify Medicare patients when they are receiving “observation care” but have not been formerly admitted to the hospital.

The bill is meant to help Medicare beneficiaries with a recurring problem.  Many face sticker shock after a hospital stay when they go to a skilled nursing facility (SNF) or rehab facility.  Medicare will not cover the tab of the post-hospital stay, which leaves the patient immediately subject to paying out-of-pocket at private pay rates.

To qualify for Medicare coverage in a post-hospital SNF stay, a Medicare beneficiary must first spend three (3) consecutive midnights as an admitted patient in a hospital; observation days don’t count towards that requirement.  It had become commonplace for people needing nursing home placement to seek a hospital stay first, so as to have the assistance of the hospital in locating an available nursing home bed and having Medicare pay for some or all of the first 100 days of care.

The rule providing for payment from Medicare often buys families time to sort through their finances and prepare for the high cost of long-term care.  Medicare typically will pay for the first 20 days of care and then cover a portion of care for the next 80 days.  This 100-day window will gives families 2 or 3 solid months to begin the daunting task of planning for how to pay for long-term care expenses.

Within the last few years, hospitals were using their ability to put someone in “observation” and then discharging them to the nursing home.  Most Medicare beneficiaries would not know at the time they are in the hospital whether they were admitted or on observation status.  After leaving the hospital, they would end up in rehab with no help from Medicare.  The sticker shock of getting the first month’s nursing home bill would cause many to panic, especially when they thought Medicare was going to pay for the services.

While this deceptive practice is not being eliminated by the NOTICE Act, the hospital is now required to put a patient and their family on notice that they are under observation and have not been formally admitted. This will let families know that they do not have a Medicare-funded grace period in the hospital and will be on the hook for costs after discharge immediately.  This also gives the family a head’s up that they need to contact a Certified Medicaid Planner™.


For a full copy of the NOTICE Act, click here.