Medicare Patients Win the Right to Appeal Gap in Nursing Home Coverage
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Category: Observation care
The Jan. 25 ruling, which came in response to a 2011 class-action lawsuit eventually joined by 14 beneficiaries against the Department of Health and Human Services, will guarantee pUnder New Cost-Cutting Medicare Rule, Same Surgery, Same Place, Different Bill
By Susan Jaffe | Kaiser Health News | March 21, 2021 | This KHN story also ran in The Washington Post
For years, Medicare officials considered some su
rgeries so risky for older adults that that the insurance program would cover the procedures only for patients admitted to the hospital. Under a new Medicare policy that took effect this year, these operations can be provided to patients who are not admitted. But patients still have to go to the hospital. The change saves Medicare money while patients can pay a larger share of the bill — for the same surgery at the same hospital. [Full story in The Washington Post and Kaiser Health News.]
… Federal Judge Rules Medicare Patients Can Challenge ‘Observation Care’ Status
By Susan Jaffe | Kaiser Health News | March 30, 2020| This story also appeared in 
Hundreds of thousands of Medicare beneficiaries who have been denied coverage for nursing home stays because their time in the hospital was changed from “inpati
ent” to “observation care” can now appeal to Medicare for reimbursement, a federal judge in Hartford, Connecticut, ruled last week.
If the government does not challenge the decision and patients win their appeals, Medicare could pay them millions of dollars for staggeringly high nursing home bills….
“If I had gone home, I would have died,” said Ervin Kanefsky, 94, a plaintiff [in a class action lawsuit against Medicare] from suburban Philadelphia. He was admitted to the hospital as an inpatient after fracturing his shoulder in a fall. When he was about to leave after five days to recuperate at a nursing home, a hospital official told him his status had changed to observation. With one arm in a sling, stitches in the other and unable to hold onto his walker, he learned Medicare wouldn’t pay for the nursing home. [Continued at Kaiser Health News or The Philadelphia Inquirer.]
…Class-Action Lawsuit Seeks To Let Medicare Patients Appeal Gap in Nursing Home Coverage
By Susan Jaffe | Kaiser Health News | August 12, 2019 | This KHN story also ran on 
and
Medicare paid for Betty Gordon’s knee replacement surgery in March, but the 72-year-old former high school teacher needed a nursing home stay and care at home to recover.
Yet Medicare wouldn’t pay for that. So Gordon is stuck with a $7,000 bill she can’t afford — and, as if that were not bad enough, she can’t appeal.
The reasons Medicare won’t pay have frustrated the Rhode Island woman and many others trapped in the maze of regulations surrounding something called “observation care.”
Patients, like Gordon, receive observation care in the hospital when their doctors think they are too sick to go home but not sick enough to be admitted. They stay overnight or longer, usually in regular hospital rooms, getting some of the same services and treatment (often for the same problems) as an admitted patient….
(Photo courtesy of Betty Gordon)
But observation care is considered an outpatient service under Medicare rules, like a doctor’s appointment or a lab test. Observation patients may have to pay a larger share of the hospital bill than if they were officially admitted to the hospital.Medicare’s nursing home benefit is available only to those admitted to the hospital for three consecutive days. Gordon spent three days in the hospital after her surgery, but because she was getting observation care, that time didn’t count.
There’s another twist: Patients might want to file an appeal, as they can with many other Medicare decisions. But that is not allowed if the dispute involves observation care.
Monday, a trial begins in federal court in Hartford, Conn., where patients who were denied Medicare’s nursing home benefit are hoping to force the government to eliminate that exception. A victory would clear the way for appeals from hundreds of thousands of people. [Continued at Kaiser Health News, Next Avenue or Salon]
…CMS lost $84M in two years for ineligible nursing home stays
IG investigators said such improper payments are accumulating year after year.
By Susan Jaffe | Modern Healthcare | February 20, 2019
The CMS pays millions of dollars a year to nursing homes for taking care of older adults who don’t qualify for coverage, according to an investigation by HHS’ inspector general.
The IG’s report, released Wednesday, includes steps the CMS should take to fix the problem; but in a written response, CMS Administrator Seema Verma rejected some key recommendations. [Continued here.]…
By Law, Hospitals Now Must Tell Medicare Patients When Care Is ‘Observation’ Only
By Susan Jaffe | KAISER HEALTH NEWS | March 13, 2017 |This story also ran in 
Under a new federal law, hospitals across the country must now alert Medicare patients when they are getting observation care and why they were not admitted — even if they stay in the hospital a few nights. For years, seniors often found out only when they got
Hospitals must complete this notice and give it to Medicare observation patients.
surprise bills for the services Medicare doesn’t cover for observation patients, including some drugs and expensive nursing home care.
The notice may cushion the shock but probably not settle the issue.
When patients are too sick to go home but not sick enough to be admitted, observation care gives doctors time to figure out what’s wrong. It is considered an outpatient service, like a doctor’s visit. Unless their care falls under a new Medicare bundled-payment category, observation patients pay a share of the cost of each test, treatment or other services. And if they need nursing home care to recover their strength, Medicare won’t pay for it because that coverage requires a prior hospital admission of at least three consecutive days.
Observation time doesn’t count.
“Letting you know would help, that’s for sure,” said Suzanne Mitchell, of Walnut Creek, Calif. When her 94-year-old husband fell and was taken to a hospital last September, she was told he would be admitted. It was only after seven days of hospitalization that she learned he had been an observation patient. He was due to leave the next day and enter a nursing home, which Medicare would not cover. She still doesn’t know why.
“If I had known [he was in observation care], I would have been on it like a tiger because I knew the consequences
This KHN article also ran in The Philadelphia Inquirer.
by then, and I would have done everything I could to insist that they change that outpatient/inpatient,” said Mitchell, a retired respiratory therapist. “I have never, to this day, been able to have anybody give me the written policy the hospital goes by to decide.” Her husband was hospitalized two more times and died in December. His nursing home sent a bill for nearly $7,000 that she has not yet paid. [Continued at Kaiser Health News and USA Today] …
Protecting California’s Seniors From Surprise Hospital, Nursing Home Bills
By Susan Jaffe | Kaiser Health News & California Healthline | August 29, 2016
Californians with Medicare coverage would no longer be surprised by huge medical bills stemming from “observation care” in hospitals under legislation that state lawmakers approved overwhelmingly last week and sent to Gov. Jerry Brown to sign into law.
The sticker-shock can happen when people go to the hospital but health care providers are not sure what’s wrong. If the patient is not sick enough to be formally admitted, but still not healthy enough to go home, they can stay in the hospital for “observation care,” which Medicare considers an outpatient service. That can mean higher out-of-pocket expenses for the patient….And because observation patients have not spent the required minimum of three straight days as an admitted patient, Medicare will not cover their follow-up nursing home expenses after discharge. Observation care doesn’t count….“I don’t think the average person knows the difference,” said Sen. Ed Hernandez (D-West Covina). Hernandez introduced the legislation requiring hospitals starting Jan. 1 to tell all patients if they are getting observation care.
…The legislation also would require the nation’s first minimum nurse-to-patient staffing ratios in observation care units for hospitals that have separate units for those patients. “We are still the only state that has these very specific mandated ratios for every unit of the hospital that have to be adhered to every minute of every day,” said Jan Emerson-Shea, a spokeswoman for the California Hospital Association, which represents 400 hospitals. Those staffing rules, however, excluded observation care units.
“We wanted to make sure hospitals didn’t use observation care as a loophole to avoid any of the minimum nursing staffing requirements,” said Sen. Hernandez. [Continued in California Healthline or San Jose Mercury News]…
Medicare Releases Draft Proposal For Patient Observation Notice
By Susan Jaffe | KAISER HEALTH NEWS | June 15, 2016 |This story also ran in
In just two months, a federal law kicks in requiring hospitals to tell their Medicare patients if they have not been formally admitted and why. But some physician, hospital and consumer representatives say a notice drafted by Medicare for hospitals to use may not do the job.
The law
was a response to complaints from Medicare patients who were surprised to learn that although they had spent a few days in the hospital, they were there for observation and were not admitted. Observation patients are considered too sick to go home yet not sick enough to be admitted. They may pay higher charges than admitted patients and do not qualify for Medicare’s nursing home coverage.
The NOTICE Act requires that starting Aug. 6, Medicare patients receive a form written in “plain language” after 24 hours of observation care but no later than 36 hours. Under the law, it must explain the reason they have not been admitted and how that decision will affect Medicare’s payment for services and patients’ share of the costs. The information must also be provided verbally, and a doctor or hospital staff member must be available to answer questions
And patients could have questions, said Brenda Cude, a National Association of Insurance Commissioners consumer representative and professor of consumer economics at the University of Georgia. She said the notice is written for a 12th-grade reading level, even though most consumer materials aim for no more than an eighth-grade level. It “assumes some health insurance knowledge that we are fairly certain most people don’t have.”
…The form does not meet the expectations of Rep. Lloyd Doggett, D-Texas, who co-sponsored the law. “I am concerned that the proposed notice fulfills neither the spirit nor the letter of the law,” Doggett said in an interview. [Continuted at Kaiser Health News or USA Today]…
Congress Overwhelmingly Approves Bill Bolstering Medicare Patients’ Hospital Rights
By Susan Jaffe | Kaiser Health News | July 29, 2015 | This KHN story also ran in 
The U.S. Senate unanimously approved legislation Monday night requiring hospitals across the nation to tell Medicare patients when they receive observation care but have not been admitted to the hospital. It’s a distinction that’s easy to
miss until patients are hit with big medical bills after a short stay.
The vote follows overwhelming approval in the U. S. House of Representatives in March. The legislation is expected to be signed into law by President Barack Obama, said its House sponsor, Texas Democratic Rep. Lloyd Doggett.
It’s called the NOTICE Act, short for “Notice of Observation Treatment and Implication for Care Eligibility.” The law would require hospitals to provide written notification to patients 24 hours after receiving observation care, explaining that they have not been admitted to the hospital, the reasons why, and the potential financial implications.
Those implications can be dire. Observation care hurts seniors in two ways: It keeps Medicare’s more comprehensive hospitalization coverage from kicking in, and it means they may not get Medicare’s limited nursing home benefit if they need care in a facility after being in a hospital.
To qualify for Medicare’s nursing home coverage, beneficiaries must first spend three consecutive midnights as an admitted patient in a hospital, and observation days don’t count. Without that coverage, seniors could pay thousands of dollars for the nursing home care their doctor ordered, or else try to recover on their own. Observation care is a classification used when patients are not well enough to go home but not sick enough to be admitted. [Continued in Kaiser Health News]…
Hospitals Required To Tell Patients Of Observation Care Status
By Susan Jaffe | September 30, 2014
Connecticut Health Investigative Team and The Hartford Courant
Starting Wednesday, a new state law requires Connecticut hospitals to tell all patients when 
they are being kept in the hospital for observation instead of being admitted and to warn them about the financial consequences.
Anyone who goes to the hospital can be placed on observation status, so that doctors can determine what’s wrong, and decide whether the patient is sick enough to be admitted or well enough to go home. Observation patients may receive diagnostic tests, medications, some treatment, and other outpatient services. Depending on their insurance, they can be 
charged a share of the cost. In addition to hospital bills, Medicare observation patients whose doctors order follow-up nursing home care will have to pay the nursing home themselves. Medicare covers nursing homes only after seniors are admitted to the hospital and stay through three consecutive midnights. A month in a Connecticut nursing home can cost as much as $15,000.
Medicare does not require hospitals to tell patients when they are getting observation care and what it means. And the number of Medicare observation patients is growing rapidly — 88 percent in the past six years, to 1.8 million nationally in 2012, according to the Medicare Payment Advisory Commission, an independent government agency.
…Meanwhile, more states are trying to address the situation. Connecticut becomes at least the third state in the nation, after New York and Maryland to require notification for observation status. Massachusetts, New Jersey and Pennsylvania are considering similar laws. CONTINUED in Connecticut Health Investigative Team CONTINUED in The Courant …
You’re Being Observed In The Hospital? Patients With Private Insurance Better Off Than Seniors
By Susan Jaffe KAISER HEALTH NEWS | September 11, 2014 | This KHN story also ran in 
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.
Because they were not considered sick enough to require admission but also were not healthy enough to go home, they were kept for observation care, a type of outpatient service. 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.
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. Here’s a primer comparing how Medicare and private insurers handle observation care. [Continued in KHN] [Continued in Washington Post]…
Medicare Testing Payment Options That Could End Observation Care Penalties
By Susan Jaffe KAISER HEALTH NEWS | July 22, 2014 | This KHN story also ran in
Medicare officials have allowed patients at dozens of hospitals participating in pilot projects across the country to be exempted from the controversial requirement that limits nursing home coverage to seniors admitted to a hospital for at least three days.
The idea behind these experiments is to find out whether new payment arrangements with the hospitals and other health care providers that drop the three-day rule can reduce costs or keep them the same while improving the quality of care. They are conducted under a provision of the Affordable Care Act that created the Center for Medicare and Medicaid Innovations to develop ways of improving Medicare.
If the experiment saves Medicare money and improves care, “we should be able to make an argument to Medicare that there is a way to do it for all our patients,” said Dr. Eric Weil, clinical affairs associate chief for the general internal medicine division at Massachusetts General Hospital in Boston. The hospital is one of five in the Partners Health System that began offering the waiver in April, after testing a limited version.
“It gets patients to the care they need much quicker and prevents them from clinically declining at home,” said Weil. If patients can spend less time in the hospital, he said that frees up valuable resources for sicker patients. And it saves money for Medicare because nursing home care or home health care is cheaper than a hospital stay. [Continued in KHN] [Continued in Washington Post]…
FAQ: Hospital Observation Care Can Be Costly For Medicare Patients
By Susan Jaffe | UPDATED June 18, 2014 | KAISER HEALTH NEWS 
Some seniors think Medicare made a mistake. Others are just stunned when they find out that being in a hospital for days doesn’t always mean they were actually admitted.
Instead, they received observation care, considered by Medicare to be an outpatient service. Yet, a recent government investigation found that observation patients often have the same health problems as those who are admitted. But the observation designation means they can have higher out-of-pocket expenses and fewer Medicare benefits. Here are some common questions and answers about observation care and the coverage gap that can result. [MORE] …
Medicare May Be Overpaying Hospitals For Patients Who Don’t Stay Long
By Susan Jaffe | Kaiser Health News in collaboration with National Public Radio | May 21, 2014, 9:35 a.m.
The federal government may be paying hospitals $5 billion too much as a result of an 18-month moratorium on enforcement of Medicare rules that tell hospitals when patients should be admitted, an independent Medicare auditing company told a congressional panel yesterday. The controversial rules were intended to reduce the increasing number of seniors hospitalized for observation but not admitted. If they have not been admitted to the hospital for at least three consecutive days, they are not eligible for follow-up nursing home coverage and may have higher out-of-pocket expenses while in the hospital. Medicare pays hospitals more for admitted patients than observation patients. MORE from NPR and Kaiser Health News …
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By Susan Jaffe Jan. 21, 2014 KAISER HEALTH NEWS in collaboration with
Medicare beneficiaries who have been waiting months and even years for a hearing on their appeals for coverage may soon get a break as their cases take top priority in an effort to remedy a massive backlog.
Nancy Griswold, the chief judge of the Office of Medicare Hearings and Appeals (OMHA), announced in a memo sent last month to more than 900 appellants and health care associations that her office has a backlog of nearly 357,000 claims. In response, she said the agency has suspended acting on new requests for hearings filed by hospitals, doctors, nursing homes and other health care providers, which make up nearly 90 percent of the cases. But beneficiaries’ appeals will continue to be processed.
“We have elderly or disabled Medicare clients waiting as long as two years for a hearing and nine months for a decision,” said Judith Stein, executive director of the Center for Medicare Advocacy. [More from KHN] [More from Washington Post]
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By Susan Jaffe | January 10, 2014, 2:41 pm 
Every year, thousands of Medicare patients who spend time in the hospital for observation but are not officially admitted find they are not eligible for nursing home coverage after discharge. 
…Medicare officials have urged hospital patients to find out if they’ve been admitted. But suppose the answer is no. Then what do you do?
Medicare doesn’t require hospitals to tell patients if they are merely being observed, which is supposed to last no more than 48 hours to help the doctor decide if someone is sick enough to be admitted. (Starting on Jan. 19, however, New York State will require hospitals to provide oral and written notification to patients within 24 hours of putting them on observation status. Penalties range as much as $5,000 per violation. ) MORE
Judge Dismisses Hospital ‘Observation Care’ Lawsuit
By Susan Jaffe | Connecticut Health Investigative Team Writer | Sept. 23, 2013
Today, A lawsuit filed by fourteen seniors, including seven from Connecticut, seeking Medicare nursing home coverage was dismissed Monday by a federal court judge in Hartford.
The seniors were among more than a million Medicare beneficiaries who enter the hospital for observation every year. Because they did not spend at least three consecutive hospital days as admitted patients, Medicare will not pay for their nursing home care.
In their lawsuit, they argued that there is little difference between observation and admitted patients, except when it comes to paying tens of thousands of dollars in nursing home bills. They asked the judge to eliminate the ‘observation care’ designation or at least set up an expedited appeals process so that their observation status would be reviewed. They also wanted the judge to order Medicare officials to require hospitals to tell patients if they are receiving ‘observation care’ and have not been admitted.MORE…
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FAQ: Hospital Observation Care Can Be Poorly Understood And Costly For Medicare Beneficiaries
By Susan Jaffe | September 4, 2013 | KAISER HEALTH NEWS
Some seniors think Medicare made a mistake. Others are just stunned when they find out that being in a hospital for days doesn’t always mean they were actually admitted.
Instead, they received observation care, considered by Medicare to be an outpatient service. Yet, a recent government investigation found that observation patients often have the same health problems as those who are admitted. But the observation designation means they can have higher out-of-pocket expenses and fewer Medicare benefits. Here are some common questions and answers about observation care and the coverage gap that can result. [Continued here]
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HHS Inspector General Scrutinizes Medicare Rule For Observation Care
By July 30, 2013 | Kaiser Health News in collaboration with 
Medicare patients’; chances of being admitted to the hospital or kept for observation depend on what hospital they go to — even when their symptoms are the same, notes a federal watchdog agency in a report to be released today, which also urges Medicare officials to count those observation visits toward the three-inpatient-day minimum required for nursing home coverage.
The investigation, conducted by the Department of Health and Human Services Inspector General, was based on 2012 Medicare hospital charges. Its findings, which underscore several years of complaints that the distinction between an inpatient and observation stay isn’t always clear, come just days before the Centers for Medicare and Medicaid Services (CMS) is expected to issue final regulations intended to address the problem. [Continued in Washington Post and in KHN]
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Seniors Sue Medicare To Close Nursing Home Coverage Gap
…Today, lawyers representing 14 seniors, including 7 from Connecticut, will go to 
U.S. District Court in Hartford to ask a judge to eliminate the observation care designation because it deprives Medicare beneficiaries of the full hospital coverage they’re entitled to under Medicare, including coverage for follow-up nursing home care. More seniors are falling into the observation care coverage gap: the number of observation patients has skyrocketed 69 percent in the past five years, to 1.6 million nationally in 2011, according federal records.
Government lawyers will ask the judge to throw out the case because the seniors should have followed Medicare’s appeals process before going to court if they believed they were unfairly denied benefits.
And yet federal records and interviews with patients and advocates show that many observation patients who call Medicare about the billing problem hear something quite different – there is nothing that Medicare can do to help. MORE
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Advocates Head To Court To Overturn Medicare Rules For Observation Care
By Susan Jaffe | May 3, 2013 | KAISER HEALTH NEWS produced in collaboration with 
Lois Frarie and her husband Wayne live in a Park Lane senior community home in Monterey, Calif. (Photo by Jay Dunn/The Salinas Californian for USA Today.)
After Lois Frarie, a 93-year-old retired teacher from Monterey, Calif., spent four days at a local hospital while being treated for a broken elbow and pelvis, she went to a nearby nursing home to build up her strength.
But her family was stunned to find out that they would have to pay thousands of dollars up front since two of the days she spent in the hospital were considered “observation care.” She wasn’t an admitted patient for at least three consecutive days and therefore she didn’t qualify under federal law for Medicare’s nursing home coverage.
Advocates for seniors say the distinction is not fair to patients.
They are taking their argument to federal court in Hartford, Conn., Friday for the first hearing on a lawsuit seeking to have Medicare eliminate the observation label. Government lawyers argue in court filings that Medicare considers observation care an outpatient service and if elderly patients think they should have been admitted to the hospital, they should file an appeal. [Continued in Kaiser Health News, and in USA Today PDF or online.]
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Medicare Seeks To Limit Number Of Seniors Placed In Hospital Observation Care
By May 3, 2013 | KAISER HEALTH NEWS in collaboration with 
“This trend concerns us because of the potential financial impact on Medicare beneficiaries,” officials wrote in an announcement April 26. Patients must spend three consecutive inpatient days in the hospital before Medicare will cover nursing home care ordered by a doctor.
…The reaction from patient advocates, doctors and hospitals has been swift and surprisingly unanimous: it’s a bad idea. MORE
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DEC 17, 2012 KAISER HEALTH NEWS in collaboration with
Dan Driscoll used to be a smoker. During a regular doctor’s visit, his primary-care physician suggested that Driscoll be tested to see if he was at risk for an abdominal aortic aneurysm, a life-threatening condition that can be linked to 
smoking. The doctor said Medicare would cover the procedure. So Driscoll, 68, who lives in Silver Spring, had the test done and was surprised when he got a bill from Medicare for $214.
“I didn’t accept that,” he said, because based on everything he had read from Medicare, he was sure this was a covered service. So Driscoll did something that seniors rarely do: He filed an appeal. Of the 1.1 billion claims submitted to Medicare in 2010 for hospitalizations, nursing home care, doctor’s visits, tests and physical therapy, 117 million were denied. Of those, only 2 percent were appealed.
“People lose, and then they lose heart, or they are too sick, too tired or too old, and they give up,” said Margaret Murphy, associate director of the Center for Medicare Advocacy, which has offices in Washington and Connecticut. “Or their kids are handling the appeal and they are too overwhelmed caring for Mom or Dad.” MORE
How To File A Medicare Appeal Here are some basic steps for challenging Medicare coverage denials…. MORE
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Medicare pilot program meant to revise policy that leaves seniors with costly bill
By August 9, 2012 | KAISER HEALTH NEWS produced in collaboration with 
Concerned that a growing number of seniors have been unexpectedly forced to pay thousands of dollars for nursing home care after a stay in a hospital, Medicare has launched a pilot project to test whether it can relax hospital-payment rules to help the 
growing number of seniors who are shelling out thousands of dollars for follow-up nursing-home care.
The issue involves what should be an easy question: Is the Medicare beneficiary an inpatient or an observation patient? The answer can mean the difference between Medicare-covered follow-up nursing-home care or a senior facing an unexpected whopper of a bill. [Continued in The Washington Post and in KHN]
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$18 For A Baby Aspirin? Hospitals Hike Costs For Everyday Drugs For Some Patients
By Susan Jaffe | April 30, 2012 | KAISER HEALTH NEWS produced in collaboration with 
For the price Diane Zachor, 66, was charged for one pill to control high pressure during her 18 hour stay at St. Luke’s Hospital In Duluth, Min
n., she could have bought a three-week supply. In South Florida, Pearl Beras, 85, of Boca Raton, Fla., said her hospital charged $71 for one blood pressure pill for which her neighborhood pharmacy charges 16 cents. Several other Medicare patients in Missouri were billed $18 for a single baby aspirin, said Ruth Dockins, a senior advocate at the Southeast Missouri Area Agency on Aging.
It’s no mistake: When Medicare patients are in hospitals for observation, they can be charged any amount for routine drugs to treat chronic conditions such as diabetes, high blood pressure or high cholesterol. Medicare doesn’t cover these type of medications and doesn’t require hospitals to tell patients when they are in observation status or that they will be responsible for paying any non-Medicare-covered services.
“I just couldn’t believe some of these prices they charge,” said Zachor (left). “It’s just atrocious.” [More from USA Today or from Kaiser Health News]