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Under Observation Rule

Written by Brian Gruss

The new under observation rule is a major change came to hospital admission that changes the way a hospital stay is classified (paid for) with Medicare.

On Wednesday, March 8th, 2017 Medicare is now requiring hospitals to MOON you!!  Okay now wipe the horrible images that just flashed through your head.  MOON, in this case, stands for Medicare Outpatient Observation Notice.  This notice is only applicable to those who have original Medicare with or without a Medigap (Medicare Supplement), and not to those who have a Medicare Advantage Plan (Part C).

Estimated at affecting over 1 million Medicare beneficiaries makes the MOON rule a major change.

Beginning March 8th, hospitals and critical access hospitals must provide the MOON to Medicare beneficiaries or their legal representative if receiving observation services as an outpatient for more than 24 hours. The MOON must, in this case, in written form that is signed and dated along with an oral explanation from the facility no later than 36 hours from the time the Medicare patient begins receiving outpatient observation services. This time limit is considered the new two midnight stay observation policy.

A hospital not providing the MOON notice, would be a breach in contract with Medicare, and could be terminated from Medicare’s network of approved providers.  This would be a substantial loss of monies to the hospital.

Why does all this matter?  That’s a great question.  If you admitted into the hospital, payment falls under Part A of Medicare, and after being admitted for 3 days you then would be able to qualify for Medicare and your Medigap plan paying for Skilled Nursing Facility care.  If however you are under observation, that is paid for under Part B of Medicare, and would not qualify you towards getting Skilled Nursing Facility care.

The MOON notice allows patients or their representatives the opportunity to tell the hospital they want to, must, instead of being under observation.  I can’t tell you how many calls that I have received with clients telling me the hospital never told them they were under observation.  …and then being referred by the hospital doctors to a Skilled Nursing Facility.

Depending on what Medicare coverage you have, this may affect more, in this case, the Skilled Nursing Facility benefit, may hit you in your pocketbook.  Under Medicare Part B, there is a annual deductible in 2017 it’s $183.  But also after that annual deductible is paid Medicare only pays 80% of the bill, leaving you with 20% of it.  Now, remember if you have a Medigap plan that pays the 20% you don’t have to worry about that.

As you’ve learned Medicare Part B usually covers doctor office visits and anything outpatient including when you’re under observation in the hospital.  Medicare Part B also covers the drugs that you might be using while under observation in the hospital.

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