By Trudy Lieberman

Rural Health News Service

Judy Norblade, a retired marketing director, and her husband, Paul, a retired teacher, thought they had all their financial bases covered. They had Medicare, good supplemental coverage from a Medigap policy, a drug plan that paid for most of their prescriptions and long-term-care insurance for a nursing home they hoped they would never need.

“I thought we were pretty well set for health care in our retirement years,” she said.

Then the Norblades bumped head-on into a notorious Medicare rule that has caught thousands of families off guard over the past eight years and disrupted the sense of health care security they thought they had planned for.

They encountered a provision in the Medicare law, one that has been part of the program since it was founded in 1965. The provision says that Medicare will pay for services at a skilled nursing facility only if a patient has had at least a three-day, inpatient, medically necessary hospital stay before being admitted---assuming a few other requirements are also met.

If they are, Medicare pays the bill for the first 20 days. After that, a patient pays coinsurance – this year, $161 a day from days 21 through 100. If a stay is longer, the family pays the rest.

In December, Paul Norblade, who has a pacemaker, uses oxygen at night, and suffers from atrial fibrillation, was admitted to a Kearney, Nebraska, hospital for what his wife thought were symptoms of congestive heart failure. He didn’t have that, but he had to return to the hospital three more times over the next month for various problems including neurological symptoms and the inability to walk. Each time the hospital said he had been admitted for “observation.”

At the end of his last stay in mid-January, doctors sent him to a local nursing home for physical, occupational, and speech therapy. The hospital discharge planner told his family that since he was in the hospital for observation, they’d have to pay for care on their own.

So far they’ve paid about $16,200 for his care. Their long-term care policy didn’t cover the bill because it came with a 100-day waiting period before benefits begin.

While the rule for three-day inpatient stays seemed straightforward for most of Medicare’s existence, it has been far from straightforward in recent years as Medicare payment auditors got tougher on hospitals that were classifying some patients as inpatients when the auditors thought otherwise. If an auditor overturns a hospital’s decision to classify someone as an inpatient, the hospital must repay what Medicare reimbursed for the care. Hospitals don’t like that very much.

Recently, they have found another reason to label someone an outpatient. Health experts believe too many readmissions could mean a hospital is delivering substandard care, so, in an attempt to improve care, Medicare has begun assessing financial penalties against facilities that readmit too many patients.

The penalty applies only to readmissions of inpatients. To protect their bottom lines, hospitals are fighting back by classifying patients as outpatients or admitting them for observation.

“They may be on observational status, but we’ve seen cases where people who’ve had pelvic fractures were considered outpatients,” says Toby Edelman, senior policy attorney at the Center for Medicare Advocacy in Washington D.C.

In January Medicare’s “two-midnight rule” went into effect to try to address this problem. If the doctor thinks a patient will be in the hospital for two midnights or more, the physician should write an order for an inpatient stay. If a patient will stay less than two midnights, then the order should be for an outpatient stay.

The rule has been controversial. Some hospitals don’t like it, and Edelman’s group and others representing providers and consumers aren’t pleased, either.

“The rule doesn’t fix the problem and doesn’t make any sense. Patients still need a three-stay day before Medicare will pay for skilled nursing care,” Edelman told me. The real solution, she says, is to count all time in the hospital before nursing care is needed. “If someone is in the hospital for three nights, they meet the requirements for nursing care whether they should be classified as an in-or an outpatient.”

Bills with bipartisan support languishing in Congress would do just that. Edelman says, “There really is no opposition.” But the Congressional Budget Office has not announced the budgetary implications, and Congress doesn’t want to act without knowing those.

Trying to appeal a hospital’s decision is difficult and time-consuming. Writing to members of Congress might help get the bill unglued from the legislative process. Or families can make a lot of noise like Judy Norblade who wrote a letter to the editor that was published in her local paper, The Kearney Hub. “I was so upset. I had to call attention to it,” she said. “Not one person I talked to knew anything about this. My friends have cut out my letter and put it with their medicines.”

Have you had any experience with Medicare’s three-day rule? Write to Trudy at [email protected].