Patients admitted for observation can face steep drug bills

— -- Sudden chest pains landed Diane Zachor in a Duluth, Minn., hospital overnight, but weeks later she had another shock — a $442 bill for the everyday drugs she also takes at home, including more than a half dozen common medicines to control diabetes, heart problems and high cholesterol.

"I just couldn't believe some of these prices they charge," said Zachor, 66. "It's just atrocious." For the price she was charged for her insulin during her 18-hour stay at St. Luke's Hospital, Zachor would have enough to cover her out-of-pocket expenses for a three-month supply under her private Medicare Advantage plan. The tab for one water pill to control high blood pressure could buy a three-week supply. And the bill for one calcium tablet could purchase enough for three weeks, when she gets them over the counter from a national chain pharmacy.

Even though her health plan covers medical and drug expenses, her policy would not pay the hospital drug bill because St. Luke's never formally admitted her, instead billing the visit as observation care, which is considered outpatient service.

That observation label excludes thousands of patients every year from full Medicare coverage. Many have spent more than a day in the hospital and had regular hospital rooms and service and, as with Zachor, never realized they weren't admitted.

These observation patients might wind up paying a larger share of their hospital bills than inpatients, since they usually have a co-payment for doctors' fees and each hospital service.

But Medicare doesn't pay at all for routine drugs that observation patients need for chronic conditions such as diabetes, high blood pressure or high cholesterol — drugs that Zachor could have brought from home if the hospital allowed it and she had time to get them. Medicare has no rules for what hospitals can bill for non-covered drugs, so they can charge any amount.

A shock, afterward

It's an unwelcome surprise for patients who may not get the bad news until they receive a hospital bill. Medicare has no rules requiring hospitals to tell patients when they are in observation status or that they will be responsible for paying any non-covered Medicare services, said Ellen Griffith, a spokeswoman for the U.S. Centers for Medicare & Medicaid Services.

"St. Luke's carries out 'observation' and all other health care policies as prescribed by Medicare rules," said Mary Greene, a St. Luke's Hospital representative, in an e-mail. She referred any questions to Medicare.

Drug prices have also surprised seniors in other parts of the country:

•In Missouri, several Medicare observation patients were billed $18 for one baby aspirin, said Ruth Dockins, a senior advocate at the Southeast Missouri Area Agency on Aging.

•Pearl Beras, 85, of Boca Raton, Fla., said in an interview that her hospital charged $71 for one blood pressure pill for which her neighborhood pharmacy charges 16 cents.

•In California, a hospital billed several patients $111 for one pill that reduces nausea; for the same price, they could have bought 95 of the pills at a local pharmacy, said Tamara McKee, program manager for the Health Insurance Counseling & Advocacy Program at the Alliance on Aging in Monterey County, Calif., who handled at least 20 complaints last year from Medicare beneficiaries about excessive hospital drug bills.