Hospital Admission Doesn't Guarantee Inpatient Benefits

Nov. 10, 2011— -- At 84, Swiss-born Ruth Grew was living independently with osteoporosis, arthritis and hypertension, relying on a walker to get around her Seattle-area home. On a Wednesday in mid-October, however, the retired school librarian suffered sudden, searing back pain and incontinence and went to a nearby emergency room, where doctors admitted her for further tests and consultations with specialists.

A social worker at Overlake Hospital Medical Center in Bellevue, Wash., "dropped the bomb" on the Grew family two days later when she said Grew had been admitted on "observation status." Under that confusing designation, chronically ill Medicare patients are hospitalized yet considered outpatients. Hugh Grew, 58, was slack-jawed. The admissions papers his sister, Shirley, signed included a yellow Medicare form spelling out their mother's rights "as a hospital inpatient."

"Amid the adrenaline and the chaos and the anxiety," Grew's children had believed the signed papers meant "without a doubt" that their mother could count on Medicare hospitalization benefits.

The fallout didn't stop there. By that Saturday, after doctors determined Grew had spinal compression fractures, the doctor in charge of her case said that because she had no acute condition such as an infection and didn't need back surgery, she should be discharged. Only when her children brought her to a skilled nursing facility for physical and occupational therapy did they learn she'd be a "private patient" paying $2,800 a week. Because Overlake admitted her for observation, Grew didn't have the qualifying three-day "inpatient stay" that would trigger Medicare nursing home benefits.

Grew, widowed in 1992, likely will return to her Maple Valley, Wash., home this weekend. But because she's tapping more than $10,000 from money set aside for basic living expenses, she fears health costs could turn her into "a pauper," her son said. "She sees everything my father worked for … the things that he set up for her to have a comfortable life, certainly not an extravagant life, in her later years, all going away."

Grew is among an increasing number of chronically ill patients scratching their heads to learn that during hospital stays of up to 13 days, Medicare never considered them inpatients. In some cases, they're unaware of their "observation status," until billed for a share of diagnostic tests, prescription medications and other services Medicare covers more generously for inpatients. Shock frequently sets in when they need aftercare and find out they'll have to pay out-of-pocket.

Two non-profit organizations, The Center for Medicare Advocacy and the National Senior Citizen Law Center, filed a class-action lawsuit last week against Health and Human Services Secretary Kathleen Sibelius on behalf of seven Medicare patients with chronic ailments ranging from Parkinson's disease to cancer, who were admitted to hospitals, but remained outpatients. The suit filed in U.S. District Court in Hartford, Conn., alleges that admitting patients under "observation status" is illegal and that "improper classification" deprived them of Medicare Part A coverage for hospital and nursing home stays. Medicare Part B benefits covered a smaller share of costs.

Health and Human Services referred a request for comment to its Centers for Medicare & Medicaid Services (CMS), where a spokesman said, "We are not able to comment on pending litigation."