A three-judge federal appeals court panel in Connecticut has likely ended an 11-year fight against a frustrating and confusing rule that left hundreds of thousands of Medicare beneficiaries without coverage for nursing home care, and no way to challenge a denial.
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 patients the right to appeal to Medicare for nursing home coverage if they were admitted to a hospital as an inpatient but were switched to observation care, an outpatient service.
The court’s decision applies only to people with traditional Medicare whose status was changed from inpatient to observation. A hospital services review team can make this change during or after a patient’s stay.
Observation care is a classification designed for patients who are not well enough to go home but still need the kind of care they can get only in a hospital. But it can have serious repercussions.
Without a three-day inpatient stay, beneficiaries are ineligible for Medicare’s nursing home benefit. So if they need follow-up care in a nursing home after leaving the hospital, they can face charges of about $290 a day, the average national cost of nursing home care, according to a 2021 survey. Also, since observation care is categorized as outpatient treatment — even if the patient is on a hospital ward — they can get stuck with significant copays under Medicare rules.
“You can appeal almost every issue affecting your Medicare coverage except this one, and that is unfair,” said Alice Bers, litigation director at the Center for Medicare Advocacy, which represented the patients in their lawsuit along with Justice in Aging, another advocacy group, and the California law firm of Wilson Sonsini Goodrich and Rosati.
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Until Congress passed a law that took effect in 2017, hospitals weren’t required to tell patients whether they were receiving observation care and had not been admitted. Under that law, hospitals must provide written notice, but it does not trigger any right to appeal.
The Department of Justice, representing HHS and the Medicare program, tried numerous times to get the case dismissed, arguing that the decision to admit patients or classify them as “observation patients” was based on a doctor’s or hospital’s medical expertise. Patients had nothing to appeal because the government can’t change a decision it didn’t make, so no Medicare rule had been violated.
Doctors rejected that notion and have long complained that the Medicare rule undermined their clinical judgment and produced “absurd results” that can hurt patients. The American Medical Association and state medical …….
