Andrew Taylor: I’m on Medicare, but I still got stuck with a $25,000 hospital bill

On June 30, 1966, President Lyndon Johnson inaugurated the Medicare program with the promise that “nearly every older American will receive hospital care – not as an act of charity, but as the insured right of a senior citizen.”

Medicare Part A was designed to provide that “insured right” to hospital care and is available without cost to every 65-year-old person who qualifies for Social Security. Unfortunately, Medicare Part A has a major gap in its coverage. As a senior citizen with Medicare Part A, I fell through that gap. I was diagnosed with prostate cancer, entered the hospital for a radical prostatectomy and spent the following two nights on a general surgical ward. Several weeks later, I was blindsided with a $25,334 bill for my hospitalization. The surgeon’s bill was an additional $4,695 that was not covered by Part A.

Certain the bill was a mistake, I contacted the hospital billing department to remind them that I had Medicare Part A, and that Medicare Part A pays the cost of hospitalization. “That is correct,” the hospital representative replied. But I hadn’t been “admitted,” I was told; I had been hospitalized as an “outpatient” under “observation status.”

Since I hadn’t been formally admitted, those expenses weren’t covered by Medicare Part A, which doesn’t cover observation status. I was stunned and incredulous. General anesthesia, major surgery, two nights on a surgical ward and not admitted? My wife and I are both physicians, but neither of us had any clue that this could be the case.

For many elderly patients, observation status carries an even greater financial hazard. Consider the patient who breaks a hip and needs a week of post-hospital care. Medicare Part A will pay for 20 days in a rehabilitation facility, but only if the patient has been admitted for three days. If the patient is admitted for fewer than three days or hospitalized under observation status, the patient, not Medicare, pays the cost of the rehabilitation facility.

Medicare Part A is often supplemented with Medicare Part B or other insurance to help cover outpatient services, doctor’s fees and drug costs. Under Medicare Part B, the patient is typically responsible for 20% of the Medicare approved amount for each service. For a hospitalization, that can be a very significant out-of-pocket cost. (I wasn’t enrolled in Part B, but did have Blue Cross/Blue Shield supplemental insurance, which required me to pay 20% of the allowable hospital and surgical charges.)

In recent years, an increasing percentage of patients are being placed in observations status. Indeed, some hospitals place up to 70% of their patients in this category.

Why would a hospital categorize a patient under observation status? There are two advantages. First, observation status allows the hospital to avoid accusations of improper hospital admissions or billing by Medicare. Second, a hospital can charge a patient who has only Part A coverage and is on observation status more than Medicare will allow if the patient is admitted.

The unexpected financial penalty imposed by observation status is often compounded with substantial emotional distress. In a feeble attempt to ameliorate the problem, Congress passed the Notice Act in 2015, which requires hospitals to inform patients of the implications of their observation status within 36 hours after observation services have been initiated. In other words, hospitals must advise patients of their observation status only after they have already incurred the expense of surgery and hospitalization.

What can be done? If you are scheduled to be hospitalized for elective surgery, get a written statement from your surgeon and from the hospital that you will be admitted and not placed under observation status. If you are already hospitalized, and receive notice of observation status, pressure your surgeon to change your status to admitted, although the hospital is not required to agree to it. These strategies might help vigilant patients, but not countless others who will still be left with unaffordable bills.

The solution is for Congress to pass a law stating that any person with Medicare Part A coverage is considered admitted if hospitalized overnight, or at the very least, any person hospitalized for a surgical procedure followed by a night in the hospital should be deemed admitted. The law should be simple and targeted, not a component of a broad health care reform bill that will never make it through Congress before the next election.

Opponents will argue that such a bill will increase the cost to the federal budget. That may be true, but so what? Congressional Republicans had no hesitation in increasing our national debt to pass tax cuts primarily benefiting corporations and the very wealthy. Why not pass a simple bill to prevent senior citizens from being blindsided by an inexplicable and unfair gap in Medicare hospital coverage? What better time than an election year to introduce such a bill? Candidates, are you listening?

Andrew Taylor is a professor of radiology and imaging sciences at Emory University School of Medicine.