As the Covid-19 public health emergency ends, many older adults who need a post-hospital stay in a skilled nursing facility (SNF) will be in for an unpleasant surprise: Traditional Medicare may not pay.
The change, one among dozens that affect older adults, restores rules from before the pandemic. But they are complicated and will shock many patients and their families, leave some without care, and drive others to home health care, which Medicare does pay for.
The basic pre-Covid rule said that traditional Medicare would pay for a SNF stay only if a patient was first admitted to a hospital for at least three consecutive days. Others would have to pay out of their own pocket. Medicare waived that rule during the pandemic but now it is back.
Here is the problem: Many patients stay in the hospital under what is known as observation status. They are in a hospital bed, cared for by hospital doctors and nurses, and eat hospital food. But they are not admitted as inpatients. Thus, even patients who remain in an observation unit for more than three days won’t qualify for Medicare SNF care.
In addition, observation stays are paid by Medicare Part B (the one you pay premiums for), not Part A hospital insurance (the one partially funded with payroll taxes). Medicare patients who have only Part A will have to foot the bill for that observation stay unless they have some other insurance.
And it gets more confusing. Medicare encourages hospitals to keep observation patients for the shortest time possible, usually less than 48 hours. This is, weirdly, called the “two-midnight rule.” But sometimes patients stay longer. Others may split their time between observation and inpatient status. No matter, if they are not admitted as a hospital inpatient for at least consecutive three days, Medicare will no longer pay for SNF care.
Imagine, for example, an 86-year-old widow goes the emergency room with shortness of breath. The docs want to monitor her in the hospital for a few days. She will almost certainly be treated as an observation patient.
An after a long wait in the emergency room and two days in a hospital bed, she likely will be weak and debilitated. And she may have no family member to care for her at home. But if she is discharged to a SNF to get her strength up, it will be on her dime. Medicare won’t pay.
Another example: That 86-year-old widow has surgery in the hospital to repair a fractured hip. In most cases, Medicare treats that surgery as an outpatient procedure, even though it was done in a hospital operating room. Unless she is admitted as an inpatient for at least three days, Medicare will not pay for her SNF stay even if she needs extensive rehab.
Hospitals are supposed to give patients a written explanation of all this. But few read it and ever fewer understand it. So that SNF bill is a shock.
When this rule was in effect before Covid, patients often were furious at hospitals. “Why don’t they just admit me as an inpatient?” they’d ask.
Truth is, the explicit purpose of this rule is to reduce Medicare’s hospital and SNF costs. It encourages outpatient orthopedic surgeries (like hips and knees) because they cost less for similar outcomes.
Medicare also pays the hospital less for an observation patient than for an inpatient. And if a hospital is later found to have admitted a patient who should have been in observation, the hospital must refund to Medicare its entire payment for that case.
There are some exceptions to the three-day rule. Members of Medicare Advantage plans, which now cover more than half of all Medicare recipients, can use SNFs for post-acute care at no extra cost—as long as they use an in-network facility. And Medicare also pays if SNF stays are part of treatment by primary care practices known as Accountable Care Organizations.
Advocating For Change
Hospitals, nursing homes, and patient advocates have lobbied Congress for years to change the three-day rule. They say health care has changed so much that the requirement is obsolete. Not only is widespread observation status a relatively new practice but average hospital stays are much shorter now.
It is not clear what would happen if the rule is repealed. When it was temporarily dropped in 1989, Medicare SNF admissions increased by 16 percent. We don’t yet understand the impact of the pandemic-related waiver.
What will happen now? Many traditional Medicare patients will get their post-hospital care at home, which they often prefer and where Medicare generally does pay. But home health won’t work for everyone. The best step forward is for Medicare to find a way to pay for post-acute care in the most appropriate setting, wherever that may be.
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