7 Things You Really Need To Know About Medicare But Probably Don't

06/25/2015 07:53 am ET | Updated Jun 25, 2015
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Many people think that when they turn 65, they'll be eligible to skate down Medicare Boulevard, relying on the federal system to take care of their every medical need forever more. They'd be wrong, wrong, wrong. Here are seven things proving that what you don't know can hurt you when it comes to Medicare.

1. Being admitted to the hospital for "observation" isn't the same as a plain old in-patient admission.
Let's just say those chest pains that landed you in the ER last Saturday night were probably nothing, but the doctor on call wants you to be "admitted for observation." You have just unwittingly stepped into the Twilight Zone. The reason is that Medicare Part A covers hospital stays, but only if you are actually admitted. "Admitted for observation" doesn't mean they want to watch you; it's a Medicare payment classification that means you will be digging deep into your wallet because Medicare Part A won't cover it.

Thanks to a policy that took effect Oct. 1, 2013, patients who are "admitted for observation" fall under Medicare Part B -- the part of Medicare that covers things that occur outside a hospital, things like doctors' office visits. Medicare Part B carries with it a 20 percent copay and deductibles and while 20 percent of the cost of seeing your doctor in her office likely won't put you in the poor house, 20 percent of a hospital stay just might.

If you are an honest-to-goodness in-patient in the hospital, Medicare Part A will pick up the tab -- minus a $1,260 deductible and the bills from your doctors. But when you are admitted for observation, you are seen -- billing-wise --as an outpatient.

If you don't have a Medigap policy or a Medicare Advantage plan to bridge the difference, you'll be wishing you did. And if you opted out of Medicare Part B, you will be expected to pay all the bills yourself. You know how people say we are all just one illness away from going broke? This is one of the situations they're talking about. "Since Medicare must pay the hospital a big fee each time a patient is admitted, the administering agency is on a crusade to cut the number of hospital stays," explained Jack Kahn, Senior Contributing Editor of the Retirement Profits newsletter at Newsmax Media, and one of the deans of retirement reporting.

Before you start hollering at your doctor, know this: It's not his fault. You can be admitted as an in-patient only when you are expected to need at least "two midnights" of medically necessary hospital care. Your doctor must order such an admission and the hospital must formally admit you in order for you to become an inpatient, says

The rule to remember: One-night stands at the hospital are likely not your friend when it comes to Medicare payments.

2. Hospitals don't have to tell you your admission status.
Unbelievable, right? Especially since "admitted for observation" looks exactly the same as an in-patient admission. You will be wheeled into a hospital room where you will don a hospital gown that opens in the back and you'll be poked, prodded and fed orange jello until the doctors agree you are well enough to be discharged. If you are "admitted for observation," all of that same stuff will still happen to you. It will be nearly an identical care experience.

But being "admitted for observation" is not the same as being admitted as an in-patient when it comes to who's paying for your stay. And no one from the hospital has any legal or regulatory obligation to tell you that.

So how do you know what your admission status is since the hospital doesn't have to tell you and many don't? Well, you can wait until the bill shows up in the mail or you can ask. Yes, we realize that your chest is still pounding, you've been in the ER for hours and you are scared to death. A doctor is saying you need to be observed, so you know it was serious. But the bottom line: If you don't ask your admission status, hospitals don't have to say.

The Society of Hospital Medicine believes that patients are "overwhelmingly uninformed" of their admission status. In a survey the group did, 43 percent of its members did not know if their patients were notified of their status, with almost 10 percent reporting that their patients are simply not notified at all. New York, Maryland and recently Connecticut are the only states that explicitly require hospitals to inform patients of their status, although some hospitals may create policies
to notify patients on their own.

But for the record, many hospitalists don't like this any more than their unsuspecting patients do. As Dr. Ann Sheehy, associate professor in the University of Wisconsin's Department of Medicine, said, "It's hard to be against transparency," although she acknowledged that some hospitals are. The reason is simple: The patient isn't likely to be happy about the news once they hear about the financial consequences and will invariably pressure the doctor to change her evaluation. To do so would be Medicare fraud; Medicare sends auditors to monitor cases.

Bottom line: At no time is anyone from the hospital required or obligated to tell you that you just checked into a very expensive hotel that Medicare Part A won't be paying for. The House of Representatives just passed a bill to change that and mandate notification; it's before the Senate.

3. Not being told your admission status is actually the least of your worries.
While it's always nice to know if you are facing imminent financial ruin, the real problem with the observation regulation is that it negatively impacts care, says the Society of Hospital Medicine and the American Hospital Association.

Doctors like Sheehy say patients who are not quite sick enough to justify two nights in the hospital are falling in the gap between being too sick to go home and not sick enough to be admitted on Medicare's dime. And the "two-midnight" rule distorts the situation and makes the time of day that you get sick a determinant of whether you have to pay for your own care or not, said Sheehy.

"If a patient comes to the ER at 10 p.m. and I write the order at 1 a.m., they have already been there for one midnight. But if the patient comes in at 1 a.m., they are 23 hours away from their 'first midnight,'" she said.

"It is clear that the current use of observation status is not a sustainable policy. ...[I]n many cases, patient care is being undermined," said a SHM white paper on the subject.

In April 2014, the AHA and other stakeholders filed two lawsuits against the Department of Health and Human Services challenging the arbitrary standards of the two-midnight rule and the resulting denial of proper reimbursement for care provided.

4. The three-day rule.
If you have been admitted -- not admitted for observation -- to a hospital and stayed there for at least three days, Medicare will cover what happens to you upon discharge, which in many cases is a stay in a skilled nursing home or a rehabilitation facility. But if you were not a hospital in-patient, it's back to Medicare Part B and the old 20 percent copay rule. Ka-ching! You now have not only your hospital bill to worry about, but also your stay in a skilled nursing facility.

5. The 20-day rule.
Medicare will pay 100 percent of the first 20 days in a post-hospital skilled nursing care facility. After that, you better hope you are healed enough to go home and to manage the rest of your recuperation. Starting on Day 21, the patient is responsible for $157.50 coinsurance per day up to 100 days. Beyond 100 days and the full costs fall to the patient.

6. Don't think you can ignore Medicare D.
OK, so you are a pretty healthy dude who takes no medications on your 65th birthday. Why not delay Medicare D since all it does is pay for drugs and what sense does it make to pay a premium for something you won't be using? There's one very good reason to do it. When you delay the start of Medicare D, you will incur a per month penalty for every month you put it off -- and you will pay that every month for the rest of your life.

The one exception to this rule are those who are employed and covered by a group plan. When you stop work, you can sign up without incurring the penalties.

In many cases, it makes financial sense to buy the cheapest Medicare Part D plan you can find knowing you won't use it, and then upgrading to a better more expensive plan when you start needing medications, recommends Kahn in his paid subscription column. This skirts the problem of being penalized.

Not all Medicare Part D plans are created alike. There is not just one Medicare Part D plan and you can comparison shop for price. But what you may have a harder time doing is comparing plan's formulary -- or list of medications it covers. If you are taking a particularly expensive drug, it behooves you to try and find out if it's covered. Because if it isn't, guess who will be left holding the tab.

You can switch Medicare Part D plans once a year.

7. Vision, hearing, and dental.
What three things do you think most seniors will need? Yep, Medicare doesn't cover vision care, hearing aids or dental care.

Medicare, despite its many parts, was never designed to cover all health care costs, said Debra Whitman, chief public policy officer for AARP. For instance, it doesn’t cover visual, hearing or dental costs.

What do you think about Medicare? Let us know in comments.

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