ObamaMESS: Change in Inpatient Care Policy could prove Costly to those on Medicare

Fewer patients linger for days in hospitals without being admitted because of a new federal rule, but hospital and consumer groups are suing the government because they say the policy compromises Medicare patients' care, and patients are often stuck with costly, unexpected bills.

Doctors now have to certify that a patient has a serious enough condition to need at least two overnight stays for Medicare to cover an inpatient admission under the rule, which took effect in October. However, patients can remain in an outpatient or "observation" status — that can even include staying overnight for several nights in a typical hospital room — even though they haven't been formally admitted as an inpatient.

While inpatient care under Medicare has a deductible, medications and care after that are generally fully covered. Time in skilled nursing and rehabilitation facilities after release is also covered. On the other hand, outpatient or observational care does not include post-release treatment, which can cost thousands of dollars, says Alice Bers, the Center for Medicare Advocacy attorney. Outpatient hospital visits also have higher cost-sharing for individual services, and medications are billed separately by the hospitals' pharmacies. Patients then have to seek repayment from other insurance plans or pay out of pocket, Bers says.

The issue can be especially confusing to patients who don't realize they have different co-payments or other cost-sharing for inpatient and outpatient/ observational care. Even when patients know the cost-sharing differs, they often wrongly think they're getting inpatient care if they have a bed and a room they've slept in overnight.

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