On March 24, 2020, a federal court issued a decision in a nationwide class action, Alexander v. Azar, finding that certain Medicare beneficiaries who are switched to “observation status” at hospitals after being admitted as “inpatients,” have the right to appeal to Medicare to challenge that status. Here are some answers to frequently asked questions about the decision:
- Why is my hospital status important? Why does it matter if I am labeled an “inpatient” or placed on “observation status”?
Inpatients are covered by Medicare Part A. They must be hospitalized for at least three consecutive days (not including the date of discharge) as Part A-inpatients to be eligible for Medicare to cover their care in a skilled nursing facility after hospitalization.
People who are in observation status at hospitals are covered by Medicare Part B. Any time spent in observation status does not count toward the three-day inpatient hospitalization that is required for coverage of nursing facility care. Thus the right to appeal your status may be important, especially if you required costly nursing home care after your hospitalization. It may also be important if you were not enrolled in Medicare Part B and were thus responsible for the entire cost of your observation hospital stay.
- How do I know if I now have the right to appeal under the court’s decision?
To be a member of the class that now has a right to appeal your hospital status, you must have:
- been hospitalized since January 1, 2009; and,
- been a Medicare beneficiary with original/traditional Medicare during the hospitalization in question (e., not a Medicare Advantage member); and,
- been admitted as an inpatient but then changed to observation status during the hospitalization; and,
- received a “MOON” notice from the hospital, or, a Medicare Summary Notice from Medicare, indicating that you will receive or did receive hospital observation services that are not covered by Medicare Part A; and,
have Medicare Part A only (no Part B).
have both Medicare Part A and Part B, AND have been hospitalized for at least three consecutive days but for fewer than three days as an inpatient, AND you were or still could be admitted to a skilled nursing facility within 30 days of hospital discharge.
Note that it may be necessary to request and examine the hospital medical records to determine whether a doctor admitted you as an inpatient and whether your status was later changed to observation.
The class is open-ended, meaning it applies to people who meet the above criteria in the future. The class definition excludes people who already appealed their status and received a final decision before September 4, 2011, but that is not a common situation.
- Do I need to do anything to join the class?
There is no action required to “join” the class. Someone meeting the class definition is automatically in the class.
- What should I do if I think I am a class member?
If you think you are a class member, we recommend saving any paperwork relating to your observation status hospitalization and any costs that may have resulted from it. We also recommend checking the Center for Medicare Advocacy’s website for further updates and signing up for our Alerts to receive news about significant developments in the case
- If I am in the class, when I will be able to appeal? How will I appeal? How will I be notified that I can appeal?
The court has ordered Medicare to set up a process that class members can use to appeal for inpatient status. The court has also ordered the Medicare agency to notify people of their appeal rights. We do not yet know when the process for appeals or notification will be established, or what the process will be. Please check the Center for Medicare Advocacy’s website for further updates and sign up for our Alerts to receive news about significant developments in the case.
- Should I appeal my observation status hospital stay? If I appeal and I win, will I get money refunded to me?
Once an appeal process is established, your decision whether to appeal will depend on your individual situation. Not everyone in the class will have a reason to appeal, but some people may want to. For example, if you paid out of pocket for nursing home care because you did not have a three-day inpatient hospital stay, you may wish to appeal to show that your hospitalization did meet Medicare’s definition of a three-day inpatient stay. If you win on that issue and also meet all other requirements for coverage of nursing home care, Medicare should cover that care by paying the nursing home. Then, you may be eligible for a refund of your out-of-pocket payments from the nursing home.
Another example would be if you had Medicare Part A but not Part B during your hospitalization. You may have been responsible for a large hospital bill because observation services are only covered by Medicare Part B. In that case, you may want to appeal to show that your hospitalization should have been classified as inpatient. If you win that appeal, Medicare should cover the inpatient hospitalization by paying the hospital. Then, you may be eligible for a refund from the hospital if you have previously paid the bill with your own money.
Note that Medicare virtually always pays medical providers, not beneficiaries.
The Center for Medicare Advocacy will provide updated information for individuals and advocates for Medicare beneficiaries to consider as more information about an appeals process becomes available.