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 admitted as hospital “inpatients” but then switched to “observation status” have the right to appeal to Medicare for coverage as hospital inpatients.
Note: On October 31, 2022, the parties jointly proposed a clarification of the judgment. The parties proposed this clarification in the interest of facilitating and streamlining the retrospective appeals process ordered by the Court, and reducing administrative burden. Read about the clarification here.
Here are some more 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 for coverage as an inpatient under Medicare Part A may be important, especially if you require 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 for coverage under Part A as a hospital inpatient, you must have:
- been hospitalized since January 1, 2009; and,
- been a Medicare beneficiary with original/traditional Medicare during the hospitalization in question (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, which is not a common situation.
Finally, the court also noted that Medicare may provide appeal rights for a wider class of people than are in the class. As noted below (Q. 5), we do not yet know how or when the court’s order will be implemented.
- 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 trial court has ordered Medicare to set up a process that class members can use to appeal for inpatient, Part A coverage. 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.
In May 2020, the government appealed the trial court’s decision. On January 25, 2022, the Second Circuit affirmed the district court’s trial decision. As of June 25, 2022, the trial court’s decision is final and no longer appealable by the government.
As of July 26, 2022, the Medicare.gov website contains general information about the court decision and who will be eligible to appeal. The Medicare website explains that the court-ordered appeal process is still under development and not currently available. It also states that appeals can be filed once the process is set up, and more information will be posted on Medicare.gov when it is available. View the information here (click on “Appeals in Original Medicare” and scroll to “Coming Soon: Appeal when a hospital changes your status from an inpatient to an outpatient with observation services.”) CMS also updated the CMS.gov website at https://www.cms.gov/Medicare/Appeals-and-Grievances/OrgMedFFSAppeals.
Class counsel is continuing to advocate for implementation as soon as possible.
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 or about the formation of a process for the court-ordered appeals.
- 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 about whether to appeal will depend on your individual situation. For example, if you paid for nursing home care with your own money because you were in the hospital for at least three days but were not an inpatient for three days, you may wish to appeal to show that your hospitalization met Medicare’s definition of a three-day inpatient hospital 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 from the nursing home for bills you paid with your own money.
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 covered by Medicare Part A as an inpatient stay. 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 (like hospitals or nursing homes), 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.