Senate Schumer to introduce legislation to fix Medicare Observation Status

February 19, 2013 – NY StateWide Senior Action Council joins US Senator Charles Schumer (D-NY) in calling for a “fix” for patients who get stung by a hospital observation status followed by rehabilitation that is not covered by Medicare.  Read the press release.

StateWide has been working on this issue for several years, and is delighted that Congress has introduced legislation to address the problem. The Senate bill is S568 by US Senator Sherrod Brown. It is the same as House bill HR 1421. New York Congressmembers Crowley, Higgins,  Jeffries, S. Maloney, & Stefanik are co-sponsoring the House bill.  UPDATED: Write to your Congressmember, sample letter    See our Observation Status Action Alert to Write to Congress 

Thalia and Ike Cassuto spoke at the press conference, held at St. Peter’s Hospital in Albany.

Mr. Cassuto was a recent patient at the facility who found himself immobilized with a pelvic fracture, but facing no coverage for rehab due to being classified by the hospital in observation status. The hospital claims its hands are tied by CMS rules.  Federal legislation, and a pending law suit from the Center for Medicare Advocacy on behalf of other patients, may change this predicament that impacts on both the economic and health security for Medicre enrollees.

Gail Myers spoke on behalf of StateWide:
NY StateWide Senior Action Council, a grassroots organization led by senior citizens with a 40 year history of advocating for economic and health security for New York families, is pleased to participate in today’s event and thanks Sen. Schumer for bringing attention to the issue of Medicare enrollees who get “stuck” in observation status.

Noting an uptick in the number of Medicare hospital observation status billing codes (in some cases doubling over the most recent 3 year period), StateWide developed a Patients Rights Toolkit, available at this link or by calling 1-800-333-4374.
Here is our brochure “Take this Brochure to the Hospital” – we urge Medicare enrollees to be aware, before they are in crisis, about the important information needed to navigate the health care system and the Medicare payment system.  Our outreach and education on this issue, including a series of articles in the Albany Times Union, resulted in us hearing about and helping in more local cases, including the Cassutos.  (Mr. & Mrs. Cassuto have already talked today about their experience.)

We encourage Medicare patients to ask about their status so that they can make informed decisions regarding their discharge plan, and uphold their rights to care through the appeals process when needed.

The Center for Medicare and Medicaid Services has appropriately been pursuing health care system payment reforms to reduce costs while improving care. This includes the serious problem of readmission following hospital discharge, as well as preventable admissions from skilled nursing facilities to hospitals. Unfortunately the “fix” has resulted in unintended consequences for patients.

Physicians admit patients based upon knowledge of the patient and their family care environment, and later the physician finds that hospital utilization reviewers have reversed their medical judgment because billing practices put the facility finances at risk, due to both the concern of a federal audit and the possible future cost penalties of readmitting a patient. Neither of these risks occurs when a patient is deemed to be in observation status.

Patients should not be forced to pay out of pocket for otherwise covered Medicare services due to institutional billing issues. We thank Senator Schumer for his leadership on legislation that will promote fairness for Medicare patients who need rehabilitation following a hospitalization. (Sen. Schumer will join lead sponsor Sen. Sherrod Brown in sponsoring federal legislation, previously S818 by retired Sen Kerry.)


Until this bill passes, we encourage Medicare enrollees to call us for free, unbiased advice on how to navigate through the system and uphold their rights as a Medicare hospital patient.   In addition to observation status resulting in large out of pocket costs when institutional rehab services (skilled nursing facility) are needed, others who do not need rehab face problems due to observation status.  Their costs are billed to Medicare B (medical services), rather than Medicare A (hospitalization), and there may be significant out of pocket costs, including medications, that face a Medicare patient upon discharge.  We are delighted that Sen. Schumer is tackling the observation status to rehab issue and that he is willing to deal with other observation challenges as legislation is needed to protect enrollees from billing code changes.