It is important to be aware that Medicare will not always cover the cost of a hospital stay and rehabilitation

If a hospital admission is classified as “under observation” it will not be covered by Medicare Part A. Understanding the status of a person admitted into a hospital or a rehab has always been confusing, but in recent years it has become increasingly difficult to predict and understand. Rehab stays are reimbursed differently depending on whether you have Traditional Medicare or a Medicare Advantage plan, and whether you were admitted under observation or as an inpatient. This is an important consideration financially.  Medicare reimburses in vastly different ways and at different levels depending on how you have been classified during your hospital stay. Qualifying for Medicare benefits in rehab also depends on the status of your hospital stay and/or the type of Medicare plan you have. Your quality of care will be the same in either case.

For example, John and Julie have been caring for John’s mom Sarah at home. Sarah has advanced dementia and is really confused much of the time about who she is and where she is. She no longer can properly bathe herself and is getting rashes. Most alarmingly she is now too weak to walk. John and Julie had Sarah brought to the ER by ambulance where she was examined in ER and brought to a room for further tests. After two days in observation and further tests the care manager told John that his mom was not found to have any treatable conditions but she is also weak and unsafe to go home and it is recommended she be transferred to a rehab to get stronger.

In this case, Sarah was under observation status at the hospital so she is considered an outpatient and is covered only under part B (medical insurance). She will be billed as an outpatient for her hospital stay. She may choose to go to rehab but she will pay privately around $250 + per day if she has traditional Medicare. If Sarah has a Medicare Advantage plan she may still qualify for Medicare benefits at the discretion of the insurance company.

Observation status defined: Observation services are hospital outpatient services that a physician orders to allow for testing and medical evaluation of your condition. While under observation care, your room may be located anywhere in the hospital. However, the quality of care is the same regardless if you are an observation patient or inpatient admission. Within the first 48 hours of your stay, the physician will decide whether you require an inpatient stay, or may be discharged home for care in another setting. Observation services are typically ordered for conditions that can be treated in 48 hours or less, or when the cause for your symptoms has not yet been determined. Some examples are nausea, vomiting, weakness, stomach pain, headache, kidney stones, fever, some breathing problems, and some types of chest pain. Since observation stays are billed as an outpatient service, your insurance co-pays and deductibles, along with any additional costs, will probably be based on the outpatient terms of your policies. Your out-of-pocket costs may change depending on whether your stay is designated as observation or full inpatient admission and your qualification for rehab may differ due to the type of Medicare plan you have; Traditional Medicare or a Medicare Advantage.