Medicare Coverage Gap?

It was an injustice Lee Barrows couldn't let stand.  Her husband needed nursing home care after a week-long hospital stay.  That’s something Medicare usually covers after three or more consecutive days as an admitted hospital patient. But Barrows soon found out she and her husband fell into a loophole.

"Around the fifth day he was there, this neurologist came flanked by a social worker and another doctor and said, ‘I'm sorry Mrs. Barrows, but your husband was never admitted,” said the Canton woman.

Unbeknownst to Lee, her husband had been placed on observation status by hospital officials instead of being considered an in-patient. So all that time in the hospital never counted towards his nursing home care, leaving Lee on the hook for tens of thousands of dollars out-of-pocket for any treatment after he left the hospital. Critics are calling it a coverage gap.

"It's been increasing exponentially and really harming people and their families,” said Alice Bers with the Center for Medicare Advocacy.

Bers said patients classified as under observation status receive the same care as admitted patients--but Medicare covers fewer costs. She claimed the process by which hospitals classify patients is often arbitrary.

"They try to use Medicare guidance and guidelines that are put out in order to classify people, but the guidelines don't really match reality,” said Bers.

Hospitals risk losing full Medicare reimbursement if a federal auditor determines an inpatient stay should have been classified as an observation stay.

"Medicare is concerned about inappropriate admissions for in-patient hospital stays and the increased costs associated with it,” said Angela Mattie, chair of the Healthcare Management Department at Quinnipiac University.

Mattie said Medicare is trying to tighten its belt and save taxpayer money, but added that observation status was never intended to be used in this manner.

"It's the unfairness of it. People have no idea they're outpatients,” said Bers.

She said many patients have no clue there are different categories they can be classified under, and so are blindsided when they learn they're not covered for subsequent care.

The Center for Medicare Advocacy has filed suit in federal court. It wants observation status to count towards Medicare coverage of skilled nursing care. Lee has signed on.

Lee paid $30,000 out-of-pocket for her husband's nursing care, but after filing appeal after appeal with Medicare, she was eventually reimbursed. For now, experts say the best thing patients or loved ones can do is to ask questions: find out if you're an in-patient, or on observation status.

"Ask for what the status is, and make sure you have been admitted and are not under observation,” advised Lee.

Congress is considering new legislation to close the so-called coverage gap.

While it may be difficult to change yours or a loved one's patient status from observation to in-patient during a hospital stay, the Center for Medicare Advocacy outlines fifteen steps you can take. You can find the steps at

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