System for what is covered in health care is broken
It happens every day in America’s hospitals: a sick patient is hospitalized for three nights, but one or more of those nights are classified as outpatient observation. Down the hall, another sick patient is hospitalized the same three nights, but all three nights are classified as inpatient. Because traditional Medicare requires three consecutive inpatient nights for skilled nursing facility coverage, only the second patient will have the option for post-acute skilled nursing facility coverage should they need it.
How did we get here? When Medicare became law in the 1960s, the word “inpatient” was used to describe the three required nights a patient must stay in the hospital to receive post-acute SNF coverage. Since hospital outpatient (observation) care did not exist until the 1980s, it seems likely that legislative intent was to count all hospital nights toward the threenight requirement. Initially, observation care did not pose a major problem, as most observation services were delivered in emergency department-adjacent settings for very short periods of time. As Medicare rules changed, observation care moved to hospital wards. The vast majority of observation care is now delivered on inpatient hospital wards and is indistinguishable from inpatient care, thus creating a large coverage disparity.
The oxymoron of an “outpatient” hospitalization is neither new, nor is the Medicare SNF coverage inequity it creates. In fact, the Office of Inspector General cites this issue in its Top 25 Unimplemented Recommendations for four consecutive years, saying “CMS (The Centers for Medicare & Medicaid Services) should analyze the potential impacts of counting time spent as an outpatient toward the three- night requirement for SNF services so that beneficiaries receiving similar hospital care have similar access to these
services.” The 2013 U.S. Senate Commission on Long-term Care similarly recommended that hospital observation days count toward the three-night requirement.
From a patient’s perspective, an uncovered SNF stay can be financially devastating, with average costs per stay of approximately $12,000. Studies demonstrate that patients hospitalized under observation may forgo recommended postacute SNF placement due to cost concerns, and that Medicare beneficiaries living in the most disadvantaged neighborhoods are least likely to go to a SNF following an observation hospitalization. This leaves vulnerable Americans no choice but to discharge home to potentially unsafe circumstances, which may lead to costly rehospitalizations and adverse medical outcomes.
What should be done?
Some progress has been made. In 2020, the federal district court in Hartford ruled that certain Medicare beneficiaries have a right to appeal when hospitalized under observation. Last month, CMS issued proposed regulation to operationalize the appeals process.
But more reform is needed. The Improving Access to Medicare Coverage Act of 2023, led by Rep. Joe Courtney, who represents eastern Connecticut, Rep. GT Thompson, Rep. Suzan Delbene, and
Rep. Ron Estes, is the right fix at the right time — for patients, for hospitals and for health systems. This bill would count all midnights spent in the hospital toward the three-midnight requirement, whether those nights were observation, inpatient, or some combination of inpatient and observation. This would essentially make permanent the most critical component of the PHE SNF waiver.
As Congressman Courtney has said, “Whether a patient is in the hospital for three days as an inpatient, or for three days under ‘observation status’ — three days is three days. Quibbling over semantics shouldn’t keep people from accessing the care their doctors have prescribed, or trap them beneath a mountain of unexpected medical debt.”
Introduced in prior Congresses, the Act has always enjoyed bipartisan support, but concern over potential cost of expanding SNF eligibility has stalled passage. Fortunately, the Centers for Medicare and Medicaid Services released data showing that Accountable Care Organizations permitted to waive the three-midnight requirement by allowing beneficiaries to enter a SNF directly from home or following a “non-qualifying” hospital stay had only a small number of so-called waiver SNF stays.
Additionally, the majority of waiver
SNF stays were direct-from-home admissions, which are not a part of the proposed Act. Collectively, these findings suggest low projected Medicare costs. Certainly, Congress should consider whether traditional Medicare should follow almost all Medicare Advantage plans and ACOS in waiving the three midnight stay requirement altogether, but that conversation should not delay passage of the proposed Act, which solves the most concerning beneficiary SNF access issue.
When Medicare became law, Americans over age 65 were the least likely to have health insurance, and the most likely demographic to live in poverty. Medicare has served elderly Americans well, but there is an opportunity to close a significant inequity knowing that recent budget estimates illustrate that this fix is fiscally responsible. Providers will always seek opportunities to help patients stay at home, but SNF level of care is still necessary for many. Supporting the Improving Access to Coverage Act of 2023 is the right next step to ensure Medicare seniors receive the care they need.