Medicare Watch

Your Weekly Medicare Consumer Advocacy Update

Proposed Bill Looks to Limit Confusion Surrounding Observation Stays

August 7, 2014

New Bill Proposed to Provide Notice on Observation Stays

Observation stays have become an increasingly common problem for Medicare beneficiaries. Observation stays may cost more than inpatient stays and affect the availability of certain benefits after discharge. To date, there is no federal requirement for hospitals to notify beneficiaries of their observation status. The Notice of Observation Treatment and Implication for Care Eligibility (NOTICE) Act of 2014—a bill recently proposed by Congressman Dogget (D-TX) and Congressman Young (R-IN)—would require hospitals to notify beneficiaries if they are under observation for more than 24 hours.

Many Medicare beneficiaries do not realize that being kept at a hospital does not necessarily mean that they have been admitted as an inpatient. Sometimes, they are kept under observation. This means that the person is kept for monitoring and is still considered an outpatient. Original Medicare covers inpatient and outpatient care differently, and a beneficiary’s costs may be greater if they are kept under observation. Additionally, to qualify for Medicare coverage of a skilled nursing facility stay (such as a rehabilitation facility or nursing home), a beneficiary must first have a three-day inpatient stay. Days spent under observation do not count toward qualifying a beneficiary for skilled nursing facility care.

The NOTICE Act would require Medicare beneficiaries to be notified of their status if they are under observation for more than 24 hours, as well as explain the potential impact on cost-sharing and coverage, including for skilled nursing facility care. This would allow beneficiaries and their caregivers to be aware of the consequences of an observation stay and to better advocate for themselves. Additionally, this knowledge would help to avoid the surprise that many beneficiaries currently experience when they receive their first bill or summary of claims from Medicare, or when they try to enter a skilled nursing facility.

Many advocates, including the Medicare Rights Center, are in support of this bill. It is important to note, however, that this legislation is only an interim step. Medicare Rights urges Congress to more comprehensively address this issue, most importantly by counting time spent in observation status towards Medicare’s coverage rules for skilled nursing care.

Click here to read Representative Young’s press release.

Click here to learn more about observation stays on Medicare Interactive.

CBO Report Provides New Analysis on the Part D Program

Last week, the Congressional Budget Office (CBO) released a report on the cost of the Medicare prescription drug program (Part D) and the impact of plan competition on costs. According to the report, the net federal cost of the Part D program in 2013 was $50 billion, which is 10 percent of net federal spending in Medicare altogether. These costs are about 50 percent lower than what CBO projected when Part D was created in 2003.

One explanation for the lower-than-expected cost of Part D is the considerable slowing of the costs of prescription drugs across the healthcare system. Spending on prescription drugs per beneficiary grew on average by only 2 percent between 2007 and 2010. Between 1999 and 2003, the average growth was 13 percent per year. CBO attributes the lower cost per beneficiary to the following factors affecting drug spending nationwide:

  • Many existing brand-name drugs lost their patent protection and now face competition from lower-cost generic options. The amount of Part D prescriptions filled with generic drugs increased from 63 percent to 73 from 2007 to 2010.
  • The rate of new brand-name drugs introduced is much slower than in the late 1990s.

CBO also cites competition among Part D plans as a reason behind lower costs in the Part D program. Based on CBO’s analysis of stand-alone Part D plan bids (the total amount a plan is willing to accept to offer Part D coverage for a Medicare beneficiary of average health), plans in areas with more competition usually had lower bids and premiums than plans in areas with less competition. With respect to plan offerings, however, cost is not the only concern. Medicare Rights continues to urge that Congress support efforts to consolidate the number of Part D offerings. Congress should seek to strike a delicate balance—ensuring enough choices to promote competition among plans, while also making certain an appropriate number of plan choices with meaningful differences between them are available to beneficiaries. Striking this balance is critical to empowering consumers and facilitating beneficiary choice.

Click here to read the full report on CBO’s website.

Volume 5, Issue 31

Medicare Interactive logo

Medicare Reminder

Medigap plans are private health insurance policies that help with your Original Medicare costs. Medigaps only work with Original Medicare; not Medicare Advantage plans. If you have a Medigap policy, Original Medicare pays its share of your care first, and then Medigap pays part or all of the remaining costs. Medigaps cover costs such as deductibles, coinsurances, and copayments. Medigaps may also cover some health care that Medicare doesn’t cover at all, such as additional days of inpatient hospital care.

Medigap plans are organized by letter—labeled A, B, C, D, F, G, K, L, M and N. Each lettered policy is standardized, meaning all policies labeled with the same letter have the same benefits no matter which company provides them. For example, Medigap policy G offered by company 1 provides the exact same benefits as Medigap policy G offered by company 2, even though the premiums may be different.

Click here to learn more about Medigap plans on Medicare Interactive.



The Medicare Rights Center recently joined the Leadership Council of Aging Organizations to urge Congress to reauthorize the Older Americans Act (OAA). The OAA funds programs—such as in-home supportive services, congregate and home-delivered meals, transportation, employment services, and legal assistance—that help older adults remain in the much-preferred setting of their homes and communities.

The Act came up for reauthorization in 2011, and there is a bipartisan bill, S. 1562, in the Senate that passed the HELP Committee but is currently stalled. Lend your voice and tell Congress to reauthorize the OAA.

Click here to take action.

Click here to read the sign-on letter.


Stay up-to-date on Medicare policy and advocacy developments, and learn about changes in Medicare benefits and rules with this weekly newsletter.

* * * *

Health Care Professionals:

Need to stay current on all things Medicare? Try a subscription to Medicare Rights University. This comprehensive training solution features traditional, webinar and video courses to help you train new staff and keep existing staff up to speed on Medicare changes, benefits and options.

Subscribe today at

* * * *

Get answers to your Medicare questions from Medicare Interactive at

© 2014 by Medicare Rights Center. All rights reserved.

For reprint rights, please contact Mitchell Clark.