On August 7, 2015, President Barack Obama signed in to law the NOTICE Act (“Notice of Observation Treatment and Implication for Care Eligibility”) which requires hospitals to give written notification to Medicare patients 24 hours after receiving observation care, explaining that they have not been admitted to the hospital, the reasons why, and the potential financial implications. The difference between “observation and “admitted” status can have hefty cost implications to seniors during and after the hospital stay.


Seniors who go to a skilled nursing facility (nursing home) after a hospital stay must first have spent three consecutive midnights as an admitted patient in the hospital for Medicare’s more skilled nursing coverage to kick in. Observation days don’t count. Without that coverage, seniors could pay thousands of dollars for the nursing home care their doctor ordered, or else try to recover on their own. Additionally, because observation care is provided on an outpatient basis, observation patients usually also face unexpected Medicare Part B copays for drugs received during hospital care, since they were never actually admitted into the hospital and the drugs therefore are not covered under Part A. The Medicare patients have to pay whatever the hospital charges for any routine drugs the hospital provides that they take at home for chronic conditions such as diabetes or high cholesterol.


Legal experts remain skeptical the NOTICE Act will actually help address these scenarios, as it gives beneficiaries no formal recourse to change their status once they find out they’re at a hospital on an observational basis. Still, advocates are pleased for this step of notification since, “Medicare beneficiaries need to know what their hospital admission status is and how it affects their out-of-pocket expenses,” said Andrew Scholnick, a senior legislative representative at AARP. Per the NOTICE Act, hospitals will have one year to comply with the law.