Plaintiffs in a nationwide class-action lawsuit are challenging how Medicare pays out for health coverage of hospitalizations and related rehabilitative services.
The first day of trial in the lawsuit, which was filed against the U.S. Department of Health and Human Services, began Monday in the U.S. District Court of Connecticut in Hartford. At the heart of the case is disagreement over the use of “observation status” for patients getting care or treatment in a hospital.
When people are hospitalized, they may be classified as an admitted patient, or as a patient under observation care. It’s an important distinction, because Medicare beneficiaries under observation status can face higher out-of-pocket costs, and there’s currently no appeal process to challenge that hospital status.
Alice Bers, a lead attorney for the plaintiffs at the Center for Medicare Advocacy, said in a March statement that this lawsuit aims to change that.
“People who have paid into Medicare their whole lives, and who risk having to pay thousands of dollars for necessary medical care, deserve a fair process to determine whether they will receive Medicare coverage,” she said.
According to court documents, patients who had been hospitalized under observation care received some of the same services as admitted patients — medication, diagnostic tests, and recovery care from procedures.
But for patients who were given an observation status by a doctor or Medicare itself, their treatment was billed as outpatient services, in which many beneficiaries paid more than they would for covered inpatient care.
These patients also, upon leaving the hospital, did not qualify for the Medicare Part A nursing home benefit, which covers short-term care at skilled nursing home facilities, but only for people who were admitted hospital patients for at least three consecutive days. Observation status patients were left to pay the out-of-pocket costs for nursing home care.
The lawsuit was first filed in 2011 by seven Medicare beneficiaries who challenged the use of the observation status by the U.S. Centers for Medicare and Medicaid Services. More plaintiffs have since joined the class-action lawsuit.
In addition to Bers and others at the Center for Medicare Advocacy, the plaintiffs are represented by attorneys from Justice in Aging, a non-profit legal advocacy organization, and the law firm Wilson Sonsini Goodrich & Rosati.
In court documents, the plaintiffs state that they want the government to allow patients to appeal their hospital statuses, which could also lead to reimbursement payments to Medicare beneficiaries who faced additional costs from their observation status.
The trial is ongoing in Hartford.
