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Medicare's Little-Known 'Two-Midnight' Rule Could Cost You Thousands

When you're a senior with a health issue, going to the hospital is not optional. Sadly, there's a good chance hospital visits will happen as you age, as 15.3% of seniors had at least one hospital stay and 4.9% had two or more hospital stays in 2015. .

Image Source: Getty Images.

Unfortunately, some of these seniors paid thousands of dollars more than others -- and got far fewer covered benefits -- because of a little-known rule called the two-midnight rule.

Many seniors don't even know this rule exists, much less realize how it impacts them -- until they end up with a huge bill for healthcare services. But you won't be one of those seniors, now, since you can learn all you need to know about the two-midnight rule right here. 

What is the Two-Midnight rule?

Under the Two-Midnight rule, Medicare beneficiaries should be admitted to the hospital as inpatients only if they're likely to spend two nights -- or cross two midnights -- in the hospital. 

Unfortunately, this rule means doctors are more reluctant to admit Medicare beneficiaries, especially on the basis of potential complications. If a doctor believes a patient might experience problems after a procedure that normally doesn't require an overnight stay, the doctor may put the patient in observation status, rather than risk admitting a patient who doesn't end up spending two midnights.

In one review, researchers found as many as 7.4% of Medicare beneficiaries admitted to the hospital would have been treated as outpatients under the two-midnight rule.  The study also revealed patients arriving to the hospital later in the evening or on weekends would be far more likely to be classified as inpatients compared with patients arriving before 8 AM or on weekdays. 

Not being an inpatient can cost you thousands

Inpatient status matters when you're a Medicare beneficiary who visits a hospital.

If you're an inpatient, Medicare Part A pays for a hospital stay of 1-60 days with no co-insurance costs after you pay a standard $1,316 Medicare deductible. Nurses' services, medications, X-rays, and equipment are all covered by Part A, while Medicare Part B covers services doctors provide. You'll owe a 20% coinsurance cost for only the Medicare Part B services. 

If you're not an inpatient, Medicare Part A pays for nothing. All care you receive is covered under Medicare Part B and you pay 20% of the Medicare-approved amount for services. Unfortunately, when you add up all the co-insurance costs, you typically spend far more than you would have if you'd been admitted and Part A paid most of the bills. 

Not being admitted also means you won't be eligible for Medicare or Medigap coverage for skilled nursing care if you require care after leaving the hospital. Patients admitted to a hospital for at least 3 days receive coverage for up to 100 days of skilled nursing service -- like a stay in a rehab facility. But, time spent in the hospital under observation doesn't count toward the 3 days necessary for eligibility.

This means you could be forced to pay thousands out-of-pocket for rehabilitation services if you were under observation rather than admitted. In August of 2017, a judge actually allowed a class action to go forward against Medicare brought by beneficiaries forced to pay thousands out-of-pocket for rehab services because they'd been placed under observation status. 

How can you protect yourself from these costs?

Unfortunately, right now you're largely at the mercy of the doctor who decides whether or not to admit you to the hospital -- unless Medicare is successfully sued and rules change.

A long-term care insurance policy could help ensure you have access to rehab services if you need them and Medicare won't cover them, but you'll need to shop carefully for a policy as premiums are often high and some policies have coverage limitations that make them an impractical solution. 

Absent the purchase of additional insurance coverage, try to time your hospital admissions to weekends or evenings when you've got a slightly greater chance of being admitted under the two-midnight rule.

Sadly, we generally have no control over when medical emergencies arise... and if you get sick before 8 AM on a weekday morning, the odds are against you. 

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