Florida Elder Law & Estate Planning Blog

Government Objections Dismissed in “Observation Status” Lawsuit


Medicare beneficiaries have scored a legal win in their ongoing fight to appeal “observation status” when they are hospitalized.

Medicare pays for a period of skilled nursing home care and rehabilitation only if it follows a three-day hospitalization. If the patient’s hospital stay is classified as “observation status,” not in-patient, the stay does not fulfill the three-day requirement. That means follow-up rehabilitation or skilled nursing care will not be covered by Medicare. Often patients do not even know they were considered observation patients until they are discharged, and learn they must pay out-of-pocket for their follow-up care, or forego it.

Ervin Kanefsky is one example. The World War II veteran, 93, was hospitalized for five days with a fractured shoulder. Originally admitted as an inpatient, unbeknownst to him he was re-classified as “Observation Status” while still in the hospital. Only after he was released did he learn about the reclassification, discovering he was responsible for a $10,000 bill for post-hospital rehab care.

In the class action suit Alexander v. Azar, now in its eighth year, Medicare beneficiaries are seeking the right to appeal observation status classification. The lawsuit was brought on behalf of patients by the Center for Medicare Advocacy.

On March 27, 2019, a federal judge dismissed the government’s attempts to halt the lawsuit, stating it must go to trial without delay. The lead attorney for the Center for Medicare Advocacy hailed the decision, saying, “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.” Read the decision here.

You may be part of the class action lawsuit if you are a Medicare beneficiary and have received in-hospital services as an observation patient on or after January 1, 2009. You do not need to take any action, but the Center for Medicare Advocacy nonetheless recommends that you save all paperwork related to your hospital stay as well as any costs that may have resulted from it.

Check the news on this website for ongoing developments in this important case.