Medicare News: Scams, surprise bills and observation status

RSVP provides Medicare Counseling to over 3,000 Montgomery County residents a year


Genetic testing is covered by Medicare for individuals with advanced cancer or a family history of certain types of cancer if the test is medically necessary and is ordered by a treating physician.

The cost can be as high as $10,000, and with that kind of money in play, opportunists see an opening to find ways to scam Medicare with fraudulent genetic testing schemes.

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The Office of Inspector General of the Department of Health and Human Services has issued a fraud alert to watch out for scammers who are offering Medicare beneficiaries cheek swabs for genetic testing to obtain their Medicare information for identity theft or fraudulent billing purposes.  They are targeting beneficiaries through telemarketing calls, booths at public events, health fairs and even door-to-door visits.

The scammer then finds a cooperating testing lab to fee split.  Several genetics companies have been fined over $2 million for over billing.

Surprise Balance Billing

Medicare pays for approved services performed by providers who accept assignment, i.e. accept the amount Medicare allows as payment in full.  If patients receive care from an out-of-network provider or one who does not accept assignment, the patient can be billed whatever that provider charges. This situation can arise when the patient is not aware that the provider is not participating in Medicare or is out of his Medicare Advantage network. Often the patient himself hasn’t chosen the provider such as an anesthesiologist, pathologist, radiologist, or a lab where specimens have been analyzed.

These “surprise” billing situations are infuriating for patients who often believe they’ve selected an in-network medical facility where all their care will be covered.  Several states have enacted consumer protection rules that limit surprise balance billing.

If you believe you have been balanced bill, contact the hospital billing or provider’s office and if possible, negotiate payment if circumstances allow.


Hospital Status Observation or Admitted

The difference between Inpatient and Observation status is important because Medicare pays different rates according to each status.  Patients admitted under Observation status are considered outpatients, even though they may stay in the hospital for several days and receive treatment.  While in Observation status, patients are covered by Part B of Medicare and are responsible for the 20 percent that Medicare does not cover of outpatient services as well as the annual Part B deductible.  If patients have a Medicare Supplement Insurance plan (Medigap), in most cases the 20 percent will be covered.  If they have a Medicare Advantage plan and are in Observation status, how they are covered depends on the details of the plan and the agreement between the insurance carrier and the hospital.

A typical example of Observation status versus Admission goes like this.  A patient comes to the hospital with chest pain.  The emergency department doctor determines she is not having a heart attack but wants her to stay overnight to monitor her health.  Instead of admitting her, the hospital designates her an outpatient, and she may remain in an ER bed or be sent to a regular room, but she is not admitted to the hospital.  The hospital then bills Medicare Part B (outpatient services) only.

Outpatient Observation status is paid by Medicare Part B while inpatient hospital admissions are paid by Part A. Medicare beneficiaries who are enrolled in Part A but not Part B will be responsible for their entire hospital bill if classified as Observation status.

Importantly whether a patient is admitted or in Observation status affects Medicare coverage of skilled nursing services.  Medicare requires a three-day hospital inpatient (admitted) stay before it will cover the cost of a skilled nursing care center or rehabilitative care.  Observation stays do not count toward this requirement.  Thus, the patient is completely responsible for the cost of this kind of care if needed following time in hospital in Observation status alone.

Hospitals should give Medicare patients verbal and written notice of an observation status within 36 hours.  Medicare has strict guidelines for Admission and only a physician can admit a patient or move him from Observation to Admitted status.  .

Pennsylvania offers free health insurance counseling through APPRISE which is designed to help older Pennsylvanians with Medicare.  Counselors are specially trained staff and volunteers who can answer questions about Medicare and provide objective, easy-to-understand information.

In Montgomery County, APPRISE is a program of RSVP.  For more information see: or call (610)834-1040 ext. 120

RSVP improves the lives of vulnerable populations in the local community by focusing on education and wellness and by supporting nonprofits through skill-based volunteer programs. Our 1,200 volunteers ages 18+ in Montgomery, Chester, Delaware Counties and Philadelphia, PA serve over 11.000 community members each year.

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