Observation stay case debated in court

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Government lawyers and opponents of Medicare's “observation stay loophole” recently squared off in federal court, when a judge convened the first hearing in the Bagnall vs. Sebelius case.

Richard Bagnall and other seniors denied Medicare coverage for skilled nursing care brought the case in 2011. 

The plaintiffs are asking the judge to eliminate hospital observation stays, or to at least require written notification when a patient is given observation rather inpatient status. Medicare will cover only post-acute care for people who are hospitalized for at least three days as an inpatient.

Government lawyers argued for dismissal, saying the plaintiffs did not go through the entire Medicare appeals process before filing the lawsuit. The Center for Medicare Advocacy, representing 14 of the plaintiffs, argued the appeals system is broken.

“The judge did not tip his hand,” Toby Edelman, senior policy attorney for the Center for Medicare Advocacy, told McKnight's. “He ... asked hard questions of both sides.”

The judge has moved the case quickly since taking it over in January, Edelman said, but she does not know when he will reach a decision.


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