·  Legal News, Analysis, & Commentary

News & Politics

‘Under Observation’ Means Over Spending

— March 14, 2017

A new law has gone into effect that will require hospitals to notify patients if they are going to be categorized as “under observation”, which means they’ll be aware of potential high bills.

A new law, created by Representative Lloyd Dogget, a Democrat from Texas, who also co-wrote the Congressional bill instituting the law, has gone into effect that will require hospitals to notify patients verbally as well as in writing if they are going to be categorized as “under observation” instead of “inpatient” or otherwise.  This means that individuals will be notified in a more timely manner if they will be receiving astronomical bills unexpectedly.

Image Courtesy of NBC News

Leaving a patient in “under observation” status opens them up to receiving much larger bills that aren’t covered by Medicare.  More than one million patients currently receive Medicare Outpatient Observation Notices (MOONS) every year.  Patients, such as M.J. Bricout, who was recently featured on NBC Nightly News as receiving a $28,000 bill after breaking her leg and being labeled as “under observation” caused Dogget to push for change.  She was shocked and outraged, saying she felt “mugged” by the system.   “In times of sickness and stress, patients should be focused on recovery, not unexpected threats to their bank account,” Representative Dogget said in an interview with NBC News. “Now, patients will be armed with the knowledge they need to be their own best advocates.”  

Distinguishing between “under observation” or “inpatient” is critical for nearly 60 million Americans who are currently covered by Medicare. and many are still attempting to dig out of years of debt after having been given “under observation” status.  These bills are often well over the amount of one’s annual salary, and those who qualify are, for the most part, retirees or those on disability over the age of 65 with very limited income, which means extended debt woe for those slapped with this status.  The policy was created by Medicare to begin with, and non-supporters argue that the governmental program should do away with regulations that are sticking patients with high bills and allowing for loop holes to begin with.  There have been efforts to promote change happening for more than a decade without much luck until now, with the bill that was just put into effect last week.

Image Courtesy of

However, another bill reintroduced on Wednesday by Congressman Joe Courtney, a Democrat from Connecticut, would count any days spent “under observation” toward qualification for Medicare coverage, which means one’s ability to get covered in the first place could be limited.  “For hundreds of thousands of families this coverage gap is a quiet crisis that threatens access to critical nursing home care or in the alternative shifts thousands of dollars in costs to elderly patients.  Congress should act immediately to restore Medicare’s long history of covering nursing home care for patients after a three day hospital stay,” says Courtney.  

“For the first time, as a result of the Congressional Act, the federal government is mandating, requiring all hospitals, to tell people if they’re in outpatient observation status,” confirms Judith Stein, Executive Director of the Center for Medicare Advocacy, a non-profit law firm acting in the best interest of Medicare patients.  An official of the Centers for Medicare & Medicaid Services, the agency within the federal Department of Health and Human Services that administers Medicare said that since MOONS had been released with instructions in December, “CMS has worked closely educating the hospital industry and other stakeholders in preparation for implementation on March 8, 2017.”


Law Aims to Protect Medicare Patients from Surprise Hospital Bill

The Two Words That Cost Medicare Patients Thousands

Join the conversation!