California protects Medicare patients from observation status under signed bill

California Gov. Jerry Brown (D) signed legislation Tuesday aimed at protecting Medicare beneficiaries and commercial policyholders from unexpected, costly medical bills stemming from observation care, reports Santa Monica Observer.

The bill requires California hospitals to inform all patients of their "observation" status within 36 hours of being placed in an observation unit. Patients are placed under observation if they are not sick enough to be formally admitted, but too ill to go home.

Hospitals' use of observation status has come under fire from patient advocates concerned the designation has been used to drive profits. The observation designation can affect what services a patient's insurance will cover, causing patient out-of-pocket expenses to increase dramatically. As is, many patients do not know they have been put under observation until they receive a bill in the mail.

Observation status can be particularly costly for Medicare beneficiaries, because it means Medicare will not cover skilled nursing care patients may require post-discharge.

The bill is effective Jan. 1.

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