SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Improving Access to Medicare 
Coverage Act of 2017''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Medicare requires beneficiaries to be hospitalized for 
        medically necessary inpatient hospital care for at least three 
        consecutive days before covering post-hospital care in a 
        skilled nursing facility under section 1861(i) of the Social 
        Security Act (42 U.S.C. 1395x(i)).
            (2) Often patients remain under ``observation status'' in 
        the hospital for several days and these observation days are 
        not counted toward the 3-day stay requirement because they are 
        considered outpatient days.
            (3) Hospitals' use of observation stays has increased 
        sharply since 2006. According to the March 2014 report of the 
        Medicare Payment Advisory Commission, outpatient visits, many 
        of which are observation stays, increased 28.5 percent between 
        2006 and 2012, with a simultaneous 12.6 percent decrease in 
        inpatient stays over this same six-year time period. A study 
        published in Health Affairs found a 34-percent increase in the 
        ratio of observation stays to inpatient admissions between 2007 
        and 2009, leading the researchers to conclude that outpatient 
        observation status was becoming a substitute for inpatient 
        admission. The same study also documented increases in long-
        stay outpatient status, including an 88-percent increase in 
        observation stays exceeding 72 hours.
            (4) To health care providers, care provided during 
        observation is indistinguishable from the care provided to 
        inpatients and all medically necessary care is provided, 
        regardless of patient status. Beneficiaries are generally not 
        informed of their inpatient or outpatient status and assume 
        that they are inpatients when they are placed in a hospital 
        bed, only to find out that such care was not counted for 
        purposes of satisfying eligibility requirements for medically 
        prescribed Medicare coverage of post-hospital care in a skilled 
        nursing facility.
            (5) Older Americans and people with disabilities who are 
        hospitalized but do not meet the 3-day inpatient hospital stay 
        requirement simply because they were placed in ``outpatient 
        observation status'' for some or all of their hospital stay 
        (even when their total actual stay exceeds three days in the 
        hospital) can face a significant and unexpected financial 
        burden, which can amount to thousands of dollars, for skilled 
        nursing facility care. Among beneficiaries who received care in 
        a skilled nursing facility that Medicare did not cover, the 
        average out-of-pocket charges were more than $10,000, according 
        to the Office of Inspector General of the Department of Health 
        and Human Services.
            (6) The Centers for Medicare & Medicaid Services (CMS) 
        attempted to provide hospitals with clarity on which patients 
        should be categorized as inpatients in the inpatient hospital 
        payment rule for fiscal year 2014. However, this rule fails 
        Medicare beneficiaries because it does not address the problem 
        and explicitly states that days spent in observation status do 
        not count for purposes of satisfying the 3-day inpatient stay 
        requirement.
            (7) Because of CMS' policy which indicates days under 
        observation do not count towards the 3-day inpatient stay 
        requirement, some patients under observation and their families 
        will continue to face a significant, often insurmountable 
        financial burden if they need skilled nursing care after their 
        hospital stay.
            (8) This Act updates Medicare policy by deeming patients 
        under observation as inpatients for the purposes of satisfying 
        the Medicare 3-day inpatient stay requirement. This Act does 
        not repeal the 3-day inpatient stay requirement; rather it 
        simply expands the Secretary's administrative definition of 
        ``inpatient'' for purposes of the 3-day stay requirement to 
        include time spent under observation. As such, it is not a 
        reprise of the Medicare Catastrophic Coverage Act of 1988, 
        which repealed the 3-day requirement. This Act simply restores 
        the original objective of the 3-day rule, which was to ensure 
        Medicare coverage of skilled nursing facility stays following 
        hospital care for patients who stayed in the hospital for 3 
        days.
            (9) It is the intent of this Congress, through this Act, to 
        allow access to skilled nursing care for the population of 
        beneficiaries who meet medical necessity requirements for such 
        care, but who do not satisfy the 3-day inpatient stay 
        requirement simply because some or all of their time in the 
        acute care hospital is characterized as ``outpatient 
        observation status'' for billing purposes.
            (10) It is the understanding of Congress that the Secretary 
        of Health and Human Services will monitor patterns of behavior 
        to ensure that providers deliver appropriate and needed levels 
        of care.
            (11) The Office of the Inspector General of the Department 
        of Health and Human Services is supportive of counting hospital 
        observation days towards the 3-day inpatient stay requirement. 
        In addition, in September 2013, the Congressionally established 
        Commission on Long-Term Care recommended that CMS' count time 
        spent in observation status toward meeting Medicare's 3-day 
        stay requirement. In addition, in a December 2016 report, the 
        Office of the Inspector General of the Department of Health and 
        Human Services found that an increased number of Medicare 
        beneficiaries classified as outpatients are paying more for 
        care that is substantively similar, and have limited access to 
        skilled nursing facility care due to their patient status.

SEC. 3. COUNTING A PERIOD OF RECEIPT OF OUTPATIENT OBSERVATION SERVICES 
              IN A HOSPITAL TOWARD THE 3-DAY INPATIENT HOSPITAL STAY 
              REQUIREMENT FOR COVERAGE OF SKILLED NURSING FACILITY 
              SERVICES UNDER MEDICARE.

    (a) In General.--Section 1861(i) of the Social Security Act (42 
U.S.C. 1395x(i)) is amended by adding at the end the following: ``For 
purposes of this subsection, an individual receiving outpatient 
observation services shall be deemed to be an inpatient during such 
period, and the date such individual ceases receiving such services 
shall be deemed the hospital discharge date (unless such individual is 
admitted as a hospital inpatient at the end of such period).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to receipt of outpatient observation services beginning on or 
after January 1, 2017, but applies to a period of post-hospital 
extended care services that was completed before the date of the 
enactment of this Act only if an administrative appeal is or has been 
made with respect to such services not later than 90 days after the 
date of the enactment of this Act. Notwithstanding any other provision 
of law, the Secretary of Health and Human Services may implement such 
amendment through an interim final regulation, program instruction, or 
otherwise.
Improving Access to Medicare Coverage Act of 2017 This bill amends title XVIII (Medicare) of the Social Security Act to deem an individual receiving outpatient observation services in a hospital to be an inpatient for purposes of satisfying the three-day inpatient hospital-stay requirement&nbsp;with respect to&nbsp;Medicare coverage of skilled nursing facility services.
Improving Access to Medicare Coverage Act of 2017