Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

M L R D
EDICARE  IFETIME  ESERVE  AYS

REPORT TO CONGRESS

Inspector General 
December 2004 
OEI-09-04-00100  Office of Inspector General 

http://oig.hhs.gov 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, 
as amended, is to protect the integrity of the Department of Health and Human Services 
(HHS) programs, as well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide network of audits, 
investigations, and inspections conducted by the following operating components: 
Office of Audit Services 
The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors 
in carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the department. 
Office of Evaluation and Inspections 
The OIG's Office of Evaluation and Inspections (OEI) conducts management and 
program evaluations (called inspections) that focus on issues of concern to the 
department, the Congress, and the public. The findings and recommendations contained 
in the inspections reports generate rapid, accurate, and up-to-date information on the 
efficiency, vulnerability, and effectiveness of departmental programs. The OEI also 
oversees State Medicaid fraud control units, which investigate and prosecute fraud and 
patient abuse in the Medicaid program. 
Office of Investigations
The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries 
and of unjust enrichment by providers. The investigative efforts of OI lead to criminal 
convictions, administrative sanctions, or civil monetary penalties. 
Office of Counsel to the Inspector General 
The Office of Counsel to the Inspector General (OCIG) provides general legal services to 
OIG, rendering advice and opinions on HHS programs and operations and providing all 
legal support in OIG's internal operations. The OCIG imposes program exclusions and 
civil monetary penalties on health care providers and litigates those actions within the 
department. The OCIG also represents OIG in the global settlement of cases arising 
under the Civil False Claims Act, develops and monitors corporate integrity agreements, 
develops compliance program guidances, renders advisory opinions on OIG sanctions to 
the health care community, and issues fraud alerts and other industry guidance.  
 A B S T R A C T
We conducted this study pursuant to section 953(d) of the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) 
concerning Medicare lifetime reserve days.  Medicare beneficiaries are 
entitled to coverage of 90 hospital days during any spell of illness. If 
beneficiaries need more than 90 days, they are entitled to an additional 
60 non-renewable days of care, called lifetime reserve days.  As 
mandated by the MMA, the purpose of this study is to determine the 
extent to which hospitals notify Medicare beneficiaries about their 
lifetime reserve days and assess the appropriateness and feasibility of 
providing an additional notification to beneficiaries before they exhaust 
their lifetime reserve days.  In calendar year 2003, approximately 
37,000 beneficiaries used 1 or more of their lifetime reserve days.  
Based on self-reported information from a random sample of 
147 hospitals, 86 percent of hospitals provide written and/or verbal 
notices about lifetime reserve days to beneficiaries who have used or 
will use 90 days of benefits, while 14 percent do not.  Because they 
cannot retrieve accurate and timely beneficiary utilization data,    
33 percent of hospitals are unable to strictly comply with the Medicare 
Benefit Policy Manual guidelines that require hospitals to notify 
patients when they have 5 regular coinsurance days remaining.  Based 
on information from hospitals and beneficiaries, providing a second 
notice may not be appropriate or feasible.  
In response to our draft report, the Centers for Medicare and Medicaid 
Services will issue further clarification to explain its lifetime reserve 
days policies to hospitals. 
  OEI-09-04-00100  LIFETIME RESERVE DAYS  i    E X E C U T I V E   S U M M A R Y
OBJECTIVE 
To (1) determine the extent and means by which hospitals comply with 
the current requirement to notify Medicare beneficiaries about lifetime 
reserve days and (2) assess the appropriateness and feasibility of 
providing an additional notification prior to beneficiaries exhausting 
their lifetime reserve days. 
BACKGROUND 
Statutory Mandate for Study 
Section 953(d) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 requires the Office of Inspector General to 
conduct a study relating to the use of hospital lifetime reserve days.  
The report to Congress is to include the extent to which hospitals 
provide notice to Medicare beneficiaries in accordance with the current 
applicable requirements and the appropriateness and feasibility of 
hospitals providing an additional notice to beneficiaries before they 
exhaust their lifetime reserve days. 
For the study, we conducted a survey of 147 hospitals from a simple 
random sample of hospitals with patients who used more than 1 lifetime 
reserve day.  In addition to completing the survey, we requested that 
hospitals provide us with copies of the policies and notices that they use 
to inform beneficiaries about lifetime reserve days.  To gather 
qualitative information, we selected a purposive sample of 10 hospitals 
from the random sample.  We conducted in-depth interviews with those 
hospitals and some of their patients who had used lifetime reserve days. 
Medicare Coverage for Inpatient Hospital Services 
Under section 1861 of the Social Security Act (the Act), a beneficiary 
is entitled to an unlimited number of benefit periods, each of which 
includes 90 days of covered inpatient hospital services. A benefit 
period, or spell of illness, begins on the first day the beneficiary is 
an inpatient in a Medicare certified acute care hospital or skilled 
nursing facility (SNF). The benefit period ends 60 days after the 
hospital or SNF discharges the beneficiary. 
Section 1812 of the Act defines the scope of inpatient hospital benefits 
and includes the provision regarding 60 nonrenewable lifetime reserve 
days, which a beneficiary may draw upon whenever hospitalized for 
more than 90 days in a benefit period.  Pursuant to the implementing 
regulations, which are contained in 42 CFR  409.65, hospitals may bill 
  OEI-09-04-00100  LIFETIME RESERVE DAYS  ii  E X E C U T I V E   S U M M A R Y  
Medicare for lifetime reserve days, unless the beneficiary elects not to 
use them or is deemed to have elected not to use them.  Hospital 
notification requirements are delineated in the Medicare Benefit Policy 
Manual, which was developed by the Centers for Medicare & Medicaid 
Services. 
If the beneficiary elects not to use lifetime reserve days, the beneficiary 
becomes responsible for hospital charges beginning with the 91st day in 
the benefit period. Similarly, if the beneficiary uses all 60 lifetime 
reserve days and remains in the hospital beyond 150 days, the 
beneficiary becomes responsible for hospital charges on the 151st day. 
FINDINGS 
The following findings are based on the self-reported responses of a 
random sample of 147 hospitals as of August 2004.  Because we 
randomly selected the hospitals and the confidence intervals are 
reasonably precise, it is appropriate to project the sample responses to 
the entire population of hospitals that have experience with Medicare 
beneficiaries who have used their lifetime reserve days. 
Eighty-six percent of hospitals provide written and/or verbal notices 
about lifetime reserve days to Medicare beneficiaries who have used 
or will use 90 days of benefits. The remaining 14 percent of hospitals 
that do not provide the required notification did not typically offer a 
reason.  Eight percent of hospitals with beneficiaries using lifetime 
reserve days indicate that they do not provide any information about 
lifetime reserve days either upon admission or sometime during the 
beneficiarys hospital stay. Some of the respondents that do not provide 
notices indicated that they lacked timely information about the number 
of lifetime reserve days beneficiaries had available.  Case study hospital 
officials confirmed this concern about timely information.  However, 
case study hospital officials said that they work routinely with 
beneficiaries to assist them in understanding their financial obligations. 
Because the hospitals cannot retrieve accurate beneficiary utilization 
data, 33 percent of hospitals are unable to strictly comply with the 
Medicare Benefit Policy Manual guidelines that require them to notify 
patients when they have 5 regular coinsurance days remaining.  In 
contrast, 61 percent of hospitals discuss the option to use lifetime 
reserve days each time a patient is readmitted, if the patient has only 
5 coinsurance days left in the benefit period. 
  OEI-09-04-00100  LIFETIME RESERVE DAYS  iii  E X E C U T I V E   S U M M A R Y  
Providing a second notice may not be appropriate or feasible. While 
64 percent of hospitals believe an additional notice could be helpful, 
hospitals and beneficiaries agree that it may be inappropriate and 
unfeasible to do so.  For example, 66 percent of hospital officials stated 
that an additional notice would affect their operational costs and staff 
time.  Furthermore, case study beneficiaries said an additional notice 
about exhausting their lifetime reserve days would not have affected 
their decisions about their care.  
AGENCY COMMENTS 
In response to our draft report, the Centers for Medicare and Medicaid 
Services will issue a Medlearn Matters article to further clarify the 
lifetime reserve days benefit. Specifically, the Medlearn article will 
inform hospitals how to obtain information about lifetime reserve days 
as well as clarify the Medicare coverage of inpatient hospitals under 
section 1861 of the Act. 
  OEI-09-04-00100  LIFETIME RESERVE DAYS  iv    T A  B L E   O F   C O N T E N T S  
A B S T RA CT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  ii

I N T RO DUC T IO N  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

F I N D IN G S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

  HospitalNotifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7

  SecondNotice  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

APPENDICES .................................................. 12 

A:  SampleElectionNotice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  12

B:  SelectedHospital Survey Questions. . . . . . . . . . . . . . . . . . . . .  13

C:  Case Study Hospitals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

D:  Beneficiary Interviews  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15

E:  AgencyComments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

A C K NO WL E D G M E N T S  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

  OEI-09-04-00100  LIFETIME RESERVE DAYS  v    I N T R O D U C T I O N
OBJECTIVE 
To (1) determine the extent and means by which hospitals comply with 
the current requirement to notify Medicare beneficiaries about lifetime 
reserve days and (2) assess the appropriateness and feasibility of 
providing an additional notification prior to beneficiaries exhausting 
their lifetime reserve days. 
BACKGROUND 
Statutory Mandate for Study 
Section 953(d) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (P.L.108-173) requires the Office of 
Inspector General (OIG) to conduct a study relating to the use of 
hospital lifetime reserve days (LRDs). The MMA requires OIG to 
submit a report no later than 1 year after enactment  
(December 8, 2004).  The report to Congress is to include: 
 	 the extent to which hospitals provide notice to Medicare 
beneficiaries in accordance with the applicable requirements,  
 	 the appropriateness of providing an additional notice to 

beneficiaries before they exhaust their LRDs, and   

 	 the feasibility of hospitals providing an additional notice to 
beneficiaries, before they exhaust their LRDs. 
The MMA does not define the terms appropriateness and feasibility. 
Therefore, based on discussions with legislative staff, we are defining 
appropriateness as helpfulness to beneficiaries and feasibility as the 
ability of hospitals to provide an additional notice in a timely manner. 
Medicare Coverage for Inpatient Hospital Services 
Under section 1861 of the Social Security Act (the Act), a beneficiary is 
entitled to an unlimited number of benefit periods, each of which 
includes 90 days of covered inpatient hospital services.  A benefit period, 
or spell of illness, begins on the first day the beneficiary is an 
inpatient in a Medicare certified acute care hospital or skilled nursing 
facility (SNF). The benefit period ends 60 consecutive days after the 
hospital or SNF discharges the beneficiary.   
Section 1812 of the Act defines the scope of inpatient hospital benefits 
and includes the provision regarding 60 nonrenewable LRDs, which a 
beneficiary may draw upon whenever hospitalized for more than 
OEI-09-04-00100  LIFETIME RESERVE DAYS  1  I N T R O D U C T I O N  
90 days in a benefit period. The beneficiary pays 50 percent of the 
benefit period deductible as a daily copayment for LRDs (42 CFR 
 409.83). In 2004, the deductible is $876; therefore, beneficiaries pay 
$438, as a daily coinsurance for each LRD that they use in 2004.     
The Act and implementing regulations are silent concerning LRD notice 
requirements. The implementing regulations, 42 CFR  409.65, state:  
 	 Hospitals may bill Medicare for LRDs unless the beneficiary 
elects not to use them or is deemed to have elected not to use 
them. 
 	 If the beneficiary elects not to use LRDs, the hospital may 
require the beneficiary to pay for any services after regular days 
are exhausted. 
 	 A beneficiary will be deemed to have elected not to use LRDs if 
charges for such days are equal to or less than the applicable 
coinsurance. 
 	 The beneficiarys election not to use LRDs must be in writing. 
 	 The election may be filed at the time of admission or at any time 
up to 90 days after discharge. 
 	 An election not to use LRDs may apply to an entire stay or to a 
single period of consecutive days in a stay, but cannot apply to 
selected days in a stay. 
Regulations also allow the beneficiary to revoke an election not to use 
LRDs during hospitalization or within 90 days after discharge 
(42 CFR  409.66). The beneficiary must submit the revocation in 
writing. The revocation not to use LRDs may not be filed after the 
hospital has filed a claim under the supplementary medical insurance 
program or the beneficiary dies. 
After beneficiaries use all of their LRDs and exhaust their Part A 
benefits, they become responsible for hospital charges.  However, 
beneficiaries remain entitled to Part B benefits for physician services 
and some ancillary services while they remain in the hospital during the 
same spell of illness.  Beneficiaries continue to be responsible for 
hospital charges until a new benefit period begins, even if they are 
readmitted to another hospital or skilled nursing facility (42 CFR 
 409.61). 
OEI-09-04-00100  LIFETIME RESERVE DAYS  2  I N T R O D
 U C T I O N  
The Centers for Medicare & Medicaid Services (CMS) Medicare Benefit 
Policy Manual (Manual) provides the only guidance to hospitals 
regarding notification and implementing instructions for the LRD 
benefit. According to the Manual, section 30.1, Hospital notice should 
be given when the beneficiary has 5 regular coinsurance days left and is 
expected to be hospitalized beyond that period.  This section of the 
Manual does not require written notice.  The Manual states, The 
hospital should annotate its records at the time it informs beneficiaries 
of the option, but a written statement (by the beneficiary or 
representative) need only be included if patients elect not to use LRDs. 
(See appendix A.) 
Lifetime Reserve Day Use 
During 2003, beneficiaries used nearly 980,000 inpatient hospital LRDs.  
This represents less than 1 percent of the more than 98 million total 
inpatient hospital days that beneficiaries used in 2003.  This percentage 
has remained consistent for the past 8 years. 
According to the Medicare National Claims History (NCH), nearly 

37,000 Medicare beneficiaries used 1 or more LRDs during calendar 

year 2003. This represents less than 1 percent of the more than 

7.5 million Medicare beneficiaries who had inpatient hospital stays 

during 2003.  Of these 37,000 beneficiaries, approximately 

6,800 beneficiaries used 50 or more LRDs and about 4,400 used their 

entire 60 LRDs. 

Beneficiaries who are less than 65 years old represent approximately 
18 percent of Medicare beneficiaries. However, they account for a larger 
proportion of beneficiaries who use LRDs.  One-third of the 
37,000 beneficiaries who used LRDs in 2003 are less than 65 years old.  
Of those beneficiaries under age 65, 20 percent used 50 or more LRDs.  
While 29 percent of beneficiaries who used LRDs in 2003 are between 
65 and 74 years old, 29 percent are between 75 and 84 years old, and  
9 percent are 85 years or older. Of those beneficiaries 85 years or older, 
approximately 500 beneficiaries used 50 or more LRDs during 2003. 
Three Diagnostic Related Groups (DRGs) are the most frequently used 
diagnoses that require hospital care beyond the 90 days in a benefit 
period: 
  DRG 430psychoses  
  DRG 087pulmonary edema and respiratory failure  
  DRG 475respiratory system diagnosis with ventilator support  
OEI-09-04-00100  LIFETIME RESERVE DAYS  3  I N T R O D U C T I O N  
These DRGs account for nearly 25 percent of the beneficiary claims that 
used more than 1 LRD. 
METHODOLOGY 
We used multiple methodologies to accomplish our objectives.  We 
conducted a mail survey of hospitals; reviewed Medicare data; 
conducted case studies; and interviewed advocacy groups, professional 
associations, and senior services programs. 
Hospital Survey 
We selected a simple random sample of 150 hospitals using data from 
the NCH. From the NCH, we extracted all 2003 inpatient claims 
(received through December 31, 2003) for patients who used more than 
1 LRD. From this data extract, we produced a database that contained 
1 observation per hospital, from which we selected a simple random 
sample of 150 hospitals. To locate the hospitals, we matched the 
provider numbers with the Online Survey Certification and Reporting 
(OSCAR) database.  For those provider numbers that did not match the 
database, we contacted the Medicare fiscal intermediaries for names 
and addresses. 
Pretesting Survey Instrument  We developed a survey of open and closed 
end questions.  We conducted pretesting of the instrument with four 
representative hospitals:  a tertiary teaching facility, a long-term acute 
care facility, an urban hospital, and a rural county hospital. 
In addition to testing the survey instrument, we asked the hospitals to 
provide us with either a sample of a beneficiary LRD notice or a 
description of the type of notation that hospital staff made in the patient 
record regarding the option not to use LRDs.  We also asked them for 
copies of policies describing their process for informing beneficiaries of 
the option not to use LRDs.  We reviewed a sample of medical and 
financial records for beneficiaries who used LRDs in 2003. 
Mail Survey  From our random sample of 150 hospitals we excluded 
3 hospitals that were under investigation by the OIGs Office of 
Investigations. As a result, we mailed 147 surveys. We addressed the 
survey to the Chief Executive Officer and asked that it be completed 
by the person(s) responsible for assuring that beneficiaries are 
informed of their Medicare benefits and hospital costs specific to 
LRDs.  In addition, we asked the hospitals to include copies of their 
policies and the notices they use to inform patients about LRDs.  We 
OEI-09-04-00100  LIFETIME RESERVE DAYS  4  I N T R O D
 U C T I O N  
conducted fax and telephone followups to hospitals that failed to 

respond by the request date, so that we received 100 percent of 147 

surveys before beginning our data analysis.  (See appendix B for 

selected survey questions.) 

National Claims History Review 
We conducted an analysis of the Medicare NCH of 100 percent of the 
beneficiaries who used 1 or more LRDs during 2003.  We contacted 
the fiscal intermediaries for details of beneficiaries in which we found 
discrepancies between the NCH and what the hospitals in our case 
study reported.  We analyzed the NCH to identify any common 
demographics or statistical issues that might be relevant to when and 
how beneficiaries are using LRDs.  We used the NCH to verify some 
of the information we received in our case studies. 
Case Study 
To enrich our quantitative analysis and gather firsthand information 
from hospitals and beneficiaries with knowledge about LRDs, we 
developed a two-part case study that consisted of interviews with 
hospital officials and beneficiaries who had been inpatients in those 
hospitals. We identified a purposive sample of 10 hospitals from the 
random sample of hospitals we used for the mail survey.  (See appendix 
C.) We selected three States in which each hospital had at least one 
beneficiary who used less than 10 LRDs and one who used more than 
50 LRDs. We conducted onsite interviews with staff responsible for 
informing beneficiaries about their Medicare benefits and LRDs.  These 
included patient financial services representatives, discharge planners, 
nurses, social workers, and senior financial managers. In addition to 
the interviews, we reviewed hospital financial and medical records to 
verify annotations regarding the LRD notifications. 
For the second part of the case study, we identified 20 Medicare 
beneficiaries from the hospitals in our cluster. Ten beneficiaries used 
more than 50 LRDs, and 10 beneficiaries used less than 10 LRDs during 
2003. Eleven beneficiaries were under age 65, and nine were over 
age 65. We were unable to locate or interview six of the beneficiaries. 
We subsequently interviewed 14 beneficiaries or their representatives.  
Four of the respondents were representatives for beneficiaries who had 
died before our contact. We conducted personal interviews with the 
beneficiaries or their representatives either by phone or at their 
residence. 
OEI-09-04-00100  LIFETIME RESERVE DAYS  5  I N T R O D U C T I O N  
Telephone Interviews 
We selected 17 organizations that were likely to provide information to 
beneficiaries or their members about LRDs or might have anecdotal 
information regarding how well beneficiaries understand their Medicare 
benefits and LRDs. They consisted of five senior advocacy groups from 
four States; four senior citizens services programs in four States; five 
professional associations representing hospitals, health care finance, 
and nursing services; one fiscal intermediary; and two Medicare 
supplemental insurance carriers.  We interviewed representatives of 
these organizations to gain a better understanding of how frequently 
they encounter LRDs and how they help beneficiaries understand the 
option. 
This inspection was conducted in accordance with the Quality 
Standards for Inspections issued by the Presidents Council on Integrity 
and Efficiency. 
OEI-09-04-00100  LIFETIME RESERVE DAYS  6  
 F I N D I N G S
FF II NN DD II NN GG SS   
Eighty-six percent of hospitals provide written  In response to our survey,  
and/or verbal notices about lifetime reserve  86 percent of hospitals, in 
compliance with the Medicare 
days to Medicare beneficiaries who have used 
Benefit Policy Manual, give a 
or will use 90 days of benefits 
verbal, written, or combination of 
notices about the LRD option to Medicare beneficiaries who have used 
or will use 90 days of benefits.1  The remaining 14 percent of hospitals 
that do not provide the required notification did not typically offer a 
reason.  Eight percent of hospitals with beneficiaries using LRDs do not 
provide any information about LRDs either upon admission or sometime 
during the beneficiarys hospital stay. 
In response to the survey question that asked hospitals how they inform 
beneficiaries about the status of their remaining benefit days (including 
LRDs), 13 percent reported that they were unable to obtain information 
about the current benefit status in a timely manner.  Several hospital 
officials whom we interviewed as part of our case studies confirmed this.  
Those officials said that hospitals might submit bills more than 60 days 
after the beneficiary has been discharged, thereby preventing a 
subsequent hospital or SNF from accurately determining the benefit 
status during a spell of illness.  Thirty-three percent of hospitals 
reported that they are unable to comply with the Manual requirement 
to notify patients when they have 5 regular coinsurance days 
remaining. The hospitals are unable to retrieve accurate and timely 
information concerning LRDs from their fiscal intermediary or the 
Common Working File (CWF)2. 
Hospitals attempt to provide LRD notices in various ways 
Based on the results of our hospital survey, 23 percent of hospitals have 
developed their own written policies that direct staff how to inform 
beneficiaries about LRDs. Sixty-one percent of hospitals further comply 
with the Manual by discussing the option to use LRDs with Medicare 
patients each time they are readmitted, if the patient has only 
1 Findings are based on the self-reported responses of a random sample of 147 hospitals as 
of August 2004.  Because we randomly selected the hospitals and the confidence intervals 
are reasonably precise, it is appropriate to project the sample responses to the entire 
population of hospitals with Medicare beneficiaries using LRDs. For the confidence 
intervals concerning the statistics cited in this report, see Appendix B. 
2 The CWF is a Medicare benefit coordination and claims validation system.  A hospital 
submits a claim to its fiscal intermediary who sends the claim to the CWF host site for 
edit checks and payment authorization.  The host site edits and reviews the claim for 
entitlements, deductible status, and accuracy. 
OEI-09-04-00100  LIFETIME RESERVE DAYS  7  FF	 II NN DD II NN GG
 S 
5 coinsurance days left in the benefit period. While not required to do 
so, 15 percent of hospitals have established a policy for notifying 
beneficiaries that they are exhausting their LRDs. 
In nearly 73 percent of hospitals, the admission and billing departments 
are responsible for informing beneficiaries about their benefits, 
including LRDs. Hospital policies typically include statements such as: 
 	 The coordinator will monitor days used...; 
 	 From their Medicare available days, the case manager will write 
a note...; and 
 	 Regarding the notification, a signed consent giving permission to 
use...done on admission. 
Case study hospitals confirm survey results 
Based on interviews with 10 case-study hospitals, hospitals are not 
consistent as to when and how the notice is given and where in the 
patients record the notation is made. Five of the ten hospitals give the 
beneficiaries a form during the admission process that allows them to 
elect to use or not to use LRDs during the spell of illness. One hospital 
does not have a form, but makes a notation in the financial record when 
the beneficiary is informed of the option. Other hospital policies vary 
depending on the case information about the beneficiary and the 
beneficiarys financial coverage. 
Hospital staff refers to the Manual (Chapter 5) for guidance. It states 
that the hospital should annotate its records and should make available 
an appropriate statement or form if the patient elects not to use LRDs. 
Frequently, a hospital staff member enters notations only if the 
beneficiary elects not to use LRDs. In four case study hospitals, the 
election to use or not to use LRDs was part of the patients financial 
record. Two hospitals entered the notices as part of the medical record, 
and three kept a record in the patients financial and medical records. 
One case study hospital does not retain any official record, but, 
according to the administrator, the social workers ... may annotate 
discussion about LRDs in their notes. Five of the ten case study 
hospitals have implemented specific hospital policies directing staff how 
and when to inform beneficiaries about making the election to use or not 
to use LRDs. The remainder uses the Manual as their primary 
reference. 
Six of the ten case-study hospitals cited inaccuracy of the CWF as a 
major reason for not being able to provide timely notices. Inaccuracies 
OEI-09-04-00100  LIFETIME RESERVE DAYS  8  F I N D I N G
 S  
in the CWF may occur because of mistakes in hospital billing or delays 
in the billing processes, which could prevent the fiscal intermediary 
from entering the data into the CWF for 60 days or more.  Multiple 
readmissions, self-referrals to specialty care, and transient beneficiaries 
also affect the reliability of the CWF data. 
All of the 10 case-study hospitals have financial staff that work 
routinely with beneficiaries or their representatives to assist them in 
understanding their financial obligations.  This includes the LRD option 
and the financial consequences of electing not to use LRDs.  Seven of 
the case-study hospitals assign a financial counselor to each beneficiary 
who is identified as a long-term stay (approaching 90 benefit days) to 
work with the beneficiary or the beneficiarys representative to answer 
questions and provide assistance regarding benefits, payments, and 
options. 
Hospitals do not interpret uniformly the notice requirements and 
beneficiaries find the LRD option confusing 
According to 42 CFR  409.65 (d)(1), The beneficiarys election not to 
use lifetime reserve days must be filed in writing...  In addition, 
pursuant to 42 CFR  409.65(d)(2), ...the election may be filed at the 
time of admission ... or any time thereafter up to 90 days after the 
beneficiarys discharge. While the regulation states that the beneficiary 
must file an election not to useLRDs in writing, in practice hospitals 
implement the regulation differently.  Of the 52 sample notices we 
received with the survey responses, 36 notices gave the beneficiary the 
choice of electing to use or not to use LRDs.  Nine notices used the CMS 
suggested format in which the beneficiary only elects not to use LRDs.  
(See appendix A.) Two notices stated that by not signing the form the 
beneficiary agreed to use LRDs, and one notice stated that failure to 
sign indicated an election not to use LRDs. 
Case-study beneficiaries and beneficiary representatives also mentioned 
that the LRD election option was confusing.  (See appendix D.)  Most of 
the beneficiaries said the definition of LRDs, their obligations, and 
options were overwhelming.  One beneficiary said, I never heard the 
term LRDs mentioned the whole time I was in the hospital.  Another 
said, There was so much paperwork I didnt know what I was signing. 
A beneficiary representative summed up the reactions of many of the 
interviewed representatives by stating, This was the first time we had 
to make choices for my mother and we didnt know anything about the 
Medicare benefits. We just listened to the hospital.  While 10 of the 
OEI-09-04-00100  LIFETIME RESERVE DAYS  9  F I N D I N G S  
beneficiaries had signed forms in their hospital records electing to use 
their LRDs, only 2 remember signing them. 
Based on the hospital survey, 
Providing a second notice may not be 
64 percent of hospitals believe an 
appropriate or feasible 
additional notice might be helpful 
or very helpful.  However, 66 percent of hospitals said that such a 
requirement would not be feasible because it would increase their 
operational costs and staff time.  Of the 27 percent of hospitals that 
specifically stated that a second notice would not be helpful, almost  
one-third volunteered that the second notice would just add to the 
beneficiarys confusion.  Overall, survey respondents listed the acuity 
level of the beneficiary, the lack of understanding by the beneficiary or 
the beneficiarys representative about LRDs, and the inaccuracy of the 
CWF regarding the status of days used as reasons a second notice would 
not be appropriate or feasible.  
Case-study hospitals express reservations about the value of a second 
notice 
Three of the ten case-study hospitals expressed legal and compliance 
concerns that could arise for not providing accurate information and not 
giving notice within the required timeframe.  They stated that the 
information in the CWF would affect the accuracy and timeliness of 
their response.  They also had concerns about the best way to deliver a 
second notice.  The case-study hospitals generally agreed that if a 
second notice is mandated, it should come directly from CMS in a 
standardized form. 
The case-study hospitals indicated that they routinely attempt to keep 
these beneficiaries or their representatives informed of their benefit 
status. While 4 of the 10 case-study hospitals have a policy to notify 
beneficiaries that they were about to exhaust their LRDs, all  
10 hospitals agreed that financial planning was not done in a vacuum. 
We are working with these unique patients through their entire length 
of stay to help them identify appropriate financial resources or qualify 
for medical assistance.  In addition, the hospital staff stated that the 
idea of once in a lifetime and lifetime reserve were rather ominous 
issues to discuss considering the health status of the beneficiaries at 
that time. 
One case-study hospital official stated, emphatically, that the hospital 
did not inform beneficiaries about exhaustion of LRDs, as a matter of 
OEI-09-04-00100  LIFETIME RESERVE DAYS  10  FF II NN DD II NN GG
 SS  
policy. The official commented that such information would not be 
appropriate, because it would cause unnecessary stress on the 
beneficiary and family. The official also believes that by the time a 
beneficiary approaches exhaustion of LRDs, the hospital has explored 
the financial options available and is ready to assist the family with 
financial aid. 
According to case-study beneficiaries, an additional notice is unnecessary 
The 14 case-study beneficiaries and representatives did not think that 
an additional notice would have been helpful. Of the seven beneficiaries 
who used 50 or more LRDs, and to whom a second notice would have 
applied, all agreed that an additional notice would not have affected 
their decisions about their care. When asked about their LRD benefit, 
8 of the 14 beneficiaries or representatives said that they were 
frightened by the idea that they might have to leave the hospital after 
exhausting their LRDs or that their level of care might decrease. 
The fiscal intermediary concurred that an additional notice would not 
be beneficial, because the hospital may not have current information 
about the actual number of LRDs used. In some instances, the 
beneficiary could be given a notice of near exhaustion when, in reality, 
they had already used all of their LRDs. 
Case study-beneficiaries and hospitals agreed that they frequently do 
not discuss LRDs because of the catastrophic nature of the beneficiarys 
illness. One beneficiary representative summed up the reactions of 
those interviewed by saying that none of these financial choices 
mattered at that stage of illness. 
Anecdotally, two representatives who spoke for deceased beneficiaries 
stated that they were receiving bills now, nearly 1 year later, which 
they did not understand. They wished that someone had spent more 
time explaining the benefits. However, they agreed that they really had 
no choice regarding LRDs because of the financial consequences of not 
using them. 
One Medicare advocacy attorney agreed with case-study beneficiaries 
who opposed the idea of an additional notice. He thought this was too 
traumatic a period for most beneficiaries to be given a notice that stated 
in part, Medicare will no longer pay for your Part A hospital expenses. 
He added, There is just too much paperwork for the beneficiary to 
handle now. This just adds to the confusion. 
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Medicare Benefit Policy Manual:   40.1 - Election Format  (sample) 
Election Not to Use Lifetime Reserve Days  
I do not wish to have Medicare benefits paid on my behalf under the lifetime 
reserve provisions of section 1812 (b) of the Act for services furnished me by 
(name of hospital) beginning (date). 
WHERE THE ELECTION MAY TERMINATE BEFORE THE END OF THE 
STAY IN ACCORDANCE WITH  40, THE FOLLOWING MAY BE 
INCLUDED: 
The last day to which this election applies is (date). 
I understand that I will be responsible for all of the hospitals charges not 
reimbursed by Medicare because of this election, except those covered under 
Medicare Part B.  Where Medicare Part B payments may be made for services 
furnished during this period covered by the election, I will be responsible for  
the deductible and 20 percent coinsurance amounts. 
(Signature) 
(Date) 
(HI claim number) 
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Selected Hospital Survey Questions 
Point  95% 
Survey Question  Response 
Estimate  Confidence Interval 
In reference to the Medicare benefit period, what 
Written  54.4%  46.0% - 62.7% 
type of notice do you provide to Medicare 
beneficiaries who have used or will use 90 days of  Verbal  69.7%  60.5% - 76.1% 
benefits, about their option to use lifetime reserve 
days?  None  14.3%  9.1% - 21.0% 
(check all that apply) 
Total hospitals that have some 
85.7%  79.0% - 90.9% 
notification process 
Do you discuss the option to use lifetime reserve 
Yes  60.7%  52.2% - 68.7% 
days with Medicare patients each time they are 
readmitted after using 85 benefit days or more in 
No  39.3%  31.3% - 47.8% 
the same benefit period? 
How do you inform Medicare patients (or their  Provide an additional copy of the 
representatives) who have multiple readmissions  standard notice with each  28.3%  21.1% - 36.3% 
in a single benefit period about their benefit days?  readmission 
(check all that apply)  Provide counseling and medical 
records notation when the  19.3%  13.2% - 26.7% 
patient has been readmitted 
Provide verbal confirmation of 
benefit status during the  49.0%  40.6% - 57.4% 
admission process 
Other (describe)  30.3%  23.0% - 38.5% 
Can you retrieve accurate beneficiary lifetime 
Yes  66.7%  58.3% - 74.3% 
reserve days information (from external sources) 
in a timely manner to meet the current 5 day 
No  33.3%  25.7% - 41.7% 
requirement? 
Do you currently have a hospital policy for 
Yes  14.8%  9.4% - 21.7% 
notifying beneficiaries that they are exhausting 
their lifetime reserve days?  No  85.2%  78.3% - 90.6% 
How helpful would a Medicare policy be that  Very helpful  27.4%  20.3% - 35.4% 
requires an additional notice to Medicare patients  Helpful  36.3%  28.5% - 44.7% 
(or their representatives) prior to exhaustion of  Not very helpful  14.4%  9.1% - 21.1% 
their lifetime reserve days?  Not helpful at all  12.3%  7.5% - 18.8% 
Dont know  9.6%  5.3% - 15.6% 
Source:  Hospital survey, Office of Evaluation and Inspections, 2004 
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Case Study Hospitals 
Number of Medicare  Number of Beneficiaries Who Used One or More 
Hospital  Number of Beds 
Beneficiaries in 2003  Lifetime Reserve Days in 2003 
1  659  3,312  18 
2  171  2,041  12 
3  42  32  3 
4  1,299  12,419  109 
5  456  55  3 
6  518  3,824  33 
7  22  913  110 
8  697  6,638  10 
9  27  83  30 
10  853  772  10 
Source:  Online Survey Certification and Reporting Database (OSCAR), 2003 
OEI-09-04-00100  LIFETIME RESERVE DAYS  14    A P P E N D I X   ~   D
Beneficiary Interviews 
Age  Number of LRDs  Beneficiary Comments about LRDs 
The hospital explained the lifetime reserve days but I dont understand.  I cant afford to lose my 
35  60 
Medicare benefits.  (Beneficiary) 
I do not understand the lifetime reserve days benefit.  Where can I go for help?  I am most 
67  2  concerned about the care my spouse is getting.  Everyone seems too busy to help.  
(Representative) 
43  60  Unable to contact beneficiary or family. 
26  2  Unable to contact beneficiary or family. 
87  4  Family and beneficiary refused to be interviewed. 
90  60  Family and beneficiary refused to be interviewed. 
I understood the information about LRDs after the hospital explained it.  The secondary 
insurance required that we use the LRDs.  An additional notice would not have made any 
81  60 
difference but something in writing might have helped us understand the charges.  My parent 
handled all Medicare up to this episode.  (Representative) 
We were never given any options.  An additional notice would not have made a difference.  We 
82  50 
had no choice. This was a very prolonged stay.  (Representative) 
The hospital was of little help.  Our family called Medicare and searched the Medicare Web site 
73  55 
for assistance. My parent does not understand Medicare benefits.  (Representative) 
Disabled. We were unaware of any choices.  We were told I was ineligible for Medicaid 
61  60 
because of a pre-existing condition.  (Beneficiary) 
We (parents) were told that Medicaid and private insurance were primary coverage.  We were 
4  5 (D) 
not informed of any Medicare obligations.  (Representative) 
38  4  Disabled. No recollection of any mention of LRDs or financial obligations.  (Beneficiary) 
Disabled. Medicaid and Medicare qualified.  The hospital explained my benefits.  I received 
41  5  good printed materials, but did not understand LRDs.  It didnt matter about the option to use 
them. I needed to be in the hospital.  (Representative) 
11  53 (D)  Hospital provided no information at all.  We called Medicare directly.  (Representative) 
Before this episode, my parent (beneficiary) took care of benefits.  I (Representative) had no 
83  54 (D) 
knowledge of options.  The hospital gave me no useful information.  (Representative) 
I do not understand any of the Medicare benefits.  I do not remember anything about LRDs.  
60  6 
(Beneficiary) 
I have no recollection of any information from the hospital.  I have coverage under Medicaid 
61  9 
and VA as well as Medicare.  (Beneficiary) 
87  60  Unable to contact beneficiary or family. 
The hospital reported that no LRDs were used. The Beneficiary received a letter regarding the 
72  6 (D) 
option to use LRDs.  (Representative) 
57  6  Unable to contact beneficiary or family. 
(D) Deceased beneficiaries 
Source:  Beneficiary interviews, Office of Evaluation and Inspections, 2004

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Agency Comments 
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 A C K N O W L E D G M E N T S
This report was prepared under the direction of Paul Gottlober, Regional Inspector General for 
Evaluation and Inspections in the San Francisco regional office, and Deborah Harvey, 
Assistant Regional Inspector General. Other principal Office of Evaluation and Inspections 
staff who contributed include: 
Tim Brady, Project Leader 
Silvia Chin, Program Analyst 
Rob Gibbons, Program Analyst 
Linda Frisch   , Program Specialist 
Tricia Schmitt, Program Specialist 
Bambi Straw, Program Specialist 
Tricia Davis, Director, Medicare and Medicaid Branch 
Technic al Assistance 
Barbara Tedesco, Mathematical Statistician 
OEI-09-04-00100  LIFETIME RESERVE DAYS  18