Department of Health and Human Services 


OFFICE OF 

INSPECTOR GENERAL 

MEDICARE LIFETIME RESERVE DAYS


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 Investiga ions t

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. 
∆ ABSTRACT 


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. 

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∆ EXECUTIVE SUMMARY 

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 

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EXECUTIVE SUMMARY 

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 

beneficiary’s 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. 

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EXECUTIVE SUMMARY 

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. 

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∆ T A B L E O F C O N T E N T S 

ABSTRACT ................................................. i

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

INTRODUCTION ........................................... 1

FINDINGS ................................................. 7

 Hospital Notifications .................................... 7

 Second Notice ......................................... 10

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

A: Sample Election Notice ............................... 12

B: Selected Hospital Survey Questions ..................... 13

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

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

E: Agency Comments ................................... 16

ACKNOWLEDGMENTS .................................... 18

 OEI-09-04-00100 L IFETIME RESERVE DAYS v 
∆ INTRODUCTION 

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 L IFETIME RESERVE DAYS 1 
INTRODUCTION 

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 beneficiary’s 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). 

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INTROD UCTION 

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 430—psychoses 

• DRG 087—pulmonary edema and respiratory failure 

• DRG 475—respiratory system diagnosis with ventilator support 

OEI-09-04-00100 L IFETIME RESERVE DAYS 3 
INTRODUCTION 

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 OIG’s 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 L IFETIME RESERVE DAYS 4 
INTROD UCTION 

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 L IFETIME RESERVE DAYS 5 
INTRODUCTION 

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 

Standar s for Inspecti d ons issued by the President’s Council on Integrity 

and Efficiency. 

OEI-09-04-00100 L IFETIME RESERVE DAYS 6 
FINDINGS ∆ FINDINGS 


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 

In response to our survey, 

86 percent of hospitals, in 

compliance with the Medicare 

Benefit Policy Manual, give a 

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 beneficiary’s 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 L IFETIME RESERVE DAYS 7 
FINDING 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 

patient’s 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 

beneficiary’s 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 patient’s financial 

record. Two hospitals entered the notices as part of the medical record, 

and three kept a record in the patient’s 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 L IFETIME RESERVE DAYS 8 
FINDING 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 beneficiary’s 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 beneficiary’s 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 

beneficiary’s discharge.” While the regulation states that the beneficiary 

must file an election not to use LRDs 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 didn’t 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 didn’t know anything about the 

Medicare benefits. We just listened to the hospital.” While 10 of the 

OEI-09-04-00100 L IFETIME RESERVE DAYS 9 
FINDINGS 

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 

beneficiary’s confusion. Overall, survey respondents listed the acuity 

level of the beneficiary, the lack of understanding by the beneficiary or 

the beneficiary’s 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 L IFETIME RESERVE DAYS 10 
FINDING S 

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 beneficiary’s 

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.” 

OEI-09-04-00100 L IFETIME RESERVE DAYS 11 
∆ APPENDIX ~ A 

Medicare Benefit Policy Manual: § 40.1 - Election Format (sample) 

INCLUDED: 

(Signature) 

(Date) 

( ) 

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 

The last day to which this election applies is (date). 

I understand that I will be responsible for all of the hospital’s 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. 

HI claim number

OEI-09-04-00100 L IFETIME RESERVE DAYS 12 
∆ APPENDIX ~ B 

Selected Hospital Survey Questions 

Survey Question Response 

Written 

Verbal 

None 

In reference to the Medicare benefit period, what 

type of notice do you provide to Medicare 

beneficiaries who have used or will use 90 days of 

benefits, about their option to use lifetime reserve 

days? 

(check all that apply) Total hospitals that have some 

notification process 

Yes Do you discuss the option to use lifetime reserve 

days with Medicare patients each time they are 

readmitted after using 85 benefit days or more in 

the same benefit period? 

No 

Provide an additional copy of the 

standard notice with each 

readmission 

Provide counseling and medical 

records notation when the 

patient has been readmitted 

Provide verbal confirmation of 

benefit status during the 

admission process 

How do you inform Medicare patients (or their 

representatives) who have multiple readmissions 

in a single benefit period about their benefit days? 

(check all that apply) 

Other (describe) 

Yes Can you retrieve accurate beneficiary lifetime 

reserve days information (from external sources) 

in a timely manner to meet the current 5 day 

requirement? 

No 

Yes Do you currently have a hospital policy for 

notifying beneficiaries that they are exhausting 

their lifetime reserve days? No 

Very helpful 

Helpful 

Not very helpful 

Not helpful at all 

How helpful would a Medicare policy be that 

requires an additional notice to Medicare patients 

(or their representatives) prior to exhaustion of 

their lifetime reserve days? 

Don’t know 

Point 

Estimate 

54.4% 

69.7% 

14.3% 

85.7% 

60.7% 

39.3% 

28.3% 

19.3% 

49.0% 

30.3% 

66.7% 

33.3% 

14.8% 

85.2% 

27.4% 

36.3% 

14.4% 

12.3% 

9.6% 

95% 

Confidence Interval 

46.0% - 62.7% 

60.5% - 76.1% 

9.1% - 21.0% 

79.0% - 90.9% 

52.2% - 68.7% 

31.3% - 47.8% 

21.1% - 36.3% 

13.2% - 26.7% 

40.6% - 57.4% 

23.0% - 38.5% 

58.3% - 74.3% 

25.7% - 41.7% 

9.4% - 21.7% 

78.3% - 90.6% 

20.3% - 35.4% 

28.5% - 44.7% 

9.1% - 21.1% 

7.5% - 18.8% 

5.3% - 15.6% 

Source: Hospital survey, Office of Evaluation and Inspections, 2004 

OEI-09-04-00100 L IFETIME RESERVE DAYS 13 
∆ APPENDIX ~ C 

Case Study Hospitals 

Hospital Number of Beds 

Number of Medicare 

Beneficiaries in 2003 

Number of Beneficiaries Who Used One or More 

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 L IFETIME RESERVE DAYS 14 
∆ APPENDIX ~ D 

35 60 

) 

67 2 

43 60 

26 2 

87 4 

90 60 

81 60 

82 50 

i We 

had no choice. 

73 55 

for assistance. 

61 60 

Disabled. 

) 

4 5 (D) We (parents) 

38 4 Disabled. ) 

41 5 

Disabled. 

them. 

11 53 (D) 

83 54 (D) 

60 6 

) 

61 9 

87 60 

72 6 (D) 

57 6 

Beneficiary Interviews 

Age Number of LRDs Beneficiary Comments about LRDs 

The hospital explained the lifetime reserve days but I don’t understand. I can’t afford to lose my 

Medicare benefits. (Beneficiary

I do not understand the lifetime reserve days benefit. Where can I go for help? I am most 

concerned about the care my spouse is getting. Everyone seems too busy to help. 

(Representative) 

Unable to contact beneficiary or family. 

Unable to contact beneficiary or family. 

Family and beneficiary refused to be interviewed. 

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 

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 g ven any options. An additional notice would not have made a difference. 

This was a very prolonged stay. (Representative) 

The hospital was of little help. Our family called Medicare and searched the Medicare Web site 

My parent does not understand Medicare benefits. (Representative) 

We were unaware of any choices. We were told I was ineligible for Medicaid 

because of a pre-existing condition. (Beneficiary

were told that Medicaid and private insurance were primary coverage. We were 

not informed of any Medicare obligations. (Representative) 

No recollection of any mention of LRDs or financial obligations. (Beneficiary

Medicaid and Medicare qualified. The hospital explained my benefits. I received 

good printed materials, but did not understand LRDs. It didn’t matter about the option to use 

I needed to be in the hospital. (Representative) 

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 

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. 

(Beneficiary

I have no recollection of any information from the hospital. I have coverage under Medicaid 

and VA as well as Medicare. (Beneficiary) 

Unable to contact beneficiary or family. 

The hospital reported that no LRDs were used. The Beneficiary received a letter regarding the 

option to use LRDs. (Representative) 

Unable to contact beneficiary or family. 

(D) Deceased beneficiaries 

Source: Beneficiary interviews, Office of Evaluation and Inspections, 2004

OEI-09-04-00100 L IFETIME RESERVE DAYS 15 
∆ APPENDIX ~ E 

Agency Comments 

OEI-09-04-00100 L IFETIME RESERVE DAYS 16 
APPENDIX~E 

OEI-09-04-00100 L IFETIME RESERVE DAYS 17 
∆ ACKNOWLEDGMENTS 


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 Frisc h , Program Specialist 

Tricia Schmitt, Program Specialist 

Bambi Straw, Program Specialist 

Tricia Davis, Director, Medicare and Medicaid Branch 

Techni cal Assistance 

Barbara Tedesco, Mathematical Statistician 

OEI-09-04-00100 L IFETIME RESERVE DAYS 18