Understanding Medicare Advantage (MA) exploitation of the 3-day stay requirement for skilled nursing facility care

By Brian Murphy

The current controversy surrounding Medicare Advantage (MA) plans and the 3-day hospital stay requirement for skilled nursing facility (SNF) care centers on disparities in coverage and potential exploitation of regulatory flexibilities. Let’s break this down.

Understanding the 3-Day Rule

Under traditional Medicare, beneficiaries must have a medically necessary inpatient hospital stay of at least three consecutive days—not counting the discharge day or time spent under observation status—to qualify for SNF coverage. This rule, established in 1965, was intended to ensure that SNF care followed significant hospital treatment.

Medicare Advantage Plans and Waivers

Unlike traditional Medicare, many MA plans have the discretion to waive the 3-day inpatient stay requirement for SNF coverage. This flexibility allows MA enrollees to access SNF care without meeting the traditional prerequisite. Which seems good for the patient… except:

Potential Exploitation and Concerns

The ability of MA plans to waive the 3-day rule has raised concerns about potential “gaming” of the system. Critics argue that some MA plans use this flexibility to discharge patients to SNFs prematurely, without adequate inpatient care, to reduce hospital costs. This practice can compromise patient outcomes and shift costs to SNFs or beneficiaries. Additionally, the lack of a standardized requirement across all Medicare plans may lead to confusion and unequal access to necessary post-acute care services.

The 3-day inpatient requirement means that observation status or an emergency room visit does not count towards the requirement. MA plans often everything they can to avoid approving inpatient admissions, so this undermines not just the IP stay but subsequent SNF care.

By law MA plans are required to cover everything traditional Medicare does. They can cover more, but not less. But patient classification often falls into the gray.

Legislative Efforts and Advocacy

In response to these concerns, bipartisan legislation has been introduced to address the inconsistencies in SNF coverage requirements. The Improving Access to Medicare Coverage Act of 2025 aims to allow time spent under observation status to count toward the 3-day requirement, thereby reducing unexpected costs for beneficiaries.

Some advocacy groups continue to push for the complete repeal of the 3-day rule, arguing that it is outdated and does not reflect current medical practices.

In summary, the controversy revolves around the flexibility MA plans have in waiving the 3-day hospital stay requirement for SNF care, leading to potential disparities in patient treatment and concerns over cost-shifting and patient outcomes. And it is leading to further standardization between Medicare and Medicare Advantage in an effort to close this and other coverage loopholes.

References

• CMS, Skilled Nursing Facility 3-Day Rule Billing: https://www.cms.gov/files/document/skilled-nursing-facility-3-day-rule-billing.pdf
• Medicare Agents Hub, What is the Medicare Advantage 3 midnight rule?: https://medicareagentshub.com/questions/what-is-the-medicare-advantage-3-midnight-rule
• La Neve Law P.A., Understanding the 3-Day Rule & Two-Midnight Rule in Medicare: https://lanevelawpa.com/2025/05/09/understanding-the-3-day-rule-two-midnight-rule-in-medicare/
• Medicare Advocacy, A New Right to Appeal “Observation Status” in Medicare: https://medicareadvocacy.org/wp-content/uploads/2025/06/AB-article-NAELANewsVol37No2_AprMayJun2025-00749247xC6348.pdf
• McKnights, Bipartisan bill to ease 3-day stay rule for Medicare coverage introduced:
  https://www.mcknights.com/news/bipartisan-bill-to-ease-3-day-stay-rule-for-medicare-coverage-introduced/