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Medicare Coverage: Inpatient vs. Observation Status

If you are in a hospital bed, are you considered as being “admitted” to the hospital and covered under your Medicare Part A? The answer might be surprising and costly. Don’t assume. Ask.

When you go to the hospital, knowing whether you’ve been admitted as an inpatient or put on observation status is highly important to you financially. Here’s why…

Inpatient vs. Observation Status

Your hospital status (whether the hospital considers you an inpatient or outpatient) can affect you in 2 ways:

  1. How much you pay for hospital services (like X-rays, lab tests, etc.), and
  2. Whether Medicare will cover care in a skilled nursing facility following your hospital stay.

Your hospital status (admitted inpatient vs. observation care) is a medical decision based on your doctor’s judgment and your need for medically necessary care.

Inpatient Status

You’re an inpatient when you’re formally admitted to a hospital with a doctor’s order.

As an inpatient, Medicare Part A (Hospital Insurance) covers your hospital stay and some services. Under Medicare Part A, you are responsible for a one-time “benefit period” deductible for your hospital stay during the first 60 days you are in the hospital.

Medicare Part B (Medical Insurance) covers most of your doctor and non-nursing care medical services when you’re an inpatient.

Having Medicare supplement insurance can help cover those out-of-pocket costs. If you have a Medicare supplement, the amount you pay (or lack thereof) for doctor services will depend on which plan type you have. If you do not have a Medicare supplement, you’ll pay 20% of the Medicare-approved amount after you pay the Part A and B deductibles.

Observation Status

You’re in observation (outpatient) status if you’re getting emergency department services, observation services, outpatient surgery, lab tests, X-rays, or any other hospital services, and the doctor has not written an order to admit you to a hospital as an inpatient. Observation services are hospital outpatient services given to help the doctor decide if the patient needs to be admitted as an inpatient or can be discharged.

inpatient vs. outpatient statusAs surprising as it may seem, you might still be considered an outpatient under observation status even though you may stay in the hospital for several days and receive treatment in a hospital bed.

Medicare Part B covers your outpatient (observation status) hospital services. Generally, this means you pay a copayment for each individual outpatient hospital service. Part B also covers most of your doctor services when you’re a hospital outpatient. If you do not have a Medicare supplement, you’ll pay 20% of the Medicare-approved amount after you pay the Part B deductible. If you do have a Medicare supplement,  the amount you pay (or lack thereof) for doctor services will depend on which plan type you have.

What Hospital Status Means for You

Medicare will only cover care you get in a skilled nursing facility if you have had a “qualifying inpatient hospital stay,” meaning you’ve been a hospital inpatient for at least three days in a row (counting the day you were admitted, but not counting the day of discharge). Observation outpatient stays, regardless of length, do not count toward Medicare’s requirement.

In light of this, it is extremely important that you be admitted to a hospital for a minimum of three consecutive nights if you feel you might be referred to a skilled nursing facility following your time in the hospital. Your rehabilitative care in the skilled nursing facility will not be covered if you have not been a qualified inpatient in the hospital for three consecutive nights.

Tips to Avoid Big Billshospital-status-affects-your-bills

If you or a loved one is in the hospital, be sure to ask the following questions upon entry and each day while in the hospital:

  • Is the patient’s hospital status inpatient or outpatient?
  • How long will the patient’s hospital stay be?
  • Will there be a need for specialized skilled care or rehabilitative care after the patient is discharged?

The answers to these questions can help you potentially avoid expensive and unexpected medical and rehabilitative bills that otherwise could have been covered by your Medicare Part A, Medicare Part B, and Medicare supplement policy (if you have one).

As always, if you have any questions, please feel free to ask in the comment section below!


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9 Replies to “Medicare Coverage: Inpatient vs. Observation Status”

  1. You go to an ER. You’re sent to a hospital & find you’re admitted for observation. You feel like crap. You appeal to be admitted as in inpatient. You’re appeal is rejected. What do you do? Dress and leave? Your Medicare supplement customer.
    Elmer Griese

    1. Hi there,

      That’s a great question. Unfortunately, patients often won’t have the ability or option to choose between getting care administered as an inpatient or outpatient basis. The type of care received (and ultimately, the cost) is completely based upon how serious the hospital team thinks the medical condition or operation is.

      An inpatient admission is generally appropriate when you are expected to need 2 or more nights of medically necessary hospital care, but your doctor must order such admission. There are different types of appeals that you can file. For more information on that, please visit: https://www.medicare.gov/claims-and-appeals/file-an-appeal/appeals.html

      At the end of the day, it is the doctor’s decision whether or not to admit you as an inpatient based on how serious the medical condition is. I hope this answers your questions.

  2. I received a bill a year later for the office visit from when I had my annual pap, breast exam for which Medicare said the doctors office did not bill it as an office visit or it would have been paid. The doctors office said they can’t bill it as an office visit and bills it as code 99397. Can you address how preventive pap is done without as office visit and should this be paid by medicare. I have read so many different stories on the internet and several of my friend are also getting conflicting information. We are trying to understand how this preventive service should work. Everyone just keeps passing the buck .Also, we all have original Medicare with supplemental plans not an Advantage plan. Thank you very much.

    1. Hi Karen,

      I’m sorry you are receiving conflicting information on this matter. The information below comes directly from Medicare’s website.

      “Medicare Part B covers Pap tests and pelvic exams to check for cervical and vaginal cancer. As part of the exam, Part B also covers a clinical breast exam to check for breast cancer. Part B covers these screening tests:

    2. Once every 24 months for all women
    3. Once every 12 months if you’re at high risk for cervical or vaginal cancer, or if you’re of childbearing age and have had an abnormal Pap test in the past 36 months
    4. All women with Part B are covered. You pay nothing for the lab Pap test. You also pay nothing for the Pap test collection, pelvic exam and breast exam if the doctor accepts assignment.

      Note: Your doctor or other health care provider may recommend you get services more often than Medicare covers. Or, they may recommend services that Medicare doesn’t cover. If this happens, you may have to pay some or all of the costs. It’s important to ask questions so you understand why your doctor is recommending certain services and whether Medicare will pay for them.”

      I hope this answers your question.

      1. I understand all the above but it doesn’t address the office visit necessary to do the pap, etc. How should the doctor bill Medicare for the office visit and what code should the OBGYN use. Would like to see something in writing on this and also if other women are having the same problem.

        1. Hi Ms. Friemark,

          Unfortunately, there is no way for us to access that information online. However, you can call Medicare claims at 800-633-4227. I see that you’re one of our clients. Our Customer Advocate would be happy to help you with this. I will have her reach out to you to find you the correct information.

          Please let me know if you have any other questions. Have a wonderful day!

  3. My mother has Parkinson’s Disease and was recently diagnosed with congestive heart failure and a damaged mitral valve. She lives in an excellent assisted care facility. She was experiencing chest pains and, a rapid heart beat and was having trouble catching her breath. The nurse at the facility felt it was appropriate to call 911, and the family agreed.

    She went to the hospital, and the ER nurse called me (I live in another state) to tell me they were “admitting” her. We were in touch with the nurses and docs multiple times during her three day stay. The assisted living facility nurse was in touch with the hospital as well, and was also told she’d been “admitted.” Fortunately, she did not have a heart attack. As she was being discharged and the issue of rehab was being discussed, we discovered she had been on observation status.

    When I spoke to an the doc who had seen her, and asked why, he told me he had tried to have her status changed, but the overseeing doc who makes those decisions (who had never seen her) denied the change.

    We have been given no good answer as to why an 88 year ole patient with CHF experiencing chest pains is not seen as an obvious inpatient. She was there from Saturday night until her discharge on Wednesday. Why would they have kept her if it was not medically necessary to insure her being heart stable? And why were we not notified of her status?

    She is now reluctant to go back to the hospital, even under the most dire of circumstances, afraid of her assets being entirely depleted…. even though she has Medicare and a very good supplemental plan.

    First, do no harm?

  4. My husband went to the ed and was diagnosed with a possible acute stroke. They did not do an MRI because he had a difibulator. He was admitted on an observation basis which we were not aware of until the next day. He has medicare a&b and an excellent supplement are we to expect a shock when we receive the eob ?

    1. Hi Ms. Kaufman,

      I’m very sorry to hear about your husband, and completely understand your concern for the bill you will receive.

      If your husband is in observation status, Medicare Part B will still cover this. Therefore, if you have a supplement, your supplement will cover the corresponding charges.

      If you do receive a high bill, you can contact your Medicare supplement agency and they will help you submit your claims. Have a great day!

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