What You Need to Know About Medicare Coverage for Hospital Stays

medicare coverage for hospital stays

New Medicare law helps patients understand out-of-pocket costs

A new Medicare law requires hospitals to notify patients that they may have to pay huge out-of-pocket costs if they stay more than 24 hours without being formally admitted.

For older adults who typically go into skilled nursing care after a hospital stay, these out-of-pocket costs even extend to their nursing home stay. This results in shockingly high medical bills.

We explain the widespread problem that prompted this new law, why it’s essential to know your senior’s hospital status, and what they should expect to pay as inpatients vs. outpatients.


Surprise! It’s not covered

Imagine that your mom fell, broke her hip, and has been in the hospital for almost a week. When the hospital is ready to discharge her, you suddenly find out that Medicare won’t cover any of the cost for her stay in the skilled nursing facility she’s moving to. And, there will be big medical bills coming your way.

Why?!? Because she was never actually admitted to the hospital by the doctor, which means she wasn’t an inpatient. She was considered an outpatient and Medicare doesn’t cover as much for outpatients.


Hospital status: inpatient vs outpatient

A hospital classifies a patient’s status as either inpatient or outpatient. Inpatients are those who have been admitted to the hospital under doctor’s orders.

Don’t assume you know their status based on what procedures are being done or how long your senior has been in the hospital. No matter what’s happening, they could still be classified as an outpatient under observation status.


Why is hospital status important?

Hospital status affects Medicare coverage for hospital stays and post-hospital care. The difference could mean thousands of dollars out of your older adult’s pocket.

When someone is admitted as an inpatient is also very important. Medicare only covers the inpatient portion of a hospital stay.

So, any time spent in the hospital or emergency room before being admitted is considered outpatient time. That time will be covered under outpatient coverage rules and doesn’t count toward the 3 day minimum for covered skilled nursing care. It’s also important to know that the discharge day doesn’t count as an inpatient day.


What seniors should expect to pay

What seniors pay as inpatients:

  • For the first 60 days of hospital services, pay the Part A deductible.
  • For doctor’s services, pay the Part B deductible + 20% of the Medicare-approved amount.
  • For nursing home / rehab care, if the inpatient stay has been at least 3 days, only pay after the first 20 days (fully covered) in an approved skilled nursing facility.

What seniors pay as outpatients:

  • For hospital services, pay a copayment for each individual outpatient hospital service. This amount may vary by service.
  • For doctor’s services, pay the Part B deductible + 20% of the Medicare-approved amount.
  • For prescription and over-the-counter medications in the hospital or emergency room, pay out-of-pocket (and try to submit a claim to the drug plan later) or try to use Part D prescription drug coverage.
  • For nursing home / rehab care, pay out-of-pocket.


Bottom line

It’s critical to know your older adult’s hospital status so you won’t be shocked by huge bills. Medicare coverage is different depending on their hospital status – inpatient versus outpatient under observation. This new law helps seniors and caregivers because hospitals are now required to make their status clear.


You might also like:
5 Medicaid Misconceptions Caregivers Need to Know About
How to Lower Medical Bills: CoPatient Helps Seniors and Caregivers
Medicare Pays for In-Home Care Under the PACE Program


By DailyCaring Editorial Team
Image: Frederick Memorial Hospital


  • Reply August 18, 2016

    Lynne G

    Having just enountered this situation in the Main Line Health system in suburban Philadelphia that’s evolved into a quality control review case, I will say that hospitals can play fast and loose with the definition of “observation.” It is not observation if a patient is brought into the ER, kept for up to a week, has repeated episodes of a medical problem during that period and the hospital is unable to treat or manage it. The three-day rule is plain: If a hospital is incapable of keeping the patient’s problem under control for three days, then the patient needs to be admitted. Whether that inability is due to doctor’s skill set, the severity of the patient’s problem or whatever, admission is required.

    But let’s be blunt. A hospital will bring in much more revenue from billing on outpatient charges than inpatient. Also, if a patient is readmitted with the same problem within a defined period of time – meaning the hospital didn’t effectively treat the problem – Medicare does not pay for the second round of treatment. But if the patient’s first go-round was on observation status, that doesn’t count as admission so hospitals don’t risk Medicare non-payment.

    A law alerting patients is great. But if hospitals don’t honor their end of the bargain, it means nothing.

    • Reply August 18, 2016

      Connie Chow

      I’m so sorry you have to go through all this 🙁 Hospitals do have a lot of things they can do to charge patients more. That’s why it’s so important for seniors to have a strong health advocate to make sure they’re getting fair treatment and accurate bills.

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