Medicare Coverage for Hospital Stays: Inpatient vs Outpatient Status

medicare coverage for hospital stays

Hospital status determines out-of-pocket costs for hospital stays

It’s critical to know your older adult’s hospital status when they’re in the hospital. If you don’t, you could be surprised by huge medical bills later.

By law, hospitals are required 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 as inpatients. But in the bustle and confusion of being in the hospital, this isn’t always as clear as it needs to be.

We explain what can happen if someone doesn’t have inpatient status, the difference between inpatient vs. outpatient status, the rules under Medicare, and what seniors should expect to pay.



Medicare doesn’t cover as much for hospital outpatients

Medicare coverage is different depending on a person’s hospital status – inpatient vs. outpatient under observation. And for older adults who are discharged to skilled nursing care for rehab after a hospital stay, the rules for out-of-pocket nursing care costs are still based on their hospital status.

Now 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.

Why did this happen?

It turns out that your mom was never admitted to the hospital by the doctor, so she didn’t have inpatient status. She was considered an outpatient and because Medicare doesn’t cover as much for outpatients, your mom (or you) is on the hook for those big medical bills.


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 older adult has been in the hospital.

No matter what type of treatment they’re receiving or where they’re physically located in the building, they could still be classified as an outpatient under observation status.


How hospital status works under Medicare

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:

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.
  • Get more detail about outpatient coverage at


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By DailyCaring Editorial Team
Image: Dapper Dude


  • 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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