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Medicare Coverage for Inpatient vs. Outpatient vs. Under Observation

Knowing how your Medicare coverage applies is essential, especially if you’re a patient in the hospital. There are differences between Medicare coverage for inpatient vs. outpatient vs. under observation. Each status can determine whether Part A or Part B of your Medicare plan will help pay costs. These differences will also decide whether you have coverage for a skilled nursing facility stay. To better understand these terms and how each status works, keep reading!

Difference Between Medicare Coverage for Inpatient vs Outpatient vs Under Observation

Many people ask, “what is inpatient vs. outpatient?” Inpatient care means you’re admitted to the hospital on a doctor’s order. As soon as your admission occurs, you’re an inpatient care recipient.

For example, when you visit the emergency room, you’re initially outpatient, because admission to the hospital didn’t happen. If your visit results in a doctor ordering admission to the hospital, then your status becomes inpatient. The care you get is inpatient until discharge.

Despite a stay in the hospital, your care may be outpatient if you’re getting outpatient care on the same day of discharge. Even if you spend the night in the hospital, you could be an outpatient.

When the doctor orders observation or tests to help with the diagnosis, you remain outpatient until inpatient admission. Outpatient is when you get care without admission or have for a stay of fewer than 24 hours, even if overnight. Health services you get at a facility can be outpatient care.

Does Medicare Pay for Observation?

Under outpatient observation status, Part B pays. Therefore, if you only have Part A, you’ll be responsible for all of your medical bills if under observation. When under observation, the doctor must monitor you to decide whether to admit you; this is a form of outpatient care.

If the doctor decides to admit you to the hospital for treatment, that’s when you will transition from outpatient to inpatient.

You can get many services through outpatient care, including:

  • Emergency room services
  • Medical observation
  • Outpatient (day) surgery
  • Lab tests
  • Stitches
  • X-rays
  • Colonoscopies
  • Mammograms
  • Chemotherapy or radiation treatments
  • Other services received without the doctor ordering admission

What’s the Difference Between Inpatient vs Outpatient?

The location itself won’t define your inpatient or outpatient status. Inpatient care usually consists of elaborate surgeries, issues that demand constant monitoring, and rehabilitation for mental health issues.

Inpatient Hospital Stays & Skilled Nursing Facility Care Eligibility

Medicare only covers a skilled nursing facility when a qualifying inpatient hospital stay precedes the need for such services. You need to get inpatient hospital care for at least three consecutive days to qualify. It will include the first day that you’re inpatient and exclude the day of discharge.

CMS has is a list of inpatient only procedures that is currently being phased out in the interst of patients and practitioners.

How Do I Know if I’m Inpatient or Outpatient

Asking questions throughout your stay is important because hospitals can change the status from one day to the next.

When you or a loved one arrives at the hospital, you can also ask questions like:

  • What is the patient’s status in inpatient or observation?
  • How long do you think the hospital stay will be?
  • Will there be a need for rehab care after discharging the patient?

You can ask to have your status changed, but it is crucial to do so while you’re still in the hospital. If necessary, you can request the hospital’s patient advocate for assistance.


Are emergency room visits inpatient or outpatient?
The Emergency room is an outpatient service. Only if a doctor orders admission will Part A charges occur. The ambulance is also a Part B service.
Does Medicare Part A cover outpatient surgery?
Any outpatient services have coverage under Part B. Only an inpatient surgery would fall under Part A benefits.
Do Medicare Supplements cover under observation?
If Medicare covers, the Medigap policy will cover; however, you must have a plan that includes the Part B coinsurance. Plan K and Plan L only cover a portion of the costs. Whereas, Plan G coverage or Plan F coverage includes 100% of the Part B coinsurance as well as excess charges.
Which is more expensive inpatient or outpatient?
Generally speaking, an outpatient procedure is cheaper than an inpatient one. But, some people will need continuous inpatient care.

How to Lower Inpatient & Outpatient Medicare Costs

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Lindsay Malzone

Lindsay Malzone is the Medicare expert for MedicareFAQ. She has been working in the Medicare industry since 2017. She is featured in many publications as well as writes regularly for other expert columns regarding Medicare. You can also find her over on our Medicare Channel on YouTube as well as contributing to our Medicare Community on Facebook.


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