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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!

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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.

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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. Medicare Supplement Plan K and Medicare Supplement Plan L only cover a portion of the costs. Whereas, Medicare Supplement Plan G or Medicare Supplement 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

If you need more information, give us a call. We can help determine if your current Medicare plan is the best plan for you. For those needing information on enrolling in a Medicare plan for the first time, we can help with that too!

The best part about working with an insurance expert is the confidence you’ll have in your coverage, the peace of mind you’ll have with your health care, and the control you’ll have over medical costs.

Your agent will help you compare plans and explain why the policy they recommend is suitable. Give us a call today at the number above or fill out our online rate form to ensure you have the best coverage in your area!

Jagger Esch

Jagger Esch

Medicare Educator
Jagger Esch is the Medicare Educator for MedicareFAQ and the founder, president, and CEO of Elite Insurance Partners and MedicareFAQ.com. Since the inception of his first company in 2012, he has been dedicated to helping those eligible for Medicare by providing them with resources to educate themselves on all their Medicare options. He is featured in many publications as well as writes regularly for other expert columns regarding Medicare.

2 thoughts on "Medicare Coverage for Inpatient vs. Outpatient vs. Under Observation"

  1. When do you start the inpatient status when the doctor first writes an inpatient order on the first day of admission on 1/1/2022 then an hour later writes an observation order then 2 days later writes an inpatient order on 1/3/2022. Does the inpatient status start on 1/1 or 1/3?

    1. Carmelita, observation typically is the period before admittance where a doctor is monitoring a patient and deciding whether admitting them is necessary. It would be an unusual circumstance if a doctor admitted a patient and then put them under observation. However, if this happened, admittance would begin on 1/1 when the original order was placed.


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