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Medicare Part A ‘hospital insurance’ – coverage of inpatient care
Medicare Part A (hospital insurance) pays for a range of inpatient care in hospitals, skilled nursing facilities, and critical-access hospitals. Part A also covers some home healthcare and hospice services.
How will my costs be affected by inpatient or observation status?
If you aren't actually admitted to a hospital – and are classified as "under observation" – your costs could change significantly.
Inpatient care is medical treatment administered to a patient whose condition requires treatment in a hospital or other health care facility, and the patient is formally admitted to the facility by a doctor.
Hospitals can also provide outpatient treatment, such as emergency room care, lab work, outpatient surgery, or observational status. In some cases, it’s obvious that the treatment is outpatient, because the patient comes and goes on the same day, such as a trip to the hospital’s emergency room for a couple stitches. But observational status is much more confusing, and patients are sometimes unaware that they’re technically not receiving inpatient care, even though they’re staying in a bed in the hospital for multiple days.
The distinction between inpatient and outpatient care (including observational care) is important for Original Medicare beneficiaries, because Medicare Part A pays for inpatient care (with a single deductible for the first 60 days of care in a benefit period), whereas Medicare Part B pays for outpatient care, with a deductible plus coinsurance based on whatever services are provided.
And the inpatient versus observation status distinction is important because, in order for Original Medicare to pay for skilled nursing facility care (to rehab from a broken hip, for example), the patient must have had a three-night inpatient stay in the hospital prior to being sent to the skilled nursing facility. If the patient was in the hospital but under observational status instead, Original Medicare won’t cover the skilled nursing facility stay, and patients are left footing the bill.