What Does Inpatient Versus Outpatient Mean for Medicare?

Steven Mott by Steven Mott | Licensed since 2012

This article was updated on: 09/16/2018

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From your perspective as a patient, the terms “inpatient” versus “outpatient,” or even “under observation,” may not matter very much regarding your care. But if you’re covered by Medicare, the terms matter a lot. Under Original Medicare (Part A and Part B), coverage rules can depend on your hospital status as an inpatient or outpatient. For example, Medicare Part A, your hospital insurance, covers inpatient care, while Medicare Part B (medical insurance) pays certain outpatient expenses.

Also, your hospital admission status as an inpatient can affect your coverage for admission into a skilled nursing facility. Here’s what you should know about inpatient versus outpatient care and your Medicare coverage.

What is an inpatient?

The inpatient definition is an important one–you are considered a hospital inpatient once your doctor has written orders for admission and the hospital has formally admitted you to a room. This is different from being sent to the hospital for tests, or your doctor telling you to go to the emergency room for immediate assessment. To qualify as an inpatient, you must be under the care of a doctor (with admitting privileges at that hospital) who then writes orders to admit you and gives instructions for your care while you are in the hospital. You’re generally an inpatient until (and including) the day before you’re discharged.

Note that in some cases, as explained below, you could even stay overnight at a hospital without having inpatient status.

What is an outpatient?

If your doctor sends you to the hospital for x-rays or other diagnostic tests, or if you have same-day surgery or visit the emergency department, you are considered an outpatient, even if you spend the night in the course of getting those services. You only become an inpatient if your doctor writes orders to have you formally admitted.

What is “under observation”?

You might have an illness or health condition that requires treatment, but your doctor may need time to observe and evaluate you. In these situations, he or she may send you to the hospital for observation to help determine whether to admit you for treatment. Think of being under observation as a sort of middle ground between inpatient vs. outpatient care. Your doctor can request regular monitoring, order tests, and check your response to medical therapy to help decide whether you require inpatient care.

This may be a complex medical judgment for your doctor; a brief observation period, usually 24 hours or less, can sometimes help clarify the decision to admit you. When you are under observation, you are generally considered an outpatient.

What does inpatient vs. outpatient status have to do with admission to a nursing facility?

In order for Medicare to cover your qualifying stay at a skilled nursing facility (SNF), you must have had at least three days of care as a hospital inpatient immediately preceding your transfer. This includes the first day you were admitted but not counting the day you were discharged.

For example, if you were sent to the hospital to be under observation on Monday, and on Tuesday, your doctor decided to admit you, your qualifying hospital stay would start on Tuesday and not Monday. If you were then discharged on Thursday, you would not meet the three-day inpatient requirement for Medicare SNF coverage, because the day of your discharge doesn’t count. For Medicare purposes, you were only an inpatient for two days (Tuesday and Wednesday).

How does Medicare pay for inpatient vs. outpatient care?

When you are formally admitted to the hospital as an inpatient, Medicare Part A covers your allowable expenses, and you pay your Part A deductible, which generally covers the first 60 days of your hospital admission. Part A pays typically for your semi-private room, meals, nursing care, medical supplies and treatments, plus any prescription drugs you need while in the hospital to treat your condition. Medicare Part B generally covers your doctor visits while you are in the hospital, subject to your Part B deductible and 20% coinsurance amounts.

On the other hand, if you are under observation or getting outpatient care at the hospital, Part B covers medically necessary, allowable costs and you pay your coinsurance amount for that particular type of service. An outpatient visit for x-rays may have a lower copayment than a visit to the emergency room.

Part B also typically pays for doctor visits you receive while getting outpatient care. You’re responsible for 20% of allowable charges plus any applicable Part B deductible. Keep in mind, however, that some preventive outpatient tests and services may be provided at no cost to you because the deductible and copayment amounts are waived for certain preventive care. Remember that your provider must accept Medicare assignment for your doctor visits and services to be covered.

Note: If you have a Medicare Advantage plan, you have at least the same level of coverage for your inpatient and outpatient hospital care (subject to your plan copayments, coinsurance and/or deductible amounts). Medicare Advantage is simply an alternative way to get your Medicare benefits and is required by law to provide the same coverage as Original Medicare (Part A and Part B), except for hospice care, which is still covered under Part A.

How does Medicare cover prescription drugs if I’m an inpatient vs. an outpatient?

Coverage for prescription drugs under Original Medicare is generally restricted to:

  • Medications necessary to treat your condition while you’re an inpatient in the hospital or skilled nursing facility (during a qualifying admission)
  • Prescription drugs given as an injection or infusion during an outpatient visit
  • Certain vaccination and immunization shots such as the pneumonia vaccine or hepatitis B shots; or shots to treat an injury, such as a tetanus shot

You may enroll in a stand-alone Medicare Part D Prescription Drug Plan to work alongside your Original Medicare coverage, or a Medicare Advantage plan with prescription drug coverage.

You still need to keep paying your Medicare Part B premium when you have a Medicare Advantage plan (or a Medicare Prescription Drug Plan, if you’re enrolled in Part B as well) – this is in addition to any monthly premium your plan may charge. Deductibles, copayments, and/or coinsurance amounts may apply, and coverage is limited to medications on your plan’s formulary, or list of approved medications. Please note that a plan’s prescription drug formulary may change at any time, and you will receive notice when changes are made.

You may have questions about the inpatient definition, Medicare prescription drug coverage, or Medicare Advantage plan options. I’m available to help answer any questions you may have. You can request information via email or schedule a phone call at a time convenient for you by clicking one of the links below. To see some plan options in your area you may qualify for, click the Compare Plans button. You can find out more about me by clicking the “View profile” link below.

For more information, please see:

“Are You a Hospital Inpatient or Outpatient? If You Have Medicare-Ask!” Centers for Medicare & Medicaid Services (CMS), last modified May 2014, https://www.medicare.gov/Pubs/pdf/11435.pdf


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