FAQ: Hospital Observation Care Can Be Costly For Medicare Patients

I have addressed this issue with many of my Medicare clients, so that they can ask the right questions regarding their status if they go to a hospital and are told to stay overnight.  A variety of difficulties can arise when your status is considered to be "outpatient". 

This becomes especially acute when someone is on a Medicare Advantage plan, as most of those plans in recent years have classified all "outpatient services" as requiring 20% coinsurance from the client.  If held in an "observation" mode in a hospital, that means the patient would be billed 20% of each charge incurred while in the hospital's care.  This can lead to thousands of dollars of coinsurance that the patient may not understand he or she owes.

Just because you're in a bed, and staying overnight in the hospital does not necessarily mean that you've been admitted.

Here's a good Frequently Asked Questions article from the Kaiser foundation that explains this phenomenon in more detail:

Medicare Observation Care FAQ