Inpatient vs. outpatient: Why it matters under original Medicare

Dear Toni: My husband recently fell from a ladder, shattered his hip and broke his right leg. After having emergency surgery, Jim is having a stay in a skilled nursing facility for his rehab to learn now to walk on his repaired hip.

I cannot remember specifics about a Medicare skilled nursing rule that you discussed in your “Confused about Medicare” Zoom webinar. I know some of the Medicare hospital rules are puzzling.

A friend recently had a skilled nursing stay and was billed more than expected because she did not stay the right amount of time as an inpatient. Please explain what I should be aware of for Jim’s skilled nursing stay. — Terry from Bellaire, Texas

Dear Terry: A stay in the hospital does not always mean you are an inpatient and that you qualify for Medicare Part A skilled nursing facility care. The Medicare rule is explained in the section of the Medicare & You handbook for 2023 titled “Am I an Inpatient or Outpatient?”

The handbook states, “Whether you’re an inpatient or an outpatient affects how much you pay for hospital services and if you qualify for Part A skilled nursing facility care. You’re an inpatient when the hospital formally admits you with a doctor’s order. You’re an outpatient if you’re getting emergency or observation services … without a formal inpatient admission (even if you spend the night in the hospital).”

Each day during your stay, you or a family member should ask if you’re an inpatient or an outpatient, since it affects whether you’ll qualify for Part A coverage in a skilled nursing facility. If you’re not being seen as an inpatient, you may end up having to pay for a skilled nursing/rehab stay out of your own pocket.

Be sure that Jim (or any family member on original Medicare who is having a hospital stay) is provided the Medicare outpatient observation notice (MOON) in written form, signed and dated, along with an oral explanation from the facility, after being under observation for 24 hours. The notice should explain why Jim is an outpatient and how it affects what he has to pay for his hospital stay and for care after he leaves.

The MOON applies to those with an original Medicare hospital stay. It does not apply to those with Medicare Advantage plans.

Even more important (and puzzling) is that Medicare covers skilled nursing facility services only after a three-day minimum inpatient hospital stay — not including the day you leave the hospital — for an illness or injury related to the hospital stay. (So, the days that you were under observation as an outpatient do not count toward the three-day minimum.)

The key points to remember about Medicare’s MOON and three-day inpatient rules:

— Discuss with your physician whether your hospital procedure will be an inpatient or outpatient stay.

— The MOON rule applies to those on original Medicare and not Medicare Advantage plans. (MA plans have their own rules regarding inpatient/outpatient services.)

— Ask every day whether you are an outpatient or an inpatient who has been “formally admitted.”

Toni King is an author and columnist on Medicare and health insurance issues. For a Medicare checkup, email info@tonisays.com or call 832-519-8664.