Hospital Observation Charges

“I stayed overnight in a hospital, but I was told that I wasn't admitted and it was considered observation. But today I got a big bill... what's up?”

This is a common scenario that happens where you go to the hospital and they decide that you're not sick enough to be admitted, but they want to keep you under observation overnight just to make sure you’re okay to leave. Observation is billed differently than an inpatient hospital stay. 

Inpatient hospital stays are billed under Medicare Part A that covers hospitalizations versus observation that is covered under Medicare Part B as outpatient services. The reason why that's important is outpatient services are built on an 80/20 basis, meaning that you're responsible for 20% of the cost if you don't have a Supplement or you don't have a Medicare Advantage plan. 

These plans have a different cost structure so if you just had Medicare and you were under observation, the bill could be $5,000-$15,000 up to $20,000 or 20% . This can be a surprising and unanticipated bill. Now, if you have a Supplemental plan that should come in and cover most to all of the charge depending on the plan you have. 

If you have a Medicare Advantage plan that includes a specific Co pay for just observation then usually your costs are covered, but if you don't then that's when you get the big bill because you'll be billed at 20%. I know that when you go into the hospital it's really hard to be in the moment and say, “hey look are you going to build me under observation or are you going to admit me?” If they say we're going to observe you then it's a really difficult situation for a lot of folks to make. But just know that when you're looking for additional coverage such as a Supplemental plan or Advantage plan, look at what the observation costs going to be that way you're mentally prepared to pay whatever bill that's going to come if you end up being in the observation status.