Observation Status with Medicare Advantage

Observation status with Medicare Advantage can cost you a lot of money. If you go to the hospital, you might start out in the Emergency Room and your co-pay would be $75 – even if they do lots of tests on you over several hours. That’s a good deal.

But…. if they keep you longer, you might think you have been admitted to the hospital – but you could be wrong. The doctors might have kept you under “observation status” and that changes how you will be billed.

If you are kept in the hospital and are not admitted, you will be billed as an outpatient – and you will pay the co-pays that your plan has for labs; expensive tests like CT scans; and even expensive Part B drugs.

Observation Status with Medicare Advantage

Here is info from an Evidence of Coverage document from a Medicare Advantage plan I represent:

Note: Unless the provider has written an order to admit you as an inpatient to the hospital, you are an outpatient and pay the cost-sharing amounts for outpatient hospital services. Even if you stay in the hospital overnight, you might still be considered an “outpatient.” If you are not sure if you are an outpatient, you should ask the hospital staff.

We cover medically-necessary services you get in the outpatient department of a hospital for diagnosis or treatment of an illness or injury.

For costs associated with laboratory, diagnostic tests, X-rays and other radiological services billed by the hospital, refer to the section of the benefits chart above titled, “Outpatient diagnostic tests and therapeutic services and supplies.”

You can also find more information in a Medicare fact sheet called “Are You a Hospital Inpatient or Outpatient? If You Have Medicare – Ask!”This fact sheet is available on the Web at:


The costs for “outpatient services” when you are under “observation status” can add up quickly if they do more than just observe you.  If they do tests and give you drugs, you could end up with a big bill.

The lesson here is:  Always ask if you have been admitted to the hospital.

I wrote a few years ago about my client, Ralph, who got burnt by “observation status”:  https://medicareblog.org/126000-hospital-bill/


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