How Does Medicare Cover Hospital Stays?

Medicare, a federal health insurance program, provides coverage for millions of Americans, primarily individuals aged 65 or older, and certain younger people with disabilities or specific health conditions. Understanding Medicare’s coverage for hospital stays is important for managing potential costs. This article clarifies how Medicare covers hospitalizations.

Medicare Part A Inpatient Hospital Coverage

Medicare Part A, or Hospital Insurance, is the primary component of Original Medicare that covers inpatient hospital care. This coverage extends to various facilities, including acute care hospitals, critical access hospitals, inpatient rehabilitation facilities, and psychiatric hospitals, though the latter has limited coverage periods. For Medicare Part A to cover a hospital stay, a doctor must formally admit the patient as an inpatient, which begins with a physician’s order for admission.

Covered services within an inpatient hospital stay include a semi-private room, meals, and general nursing care. Part A also helps cover the cost of drugs, medical supplies, equipment, operating room and recovery room services, and intensive care and coronary care unit services used during the hospital stay.

Financial Responsibilities for Hospital Stays

Beneficiaries incur specific financial responsibilities during a Medicare Part A covered inpatient hospital stay, which are structured around a “benefit period.” A benefit period begins the day a patient is admitted as an inpatient to a hospital or skilled nursing facility and ends when they have not received inpatient hospital or skilled nursing care for 60 consecutive days. For each new benefit period, a deductible applies before Medicare begins to pay for services. In 2025, the Medicare Part A inpatient hospital deductible is $1,676.

After the deductible is met, there is no coinsurance for the first 60 days of an inpatient hospital stay within a benefit period. For days 61 through 90, a daily coinsurance amount applies, which is $419 per day in 2025. If a hospital stay extends beyond 90 days within a benefit period, individuals can use “lifetime reserve days.” There are 60 non-renewable lifetime reserve days available over a beneficiary’s lifetime, each incurring a daily coinsurance of $838 in 2025. Once these lifetime reserve days are exhausted, Medicare Part A no longer covers the hospital stay, and the beneficiary becomes responsible for all costs.

Inpatient vs. Outpatient Status and Observation Stays

The classification of a hospital stay as “inpatient” or “outpatient” significantly impacts Medicare coverage and associated costs. An individual is considered an inpatient only when formally admitted to the hospital with a doctor’s order. Conversely, a patient is considered an outpatient if they receive hospital services, such as emergency department care, observation services, or outpatient surgery, without a formal inpatient admission order, even if they stay overnight. This distinction impacts coverage because Medicare Part A covers inpatient services, while Medicare Part B primarily covers outpatient services.

“Observation stays” are an outpatient service where a patient receives hospital care while a doctor determines if inpatient admission is necessary. During an observation stay, services like physician care, tests, and hospital facility charges are covered under Medicare Part B, meaning the Part B deductible and coinsurance apply. The financial impact differs, as Part A’s inpatient deductible and coinsurance structure differs from Part B’s 20% coinsurance for most services after the annual deductible.

An implication of outpatient status, including observation stays, relates to coverage for post-hospital skilled nursing facility (SNF) care. Medicare generally requires a qualifying inpatient hospital stay of at least three consecutive days before it will cover SNF services. Time spent in observation status, regardless of its length, does not count toward this three-day inpatient requirement, potentially leading to beneficiaries being responsible for the full cost of subsequent SNF care.

How Other Medicare Parts Relate to Hospital Care

Beyond Part A’s inpatient coverage, other Medicare parts cover services related to hospital care. Medicare Part B, or Medical Insurance, covers doctor services received during a hospital stay, whether the patient is an inpatient or an outpatient. It also covers outpatient hospital services, emergency room visits, and various diagnostic tests. Part B ensures coverage for the professional services provided by physicians and other healthcare providers, distinct from the hospital facility charges.

Medicare Part C, or Medicare Advantage Plans, are private health plans approved by Medicare that provide all Part A and Part B benefits. These plans often have different cost-sharing structures, network restrictions, and may offer additional benefits not covered by Original Medicare, such as vision, hearing, and dental care. If an individual enrolls in a Medicare Advantage Plan, their hospital coverage is provided through that private plan rather than directly through Original Medicare Part A.

Medicare Part D provides prescription drug coverage. While drugs administered during an inpatient hospital stay are typically covered under Part A, and those during an outpatient visit under Part B, Part D primarily covers prescription medications obtained from a pharmacy after discharge. Medigap, or Medicare Supplement Insurance, policies are sold by private companies to help cover some of the out-of-pocket costs associated with Original Medicare, including Part A hospital deductibles and coinsurance amounts.