Many families assume Medicare will pay for nursing home care when it’s needed. Unfortunately, this misunderstanding often leads to major surprises and unexpected bills.
As estate planning attorneys, we most often see this confusion surface during a medical crisis, when decisions are rushed and families are already under stress. At that point, learning how Medicare actually works can feel overwhelming, especially when care is urgently needed.
This is Part 3 of our 4-part Medicare series.
In this post, we explain the Medicare 3-day rule, observation status, and the important difference between skilled nursing care and long-term nursing home care.
Skilled Nursing vs. Long-Term Nursing Home Care
These two types of care are often confused, but they are not the same.
Skilled nursing care is short-term recovery care that is typically ordered by a doctor. It may include:
- physical therapy
- occupational therapy
- speech therapy
- skilled nursing services
This type of care is designed to help someone recover after a hospital stay, not to provide permanent living assistance.
Long-term nursing home care, sometimes called custodial care, is ongoing help with daily activities, such as:
- bathing
- dressing
- eating
- ongoing supervision
This type of care is focused on daily living needs rather than recovery.
Medicare does not cover long-term nursing home care.
In simple terms, Medicare helps pay for recovery care. It does not pay for long-term nursing home living.
The Medicare 3-Day Rule
Even when skilled nursing care is needed, Medicare coverage usually depends on meeting a specific requirement known as the 3-day rule.
To have Medicare pay for skilled nursing facility care:
- you generally must be formally admitted to the hospital for at least three full days, and
- you must require skilled care afterward
If this rule is not met, Medicare may refuse to pay for the skilled nursing facility stay, even if the care itself is medically necessary.
This is often where families feel caught off guard.
Observation Status (Very Important)
One of the most confusing parts of Medicare involves observation status.
In some situations, a patient may stay overnight in a hospital bed for several days, but Medicare classifies the stay as observation rather than inpatient admission.
This distinction matters because:
- observation stays are often billed under Medicare Part B, not Part A
- observation status usually does not count toward the 3-day rule
A common surprise for families is learning that someone can spend multiple nights in the hospital and still fail to meet the 3-day requirement if they were classified as being under observation.
Why This Matters for Estate Planning
When Medicare does not pay for care, families may face significant costs very quickly. These expenses can reduce savings, disrupt retirement plans, and force difficult decisions during an already stressful time.
Understanding these rules ahead of time allows families to plan more intentionally and avoid being caught off guard when care decisions must be made quickly.
Coming Up Next
Part 4: How Medicare choices affect long-term planning and what to consider when coordinating Medicare with estate planning.