If you are 65 or older, any time you read or hear something about Medicare, you definitely sit up and take notice. NBC caught the attention of its older viewers Thursday when anchor and managing editor Brian Williams said, “Back as promised with this new warning for everyone on Medicare.”

Now, that sounded serious, and it is. Just ask M.J., 79, the subject of NBC’s story who spent three days in the hospital after breaking her leg. She then underwent rehabilitation in a nursing facility, and is facing a $28,000 bill.

Medicare won’t pay any of that bill because M.J. wasn’t considered to be an inpatient during her three-day hospital stay. She was only there “under observation.” It’s a term unfamiliar to most people on Medicare, who, like M.J., don’t find out what it means until it’s too late.

Kaiser Health News last September said, “Some seniors think Medicare made a mistake. Others are just stunned when they find out that being in a hospital for days doesn’t always mean they were actually admitted.”

The Centers for Medicare and Medicaid Services (CMS) isn’t trying to be secretive about your hospital status. Here is what you will find on its website:

“Did you know that even if you stay in the hospital overnight, you might still be considered an ‘outpatient’? Your hospital status (whether the hospital considers you an ‘inpatient’ or ‘outpatient’) affects how much you pay for hospital services (like X-rays, drugs and lab tests) and may affect whether Medicare will cover care you get in a skilled nursing facility.”

Unfortunately, most of us on Medicare don’t spend a lot of time reading the CMS website. I thought I knew a lot about Medicare, but have to admit this latest revelation was eye-opening for me.

What’s the difference between being “under observation” or being an inpatient?

Kaiser said hospitals provide observation care for patients who are not well enough to go home, but not sick enough to be admitted. Your doctor is the only person who can order that a patient be admitted to a hospital. Medicare requirements recommend that a decision be made by the doctor within 24 to 48 hours.

The rule is simple, according to Kaiser. To be eligible for nursing home coverage, seniors must have first spent at least three consecutive days (or through three midnights) as an admitted patient, not counting the day of discharge.

Medicare is strict on what it takes to be admitted to a hospital, and Kaiser said that is why hospitals in recent years have increased the number of patients “under observation.” The number increased by 60 percent in five years to 1.6 million nationally in 2011. Hospital admissions declined slightly at the same time, Kaiser said.

NBC spoke to a representative for most of the hospitals in the country, who said hospitals are being squeezed by Medicare. He said inpatient service costs more, so Medicare aggressively audits the classifications. Sometimes those audits come years later and Medicare takes the payment back, he said. The patient is left holding the bag.

CMS notes that you’re an outpatient if you’re getting emergency department services, observation services, outpatient surgery, lab tests or X-rays and the doctor hasn’t written an order to admit you to the hospital as an inpatient.

Here is the agency’s recommended solution for every Medicare recipient: “If you’re in the hospital more than a few hours, always ask your doctor or the hospital staff if you’re an inpatient or an outpatient.”

A doctor can change your status from “under observation” to inpatient, but he or she could be overruled by the hospital or Medicare. And Kaiser adds that Medicare can change that doctor’s decision later when it reviews the claim.

Medicare doesn’t require hospitals to tell patients they are “under observation.” However, it does require hospitals to tell patients they have been downgraded from inpatient to observation.

Some people on Medicare aren’t taking this “under observation” situation lightly. NBC tried to speak with someone at CMS and at M.J.’s hospital, but they declined, saying the issue is under litigation.

Kaiser said a group of 14 seniors has sued the government to eliminate observation status. Government lawyers are trying to get the suit dismissed. Legislation has also been introduced in Congress to count an observation visit as part of the three hospital days required for nursing home coverage, but it hasn’t moved.

Toby Edelman, a senior policy attorney with the nonprofit Center for Medicare Advocacy, told the Wall Street Journal those who enter a skilled-nursing facility only to discover their stays aren’t covered can file an appeal on their quarterly Medicare Summary Notice.

Persons who are in a Medicare Advantage Plan like health maintenance organizations (HMOs) and preferred provider organizations (PPOs) may come under different rules. They should check with the companies that handle their plans about where they stand while “under observation” in the hospital.

And remember, if you are on Medicare and end up in the hospital, don’t forget to ask your doctor if you are an inpatient or an outpatient. Getting a straight answer can save you big bucks.