The objective of this study was to estimate household costs (direct medical, direct non-medical and opportunity costs) associated with outpatient consultations and inpatient admissions at three tertiary hospitals in Lao PDR (national, university and regional hospitals). Revolving drug funds are the main sources of revenue for the facilities. We used outpatient exit interviews and interviews with discharged inpatients to obtain data. A total of 280 outpatients and 149 patients discharged from internal medicine wards were interviewed. The average cost for the outpatient services was USD16.0 per patient. Direct medical costs accounted for more than half the amount. Patient interviews revealed it was common for the hospital to require patients to come back the following day to obtain the results of ancillary services which will result in higher transportation and opportunity costs to the patient. The average cost for inpatient admission was USD292; this ranged from USD118 (regional hospital) to USD407 (national hospital). Direct medical costs accounted for 60% and 35% at those two facilities, respectively. Revolving drug funds as a provider payment method at tertiary hospitals were regressive. An uninsured patient faced higher outpatient costs than an insured patient. With the limited number of people currently insured in Lao PDR (8% of the total population in 2009), these results suggest the need to rapidly scale up effective risk protection schemes.