Understanding the various expenses associated with Medicare is crucial to choosing the right Medicare insurance plan. You need to consider your Medicare premiums, co-payments and coinsurance expenses. A Medicare beneficiary under Original Medicare will have different out of pocket and deductible expenses than those enrolled in Medicare Advantage Plans.
Deductibles are the amount of money an insured will need to pay out of pocket for health care services before his/her plan starts coverage. In most cases, the insured pays one hundred percent of the costs until the deductible is reached. After the deductible has been reached, the insured may still be responsible for paying coinsurance and/or copays under certain plans. Let’s look at an example of how deductibles work.
Larry goes to his doctor for his annual physical which is considered preventive care. His plan covers one hundred percent of preventive care. Joe’s plan has a $250 deductible. After his physical exam, Larry’s deductible is still intact.
In December, Larry is out skiing and takes a wrong and hurts his knee. He goes to the doctor to get it examined. The doctor visit along with incidentals costs $375. Because his deductible is still intact, he has to pay $250 and then the plan pays the rest. He will also need a knee brace while the knee heals. Now that Larry has met his deductible, he will pay twenty percent coinsurance for the knee brace.
It’s important to be able to understand the difference between these two expenses; it can be substantial in out of pocket amounts depending on the circumstances. Coinsurance is a percentage of the bill for medical care. Let’s take an example; Joe has hip-replacement surgery. The total bill for the procedure is $35,000 with his current plan, which has a copay of $125 a day for the first six days in the hospital. Joe stays for three days in the hospital in this case. He will pay $375, and his plan will pay the remainder of his hospital expenses.
Joe is going to need crutches while his hip is healed, and he can walk around without them. Crutches fall under the category of durable medical equipment. Joe’s plan has a twenty percent coinsurance for durable medical equipment. The crutches cost $75. Joe’s portion of the cost will be 20% of $75 which is $18.75
Mary, on the other hand, has a plan which only requires a copay. She visits her doctor and has a $20 copay regardless of the Medicare-approved amount the doctor charges for the visit. All she pays is $20. If she were to require additional care, surgery, tests etc. She will only pay a predetermined copay amount that will always be fixed.
Medicare Part A covers in-hospital care, home health care and skilled nursing facility (SNF) for the particular benefit period, with the exception of deductibles and coinsurance expenses.
The majority of Medicare recipients don’t pay monthly premiums for part A. If the beneficiary or their spouse paid Medicare taxes for forty quarters, ten years, then Medicare Part A is free. For those who do not meet the forty quarters rule, buying part A may cost you as much as $422 a month.
For the year 2019, Medicare Part A deductible will be $1,316 for each benefit period. A “Benefit Period” starts the day you enter a hospital facility or skilled nursing facility. The benefit period ends when the recipient has NOT received inpatient hospital care, or SNF (Skilled Nursing Facility) Care for sixty days in a row. There is no limit on how long the benefit period can be or on the number of benefit periods.
For 2019, the amount you pay per benefit period will vary depending on the length of the hospital stay:
Original Medicare will cover up to ninety days of in-patient hospital care during each benefit period. Recipients also have an additional sixty days of coverage- these are called “lifetime reserve days”. These additional sixty days may only be used once.
Medicare Part B covers two areas of services:
Recipients usually don’t pay anything for preventive care as long as the services are provided by a medical provider who accepts Medicare assignments. Some of the services covered under part B are:
The standard premium for part B for seniors whose income is $85,000 or below, is $134 and can be higher depending on your income. It can be as high as $428.60 for those in the highest income bracket.
In 2019, the Medicare Part B deductible will be $183. Once the deductible has been met, the recipient is responsible for paying twenty percent coinsurance of the Medicare-approved amount for the following:
Medicare Part D covers prescription drugs. The monthly premiums vary based on the plan chosen.
Deductibles– The initial deductible in 2019 will be $415, a ten dollar increase from 2018.
Other costs and considerations to keep in mind about Plan D. The initial coverage limit (ICL) will be increasing to $3,820. The out of pocket threshold will go to $5,100. The Coverage Gap, also known as the Medicare Donut Hole will increase to $5,100 in 2019.
Prescription drugs out of pocket costs are progressive, much like your income tax. Recipients will pay the initial deductible of $415. After the deductible, they will pay a twenty-five percent coinsurance up to the ICL of $3,820.
The Donut Hole phase of part D coverage begins when the total cost of retail drugs reaches $3,820 and ends when your total out of pocket costs reach $5,100. Note that the $3,820 amount is the total retail cost of medications covered and NOT what you pay out of pocket at the pharmacy. The retail cost of the medication is computed from your specific Medicare plan D’s negotiated prices for the covered medications, and each Part D plan may have different negotiated prescription drug rates. Different enrollees with plan Ds from different providers can reach the Donut Hole at different times.
Beneficiaries are responsible for the first $415 of the initial deductible, and then they will be responsible for twenty-five percent of the next $3,405 for a grand total of $1,266.25 as the true out of pocket costs, excluding any monthly plan premiums.
It is a lot to digest. As you are shopping around for the right Medicare Plan, you will be well served by speaking with a licensed Insurance Agent who can make sense of all of this information.
Speak to a licensed agent today