Welcome back to part 2 of “New to Medicare!”
Welcome to Part 2 of the series, “New to Medicare” which I’m writing to help guide those who will soon be going on Medicare Parts, A, B, or both.
This Week’s Question
What does Medicare Parts A and B cost and cover? What are the choices in Medicare Plans? Do they differ as far as coverage, premiums and out of pocket costs, access to doctors and hospitals, and how claims are approved and paid?
Answer
The Pricing
Medicare Part A has no cost while Part B is currently $148.50/month. However, some people will pay more based on their income. A single person who makes over $87,000 annually and a married couple earning $174,000 are charged a higher amount. This is known as IRMAA (Income Related Monthly Adjustment Amount). The more one makes, the higher the cost for Part B, up to $504 per month.
Part A
Part A covers two services: inpatient hospitalizations and a stay in a Skilled Nursing Facility (SNF). Those who have Medicare only and no other plan are responsible for a $1,484 deductible, as Medicare calls it, for any hospital admission up to 60 consecutive days. An odd aspect of Medicare is someone who stayed two days in the hospital pays the same $1,484 as the person who was there for 52. After 60 days, additional costs are billed on a per day basis. Days 61 through 90 are $371/day and days 91 through 150, $742. It’s quite rare for someone to spend 100 or more days as an inpatient, let alone 60, but it does happen. I’ve had two clients I know of, and I’m sure a few others I didn’t, who spent over 100 days in the hospital. With Medicare only, we’re talking about a total cost upwards of $50,000. This alone is why people purchase either a Supplement or Advantage Plan. Both protect against this kind of catastrophic medical bill.
A Skilled Nursing Facility is a short-term nursing home. I often refer to it as inpatient rehab that’s needed after lengthy hospital stay, a bad stroke, a serious injury, etc. The care given is designed to nurse a patient back to health so they can go home and be independent again. Medicare pays 100% of the cost for the first 20 days. Days 21- 100 have a liability of $185.50 per day.
Part B
art B covers outpatients services: doctor visits, testing such as blood work, X-Rays and CT scans; surgeries such as Cataract, Carpal Tunnel, a Colonoscopy, etc., that people have performed and are home the same day; Chemo and radiation; emergency room visits; and rehab. Medical equipment and supplies are also covered under Part B and include oxygen, wheelchairs, crutches, C-Pap machines, diabetic supplies, etc. Anything covered under Part B is paid for by Medicare at 80%, putting the beneficiary on the hook for the other 20%.
The two choices in Medicare plans are Supplements, aka Medigap, and Advantage Plans.
Supplements are secondary to Medicare and pay the portion of the bill Medicare doesn’t pick up. Those with Supplements show two cards at a doctor or hospital. Advantage Plans are HMO’s or PPO’s and pay in place of Medicare. Those on Advantage Plans don’t show their Medicare card at a doctor or hospital because Medicare no longer pays any portion of one’s medical bills for those with HMO’s or PPO’s. What Medicare does instead is pay a private insurance company of one’s choice approximately $800 per month to become the beneficiary’s one and only insurance company. At that point it becomes the private insurance company’s job to provide health insurance to that individual and pay claims, minus the insured’s cost sharing.
Supplement vs Advantage Plans
Which brings us to a couple of the biggest differences between Supplement and Advantage Plans: premiums and out of pocket medical responsibility. Supplements generally cost more than Advantage Plans and start between $80 to $95/month for a 65-year-old. However, the Supplement plans my agency recommends eliminate all medical bills except for a $203 annual deductible and possibly a couple small co-pays of $20 at the doctor and $50 for a trip to the ER. In addition, Supplements almost always need to be piggy backed with a separate Part D prescription drug plan and most people pay between $7 and $25/month. Advantage Plans, when chosen wisely, are less expensive. We almost never advise our clients to spend more than $40/month for a plan and many have premiums of $0. However, those who choose Advantage Plans are exposed to higher out of pocket medical costs, up to $7,550 per year. Co-pays or coinsurance (a percentage of the total bill) can range from $5 for a PCP visit, to $200 for an MRI or CT scan, to thousands for Chemotherapy or a lengthy stay in a SNF. Almost all Advantage Plans include Part D, so the purchase of an additional prescription plan isn’t necessary.
How claims are approved and paid also differ. Supplement insurance companies actually have no say in what’s covered. If Medicare pays, the insurance company must pay their share, no questions asked. Medicare lets the treating physician decide what’s medically necessary so there’s no prior authorizations needed. In addition, claims for Medicare covered services are never denied. Medicare Advantage Plan insurance companies make the determination of what is “medically necessary” and require prior authorizations for outpatient surgeries and rehab, MRI’s and CT scans, home health care, and a couple other services. Although not a common practice, claims can be denied, and insurance companies can make a determination that additional days in the hospital or Skilled Nursing Facility (SNF) aren’t necessary and refuse to pay for them, although these decisions can be appealed.
What medical services and supplies are covered are the same with both types of plans. Advantage Plans are required to cover the same services as Original Medicare and as good or better than Medicare. Most Advantage Plans offer ancillary benefits, which include dental, vision, Over the Counter (OTC) and hearing aid allowances, gym memberships, and more that can be very generous and valuable. Supplements do not provide any of these.
Access to Medical Providers
Yet another difference is access to medical providers. Those on Supplements can go to any doctor or hospital in the country that accepts Medicare Assignment and agrees to take them as a patient. Again, Advantage Plans are HMO’s and PPO’s, and utilize networks. With and HMO, the insurance company will not pay for services at an out of network provider except in an emergency. You can go out of network with a PPO if the provider agrees to accept the insurance. However, costs for the same services at an out of network can be much higher.
Thank you!
In the coming weeks, I will get more in depth of the differences, pros and cons, and who I feel is best to choose a Supplement and Advantage Plan.
If you would like to read previous columns in the series, listen or watch the podcast and webcast versions, please visit our website. With questions or to set up a no cost consultation with one of our licensed agents, please give one of our offices a call or feel free to email me personally at aaron@GetYourBestPlan.com.
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