Medicare is a government health insurance program for individuals who either are over the age of 65, are receiving disability income from either Social Security or the Railroad Retirement Board, have Lou Gehrig’s disease, or have end-stage renal disease. There are several fundamentally different types of Medicare plans available to consumers, each of which has different rules for consumer out-of-pocket costs such as deductibles, copayments, and coinsurance. The sections below explain the Medicare out-of-pocket costs associated with Medicare Parts A, B, C, D, and Medigap (Medicare Supplement plans).
Medicare Part A covers inpatient hospitalization services such as surgery, rehabilitation services, skilled nursing facility care, and hospice care, but these services are only covered if the health care provider accepts Original Medicare. If the beneficiary or their spouse worked at least ten years in a Medicare taxable job, then they usually do not have to pay a premium for Medicare Part A. Otherwise their premium costs in 2018 can be up to $422 per month. If you do not enroll in Part A when you are first eligible, then you may have to pay a 10% higher premium for twice the number of years you could have been enrolled but did not sign up.
In addition to the premium which all beneficiaries must pay (this premium can be $0), those that receive inpatient hospitalization services must also pay Medicare Part A out-of-pocket costs. The following paragraphs cover the 2018 out-of-pocket costs associated with home health care, hospice care, hospital inpatient stays, mental health inpatient stays, and skilled nursing facility stays.
Medicare Part A enrollees pay $0 for home health care services and 20% of the Medicare-approved amount for durable medical equipment. For hospice care enrollees pay $0, but they may need to pay a copayment of no more than $5 for each prescription drugs, as well as pain relief and symptom control products. They may also need to pay 5% of the Medicare-approved amount for inpatient respite care, which is temporary care provided in a hospital, hospice inpatient facility, or nursing home so that the patient’s caregiver can take time off. If a beneficiary receives hospice care in their home or another facility where they live, Medicare Part A does not cover room and board.
A benefit period begins the day you are admitted as an inpatient in a hospital or skilled nursing facility. It ends 60 days after the last day you received inpatient care. For hospital inpatient stays, individuals must pay a $1,340 deductible for each benefit period. In other words, they must pay all of the costs of the stay until they have paid $1,340, and then Medicare Part A begins to share the costs with them. During the first 60 days of each benefit period, beneficiaries do not pay any coinsurance. However between days 61 and 90 a beneficiary must pay $335 coinsurance per day. Usually coinsurance refers to a percentage of the costs for the services, but in this case it refers to a fixed amount, similar to a copayment. For each day of a benefit period after day 90, Medicare Part A gives beneficiaries 60 lifetime reserve days which like the name suggests, the beneficiary can use any time during their lifetime. A beneficiary pays $670 coinsurance for each lifetime reserve days after day 90 and all costs beyond their lifetime reserve days. Moreover inpatients would have to pay the full costs for the following: television, private-duty nursing, a phone in their room, or a private room unless it is medically necessary.
For mental health inpatient stays, Medicare Part A enrollees pay the same deductibles and coinsurance amounts as for hospital inpatient stays. Mental health inpatients also pay 20% of the Medicare-approved amount for mental health services from doctors and other providers that accept Original Medicare. There is no limit on the number of benefit periods a mental inpatient can get in a general hospital or psychiatric hospital, but there is a lifetime limit of 190 days on Medicare mental health coverage. For a skilled nursing facility stay, a beneficiary would pay $0 during the first 20 days of each benefit period, $167.50 coinsurance per day during days 21-100, and all costs after day 100.
Medicare Part B covers outpatient medical services such as doctor visits and preventive care. The monthly premium for Part B increases with yearly income and ranges between $134 and $428.60. Like Medicare Part A, Medicare Part B also has a late enrollment penalty for people that do not sign up when they are first eligible during their initial enrollment period. Their monthly premium may increase 10% for each full twelve month period that they were eligible to have Part B but did not enroll. Unlike the Medicare Part A late enrollment penalty, the Medicare Part B late enrollment penalty lasts for as long as the beneficiary is enrolled in Medicare.
Like Medicare Part A, enrollees must pay Medicare Part B out-of-pocket costs for outpatient medical services in addition to their monthly premiums. The annual deductible for Part B services in 2018 is $183, so an enrollee would only have to pay the entire cost of their services up to $183 before Medicare Part B begins to share costs with them for the remainder of the year. This differs from Medicare Part A in which beneficiaries may have to pay multiple deductibles if they have multiple benefit periods.
Medicare Part B beneficiaries do not pay any costs for clinical laboratory services or home health services, but they would pay 20% of the Medicare-approved amount for durable medical equipment, most doctor services (including during their hospital inpatient stay), and outpatient therapy.
Beneficiaries pay no out-of-pocket costs for yearly depression screenings, but they do have to pay 20% of the Medicare-approved amount for doctor visits to diagnose or treat a mental health condition, and the Part B deductible applies for these visits. If they get their services from a hospital outpatient clinic or department, then they may have to pay an additional copayment or coinsurance amount between 20-40% of the Medicare-approved amount for their services.
For partial hospitalization mental health services, the Part B deductible applies and beneficiaries pay a percentage of the Medicare-approved amount for each service they get from a doctor or mental health professional that is qualified to receive payments from Medicare. They also pay coinsurance for each day of partial hospitalization services in a hospital outpatient setting or community mental health center.
The Medicare Part B deductible also applies to outpatient hospital services from a doctor or other health care provider, and enrollees usually pay 20% of the Medicare-approved amount for these services. For all other outpatient hospital services, beneficiaries usually pay a copayment for each service they get which may be higher than the copayment they would pay for the same service in a doctor’s office. However beneficiaries do not have to pay for some preventive services and screenings that are outpatient hospital services.
Medicare Part C plans are also called Medicare Advantage. These plans are an alternative to Original Medicare (Parts A and B) provided by private insurance companies that cover the same services but usually have lower Medicare out-of-pocket costs and additional benefits such as vision, dental, and hearing.
Enrollees in Medicare Part C plans pay a premium in addition to their Part B premium, but the premium varies by plan. Since the government reimburses Medicare Advantage insurers for their enrollees, the premiums for Medicare Advantage plans can be as low as $0. Moreover some Medicare Advantage plans pay part of the monthly premium and the deductible for Medicare Part B.
Medicare Advantage plans may have deductibles that the enrollee must pay before the plan shares costs for any medical services, as well as copayments or coinsurance that may not be the same as in Original Medicare. Unlike Original Medicare, Medicare Advantage plans have a limit on the amount of out-of-pocket costs the enrollee can pay in a year. In 2018 this out-of-pocket limit is at most $6,700 for every Medicare Advantage plan.
Most Medicare Advantage plans also include a drug component, which may have its own deductible and cost-sharing amounts. The next section explains Medicare drug plan cost-sharing in more detail.
A Medicare Part D plan is also known as a Medicare drug plan and provides the prescription drug coverage that Original Medicare lacks. Medicare drug plans can be purchased either as a component of a Medicare Advantage plan or as a stand-alone prescription drug plan.
Premiums for stand-alone Part D plans vary by plan. If enrollees do not sign up for a Medicare drug plan when they are first eligible, then like Medicare Part B they will have to pay a late enrollment penalty that lasts as long as they are enrolled in Part D. In addition some Part D plans have a yearly deductible that is limited to at most $405 in 2018, but there are also Part D plans with $0 deductibles.
Enrollees in Part D plans pay all of their covered prescription drug costs up to the deductible amount. After that point, they pay either copayments or coinsurance for each drug prescription in what is known as the Initial Coverage Period. Drugs are grouped into tiers in each Medicare Advantage plan’s formulary, and the same drug may have different tiers in different plans. A formulary is simply a list of drugs which a plan covers. Moreover it is possible for a drug to be covered in some Medicare Advantage plans but not others. Copayments and coinsurance amounts for prescription drugs during the Initial Coverage Period depend on the drugs’ tiers.
Once the total costs paid by the enrollee and the insurer exceed $3,750 in 2018, the enrollee enters the Part D coverage gap. During the coverage gap in 2018, the enrollee must pay 44% coinsurance for generic drugs and 35% coinsurance for brand-name drugs. Since brand-name drugs have a 50% manufacturer discount, 85% of the price of brand-name drugs contribute toward an enrollee’s out-of-pocket cost threshold to exit the coverage gap. However since generic drugs have no manufacturer discount, just 72% of the price of generic drugs contributes toward the threshold.
Once the enrollee’s out-of-pocket cost threshold to exit the coverage gap reaches $4,950 in 2018, they enter catastrophic coverage. During catastrophic coverage they pay the maximum of 5% of the drug cost or $3.35 for generic drugs and $8.35 for brand-name drugs.
Medicare beneficiaries with limited income and resources, such as dual eligible Medicare and Medicaid beneficiaries, can qualify for Extra Help paying their drug costs. Enrollees with Extra Help pay no more than $3.35 for each generic drug and $8.35 for each brand-name drug. Moreover they never enter the coverage gap.
Medigap plans are also known as Medicare Supplement insurance plans. They help pay for the Medicare out-of-pocket costs associated with Original Medicare Parts A and B such as deductibles, copayments, and coinsurance. In 47 out of 50 states there are ten standard kinds of Medicare Supplement insurance plans, called Medigap A, B, C, D, F, G, K, L, M, and N. However, Massachusetts, Minnesota, and Wisconsin have state-specific Medigap plan designs which are named differently than the ten standard plans.
Medigap plans have a premium that is often higher than the premiums for Medicare Part C and Part D. The most popular Medicare Supplement insurance plan is Medigap F, which pays 100% of costs for Part A hospital coinsurance, Part A deductible, Part B coinsurance or copays, Part B annual deductibles, Part B excess charges, blood transfusion costs for the first three pints, foreign travel emergency costs up to plan limits, hospice care coinsurance costs, and skilled nursing facility care coinsurance.
Medigap C plans cover 100% of costs for the same services covered by Medigap F except for Part B excess charges. Medigap G plans also cover 100% of costs for the same services covered by Medigap F except for Part B annual deductibles. For more information about out-of-pocket costs in other Medigap plans, see HealthPocket’s Medigap page.
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