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Original Medicare (Part A and Part B) only covers about half the total health-care costs of Medicare beneficiaries. That’s according to the AARP Public Policy Institute.
According to the AARP Public Policy Institute, Medicare beneficiaries spent a median amount of $3,685, or an average of 17% of their income, on health-care costs out of their own pockets in 2013.
Older Medicare beneficiaries pay proportionately more for their medical care. On average, half of those aged 85 and older spent at least 30% of their income on health-care costs. For younger beneficiaries (aged 65-69), half of them spent at least 12% of their income on health-care costs.
Medicare coverage under the federal Original Medicare program is categorized into hospital insurance (Medicare Part A) and medical insurance (Medicare Part B).
Medicare Part A may pay health-care costs when you’re a hospital inpatient. There’s a deductible amount that you typically need to pay. This is not an annual amount, but an amount you generally pay once per benefit period. A benefit period starts when you’re admitted to the hospital as an inpatient, and ends when you haven’t had inpatient care for 60 days in a row.
You might also pay a coinsurance amount every day that you’re in a hospital beyond 60 days. Generally there’s no coinsurance for the first 60 days in a row that you’re an inpatient. There is a coinsurance amount ($341 per day in 2019) for days 61-90.
For days 91 and after, you may need to pay a coinsurance amount ($682 per day in 2019) for every lifetime reserve day. If you have to stay in the hospital for more than 90 days, Medicare will generally cover your inpatient care for up to 60 lifetime reserve days. You generally have to pay the daily coinsurance amount.
After you run out of lifetime reserve days and you’ve been in the hospital more than 90 days, you may have to pay all costs.
The good news is, if you have a Medicare Supplement insurance plan, the plan will generally pay your Part A hospital costs and coinsurance for up to 365 days after your Medicare benefits are used up. See below for more information.
Medicare Part B may pay health-care costs for doctor visits, preventive care, certain lab tests, some medical equipment and supplies, and certain other medically necessary services and items.
There is an annual deductible that you must pay before Medicare starts paying for services. However, the deductible doesn’t apply to some services, such as an annual wellness visit and limited smoking cessation counseling.
But there’s no out-of-pocket maximum under Original Medicare. That means no matter how much you spend on health-care costs, there’s generally no point where Medicare takes over your out-of-pocket costs.
Original Medicare also doesn’t cover most prescription drugs you take at home. Part A may cover medications you receive as a hospital inpatient, and Part B may cover some medications administered to you in an outpatient setting, like a clinic.
If you’d like to protect yourself against unlimited health-care cost spending, here are a few options to consider.
Medicare Supplement insurance – If you’re enrolled in Medicare Part A and Part B, you may be able to buy a Medicare Supplement plan to help pay your out-of-pocket health-care costs. Deductibles, coinsurance, and copayments are some of the costs Medicare Supplement plans may cover. Different plans have different sets of basic benefits – not every plan covers deductibles, for example.
Medicare Supplement plans are standardized in most states. Two of these standardized plans – Medicare Supplement Plan K and Plan L – have out-of-pocket limits on your Medicare health-care costs. Once you’ve spent the specified amount on approved costs during one year, the plan may cover your health-care costs for the rest of the year.
Medicare Prescription Drug Plan – If you’re enrolled in Medicare Part A and/or Part B, you can enroll in a stand-alone Medicare Part D Prescription Drug Plan to help with your medication costs. Or, you can enroll in a Medicare Advantage Prescription Drug plan (see below). Be aware that different plans may cover different medications, and costs may also vary.
Medicare Advantage plan – If you’re enrolled in Medicare Part A and Part B, you can generally sign up for a Medicare Advantage plan to get your Part A and Part B benefits, instead of getting these benefits directly from the government. Many Medicare Advantage plans include prescription drug coverage.
Medicare Advantage plans have yearly out-of-pocket limits on your covered health-care costs for medical services. After you reach this limit, the plan may pay your health-care costs for medical services for the rest of the year. These limits may change from year to year, and may vary among plans. You may want to ask your plan about this limit.
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