PUBLISHED THU, AUG 22
2019 12:32 PM EDTUPDATED THU, AUG 22 2019 3:58 PM EDT Sarah O’Brien@SARAHTGOBRIEN
KEY POINTS
·
Roughly one-third of beneficiaries use Advantage Plans, which
have out-of-pocket maximums and often include dental and vision coverage or
other extras.
·
The other two-thirds stick with basic Medicare.
·
In that situation, unless you have some type of
employer-sponsored insurance or you get extra coverage from Medicaid, the
option for reducing your out-of-pocket costs is a Medigap policy.
Experts have a message for
anyone thinking about relying on basic Medicare with no extra coverage: Don’t
do it.
With deductibles, copays,
coinsurance and — this is a biggie — no out-of-pocket maximum, the program has
a variety of costs that make having no backup insurance a huge financial risk.
“All it takes is one big
hospital stay and you could be out tens of thousands of dollars,” said
certified financial planner Ken Waltzer, co-founder and managing partner of KCS
Wealth Advisory in Los Angeles. “Even if you don’t face a big event like that,
the smaller ongoing expenses can really add up.”
Roughly 51 million older
adults are enrolled in Medicare. Beneficiaries can stick with just Part A
(hospital coverage) and Part B (outpatient care) or get their benefits
delivered through an Advantage Plan. Part A typically costs nothing, and Part B
has a monthly standard premium of $135.50 for 2019 (more for higher-income
people).
About one-third of
beneficiaries use Advantage Plans, which come with out-of-pocket maximums and
often include dental and vision coverage or other benefits. Those plans also
typically provide Part D prescription drug coverage. The average premium for an
Advantage Plan is $29, according to the Henry J. Kaiser Family Foundation.
Some, however, have no premium.
The other two-thirds of
recipients choose to go with original Medicare (and pair it with a stand-alone
Part D prescription plan).
SUPPLEMENTAL COVERAGE AMONG BENEFICIARIES
WITH BASIC MEDICARE
|
MEDIGAP
|
29%
|
|
MEDICAID
|
22%
|
|
OTHER
COVERAGE
|
1%
|
|
NO
SUPPLEMENTAL COVERAGE
|
19%
|
In that situation, unless
you have some type of employer-sponsored insurance or you get extra coverage
from Medicaid, the only option for mitigating your out-of-pocket costs is a
Medigap policy.
Those supplemental
policies, which are sold by private insurance companies, either fully or
partially cover cost-sharing of some aspects of parts A and B, including
deductibles, copays and coinsurance. They also limit what you’ll pay out of
pocket each year.
Yet about 19%, or 6.1
million, of those who stick with basic Medicare have no extra coverage,
according to a 2018 study from the Henry J. Kaiser Family Foundation.
That’s risky, experts say.
While Part A is free for most beneficiaries, it comes with a $1,364 deductible
per benefit period. And although Part B comes with a low $185 per-year
deductible, you typically pay 20% of the remainder for most doctor services —
including while you’re a hospital inpatient — as well as outpatient therapy and
durable medical equipment such as wheelchairs or walkers.
“That 20% is after your
deductible, and there’s no limit to how much you’d pay out of pocket,” said
Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent
broker and general agent for Medicare plans.
“If you have a heart
attack, need multiple surgeries and hospital visits, you could literally end up
bankrupt,” she said.
Heart bypass surgery can
cost more than $100,000, according to Statista. Heart valve replacement can run
upward of $170,000. For illustration purposes only: If all those charges were
delivered through Part B, your 20% share would be at least $20,000 for the
bypass and $34,000 for the valve replacement.
A 65-year-old male will pay
anywhere from $126 to $464 monthly for a Medigap policy, according to the
American Association for Medicare Supplement Insurance. For 65-year-old women,
the range is $118 to $464.
When you first enroll in
Medicare Part B, you get six months to purchase a Medigap policy without an
insurance company nosing through your health history and deciding whether to
insure you. After that, unless your state allows special exceptions, you have
to go through medical underwriting.
While a number of companies
offer Medigap insurance, they can only offer policies from a list of about 10
standardized plans. Each is simply assigned a letter: A, B, C, D, F, G, K, L, M
and N. (Be aware, however, that plans C and F will no longer be available as
of Jan. 1 to people who turn 65 after this year.)
This standardization means
that, say, Plan A at one insurance company is the same as Plan A at another. Be
aware, however, that not every plan is available in all states. They also do
not cover any costs associated with Part D prescription drug coverage.
Everyone
should at least consult with a Medicare agent to understand what the results of
their choices could be. Carolyn McClanahan
CFP AND FOUNDER OF LIFE PLANNING
PARTNERS
The plans differ on what is
covered. For instance, some pay your Part A deductible, while others do not or
might only pay a portion.The Centers for Medicare and Medicaid Services has
a chart on its website that shows the
differences. You also can use the agency’s search tool to find available plans in
your ZIP code.
CFP Carolyn McClanahan said
if you can’t afford a Medigap policy, you should consider an Advantage Plan to
help protect against endless medical bills. If you can find one with no
premium, you’ll at least get protection from its out-of-pocket maximum — even
if you have to use in-network doctors and other health facilities to avoid
paying more.
“It might limit how you use
Medicare, but at least you wouldn’t be on the hook for a potentially exorbitant
amount of money,” said McClanahan, founder of Life Planning Partners in
Jacksonville, Florida.
She also said that before
you make a decision on your coverage, you should check in with a professional.
“Everyone should at least
consult with a Medicare agent to understand what the results of their choices
could be,” McClanahan said.
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