Today we will focus primarily on Original Medicare- parts A and B. We will also take a look at Medicare Supplements.
Original Medicare was never intended to cover all of a retiree’s health expenses, similar to how Social Security was never intended to be a retiree’s sole form of income.
Its purpose is to help cover a portion of the cost for hospital and doctor services. You will be expected to pay out-of-pocket for the remaining portion of the cost which can vary based on the services provided.
Most people don’t have a monthly premium for Part A. As long as you have 40 tax quarters, or paid 10 years of Medicare taxes, you get Part A at no cost.
You will however have a Part A annual deductible of $1,364 in 2019.
You will also have co-pays for hospital and skilled nursing stays. Depending on the length of stay, you will have different out-of-pocket costs.
Here is an example:
Say you spent 70 days in the hospital… you wouldn’t pay anything for the first 60 days. You would then pay $341 for each of the remaining 10 days, which equates to $3,410.
Assuming you left the hospital after these 70 days and went to spend 25 days in a skilled facility, you would pay nothing for the first 20 days, then pay $170.50 for each of the remaining 5 days, which equates to $852.50.
So total out of pocket cost for you would have is $4,262.50 WITHOUT a Medicare Supplement.
Now for Part B, your monthly premium is based on what your Modified Adjusted Gross Income was 2 years ago. In 2019 it would have been based on 2017. In 2020, it’ll be based on 2018 and so on.
This monthly premium can range from $135.50 to $460.50 per month.
You will also have a one time annual deductible of $185 in 2019.
Now, if we remember, Part B covers doctor services, but it does not cover these services completely. Medicare will cover 80% of the costs and you will be expected to pay 20%.
What does that mean for you?
It means you could expose yourself to potential high out-of-pocket costs.
There are various types of Medicare Supplements offered.
Regardless of which insurance company or plan you buy, the coverage was standardized by the government which made it the same, state by state, throughout the country
The plan types vary based on the level of coverage they provide.
Plan A provides the most basic coverage while Plan F covers nearly all potential costs. Depending on your situation, certain plans will provide better value than others.
Plans F, G, and N are the most common plans selected by enrollees. They cover nearly all potential costs and allow you to have a predictable out-of-pocket cost.
Plan F is the most comprehensive by covering nearly all potential costs. It typically has the highest monthly premium of all plans. There is also a High Deductible Plan F that covers nothing until a $2,300 deductible is met.
Plan F goes away January 1, 2020, however Plan G is practically identical and costs less.
Now here is the REAL VALUE of a Medicare Supplement…
If we review our Part A and Part B costs from earlier, we can see which of these costs a Medicare Supplement covers.
- It will cover our Part A deductible of $1,364 per year.
- It will cover our co-pays up to 150 days of a hospital stay and up to 100 days of a skilled nursing stay.
- It will also cover our 20% out-of-pocket costs for Part B.
The only thing left for you to pay would be the Part B monthly premium and Part B deductible of $185.
Here is an example of a 65-year old male client who is on Plan G and has the standard Part B premium rate ($135.50), and is a non-tobacco user in ($120/mo from Carrier XYZ)
As I mentioned before, the supplement will pay for the Part A deductible, Part B co-payments and excess charges, and the hospital and skilled nursing co-payments.
The total out of pocket per month in this example is $255.50 vs the average out-of-pocket of $655.
In this example, you would save $400/mo.
A Medicare Supplement helps give you peace of mind by allowing you to accurately budget your monthly health costs and avoid unexpected medical expenses.
So that wraps up Medicare Supplements, for now.
One word of caution:
Make sure your producer understands your health situation and your financial ability to make monthly premiums. This is crucial when finding the plan that is right for you.
In the next (and last) Blog post we will look at the final part of Medicare, Part D, and what it covers.
Any questions, please give me a call on my private line…don’t share this number! (732) 614-5832 😊
Artie "The Soup Man" Bernaducci