Medicare Out-of-Pocket Expenses

How much do you pay for medicare
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What happens to your out-of-pocket medical expenses when you obtain Medicare insurance coverage? Do you know?

It is important to understand whether we are there already or nearing the age of 65 years. Just because you become eligible for Medicare, it doesn’t mean your worries about health care bill will be over.

Let’s first look at traditional Medicare.

Part A (hospital insurance): It costs nothing to enroll and you don’t pay monthly premiums (with a few exceptions to eligibility), but there is no annual cap on out-of-pocket expenses. The more services you use, the higher your expenses in the form of co-payments for outpatient care (usually 20 percent of the cost) and inpatient care. Currently, a $1,068 deductible covers your first 60 days in the hospital, but if you stay longer, you will be charged $267 a day from day 61 to day 90, and $534 per day from day 90 to 150--plus all costs after 150 days. Part B deductible is $135 for 2009.

Part B (doctors and outpatient services): Most people on Medicare will pay $96.40 a month for Part B in 2009, but let’s round it up to $100 a month. Deductible $135, then 20% out-of-pocket.

Part D (prescription drugs): If you delay signing up for Part D beyond the time you’re first eligible for it, you could incur a late penalty that adds to your Part D premiums—12 percent for each year that you could have had Part D but did not. There are exceptions., but to avoid a penalty, you need to sign up for Part D at the same time as for Part B. Medicare Part D helps provide coverage for prescription drugs, but if you are on very many medications this can still add up quickly. The program has a “donut hole” which may end up with as much as $4,350 out-of-pocket before the second half of Part D kicks in and covers 95 percent of any further drug bills.

Medigap insurance fills some of the holes in Medicare insurance, but many seniors find it pricey. There are up to 12 different Medigap policies to chose from. The benefits are standardized but premiums and deductibles vary widely. It is reported by Marilyn Moon, a former trustee of the Medicare system, as not being a good value. She is quoted as saying “When people buy ‘Medigap’ insurance, on average they may be getting back only seventy-five cents worth of health care for every dollar they spend.”

As a simple example, lets just put our “imaginary” senior (Medicare Part A, Medicare Part B, no Medigap plan, Medicare Part D) in “good health” with one hospital admission for the year and estimated yearly expenses:

Medicare Part A $0.00/ yr premium

One admission to hospital, 30 days $1.068.00 deductible

Medicare Part B $100 / month = $1200 / yr premiums

Medicare Part D $39.60 / month = $475.20 premium

Medicare Part D (est drug cost) $35 /month = $455/yr

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Doctors Visits $135 + 20% = $375-500/yr

est Total Costs / year = $3698.20

Same “imaginary” senior in “good health” but now with Medicare Part A, a Medigap plan, Medicare Part D, with one hospital admission for the year and estimated yearly expenses:

Medicare Part A $0.00/ yr premium

One admission to hospital, 30 days paid by Medigap

Medicare Part B $100 / month = $1200 / yr premiums

Medicare Part D $39.60 / month = $475.20 premium

Medicare Part D (est drug cost) $35 /month = $455/yr

Doctors Visits paid by Medigap policy

Medigap Policy $200 / month = $2400 / yr premium

est Total Costs / year = $4530.20

Remember these are estimated costs and the imaginary person is considered in “good health.” If you are a person with one or more chronic illnesses, then the estimated costs will most likely be much higher.

For more information call Medicare toll-free, 800-633-4227 or visit www.medicare.gov on the Web.

Sources
AARP Bulletin Today
Medicare.gov -- Medicare Questions Page
Excluded Voices: An interview with Marilyn Moon By Trudy Lieberman (April 2009)

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