Covering The Medicare Gap With Private Insurance

How To Use Private Insurance To Close The Medicare Coverage Gap

Do you know what your out of pocket costs will be with Medicare? Most of the people I help with Medicare know they’ll have to pay some costs out of pocket. But, I find that many of them haven’t really dug into how much they might have to pay.

In this article, I’ll give an in-depth review of the out of pocket costs you can expect with Medicare Parts A and B, as well as the Medicare donut hole. I’ll also review your options to close some of these Medicare gaps in coverage.

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What Are The Medicare Gaps In Coverage?

When I speak about coverage gaps, I’m referring to the costs you pay for services or procedures. The premiums that you might pay – Part B or (rarely) Part A are a separate issue. You’ll have to pay those premiums whether you stick with Original Medicare or use a private plan option.

The out of pocket costs you’ll pay with Original Medicare come in two types:

Deductibles, and
Co-payments or Co-insurance

Both Part A and Part B have out of pocket costs. For Part A, you’ll encounter these expenses:

Part A Deductible
Part A co-insurance for inpatient hospital stays
Part A co-insurance for hospice care
Part A deductible for skilled nursing care

For 2021, the Part A deductible is $1,484. You must pay this amount out of pocket before Medicare will cover any part of your bills. So, if you stay in the hospital, you’ll pay up to $1,484 on your own.

Once you’ve hit the deductible, you’ll have no out of pocket costs for up to:

60 days in the hospital
20 days of skilled nursing care

If you need more days than these, you’ll begin paying a daily co-payment:

$371 per day for hospital days 61 to 90, and
$185.50 per day for skilled nursing days 21 to 100

For skilled nursing stays longer than 100 days, you’ll pay the full cost out of pocket. For hospital stays longer than 100 days, you’ll pay:

$742 for hospital days over 91, for up to 60 “lifetime reserve days”
Full cost for every day after you’ve used up your lifetime reserve days

A really important fact is that you could pay many of these costs more than once in a year. This is totally different from private health insurance you’ve had in the past. Usually, once you’ve paid a deductible, you don’t pay it again until the next year.

With Original Medicare, you pay the Part A deductible each time you begin a new benefit period. A benefit period begins when you first receive care for a covered service. It ends when you have gone 60 days without receiving covered services.

As an example, if you’re admitted to the hospital on June 1st, and you are discharged on June 5th, your benefit period will end 60 days later, or August 4th. If you’re re-admitted, or need skilled nursing care during this 60 day period, your benefit period is extended.

It will only end whenever 60 consecutive days have passed since you received care related to your initial hospitalization. Using benefit periods like this protects you from paying the deductible several times in a short period due to the same illness or injury.

So, returning to our example, if you stayed in the hospital from June 1st to June 5th, you would have paid the Part A deductible out of pocket. Assuming you received no other Part A services, your benefit period ends August. 4th.

If you go back to the hospital in September, you’ll have to pay the deductible once again. Again, this is unique to Medicare, and so many people I help don’t realize this.

For Medicare Part B, which covers things like doctor’s visits, you’ll pay these costs:

Part B deductible ($203 for 2021)
Part B co-insurance (20% of the Medicare-approved charges for services)
Part B excess charges (up to 15% of the Medicare-approved charges for services from certain providers)

Unlike Part A, you only pay the Part B deductible once in a year. After that, you’ll pay 20% of the cost for every procedure or service you receive. If you use a provider that doesn’t accept Medicare’s pricing, you’ll also pay excess charges of up to 15% of the Medicare-approved amount.

For the most part, these 20% co-insurance amounts will be relatively small. After all, 20% of the cost for a doctor’s visit might be only $20 to $30 for a simple appointment.

However, I always remind those I’m helping with Medicare that chemotherapy and radiation treatments are covered by Part B. This means that you’ll be on the hook for 20% of those costs.

The cost of chemotherapy can exceed $100,000. You’re share could be over $20,000 in this case. Most of my clients think of this number and realize that this Medicare gap is not tolerable.

To combat these out of pocket costs, I help my clients find private plans that close some or all of these gaps. The two main plan types people choose are:

Medicare Supplement Insurance plans, and
Medicare Advantage plans

For those who use Medicare Supplement Insurance, they also add a standalone Part D Prescription Drug Plan.

Are There Medicare Gaps In Private Coverage?

The answer to this question is usually “yes” or “maybe.” If you choose a Medicare Advantage plan, you will definitely pay some costs out of pocket. You can expect to pay these fees for with a Medicare Advantage (also known as Part C) plan:

Monthly premium (if any)
Annual deductible (if any)
Co-payments
Co-insurance

Many Medicare Advantage plans don’t have a monthly premium or deductible. But, you’ll still have out of pocket costs. If you still have to pay, what’s the point of using Medicare Advantage?

The number one reason my clients choose Part C plans is because they come with Out Of Pocket Maximum (OOPM) spending protection. Unlike Original Medicare, Part C plans provide a hard cap on your spending.

Even if you undergo chemotherapy. Or, if you spend 9 months in the hospital. Knowing they’ve put a cap on health care spending during the year brings a lot of peace of mind to my clients. Even those with significant savings; nobody wants to pay medical bills from savings if they can avoid it.

As far as Medicare Supplement Insurance goes, you may also have out of pocket costs. Medicare Supplement Insurance, or Medigap as it’s also known, is issued in ten standardized “Plans.” The Plans are known by letter: A, B, C, D, F, G, K, L, M, and N.

Each of these Plans are standardized across 47 States. Wisconsin, Minnesota, and Massachusetts have their own Medigap plans and rules. The Plans each cover a different mixture of Medicare gaps.

Plan F is the most comprehensive plan available. This plan covers 100% of every Medicare gap. Note that Plan F is not available to anyone who becomes eligible for Medicare on or after January 1, 2020. If you were eligible before that date, you can still choose Plan F.

All the other Medigap plans require some amount of out of pocket payments. However, these other Medigap plans either have annual Out Of Pocket Maximum protection, or very minimal cost-sharing. All Medigap plans offer better protection from high medical bills than Original Medicare.

What Is The Medicare Donut Hole?

The Medicare donut hole is a slang term for a coverage gap in Part D drug coverage. Original Medicare doesn’t cover prescription drugs. In 2006, Part D drug coverage became available from private insurance companies.

Drug coverage from Part D is available two main ways:

From standalone Medicare Prescription Drug plans, and
Medicare Advantage plans with drug coverage (MAPD plans)

With drug coverage from either of these Medicare plans, you’re going to have out of pocket costs. Part D drug plans can have all of these expenses:

Monthly premium
Annual deductible (not more than $445 for 2021)
Co-payments
Co-insurance

Many drug plans, especially MAPD plans have low, or $0 monthly premiums. Many plans also lack deductibles. However, every Medicare Part D plan will have co-payments or co-insurance for the prescriptions you fill.

The amount of these costs can change during the year as you and your plan pay more for your medications. As your total drug spending rises during the year, you move through four Coverage Stages:

Coverage Stage 1 – Deductible Stage – you pay full cost up to $445
Coverage Stage 2 – Initial Coverage Stage – you pay co-payments or co-insurance until you and your plan combine for $4,130 in spending
Coverage Stage 3 – Coverage Gap Stage – you pay 25% of the full cost of generic and brand name drugs
Coverage Stage 4 – Catastrophic Coverage Stage – once your total drug costs (including the value of manufacturer discounts on brand name drugs) exceeds $6,550, you pay no more than 5% of drug costs for the rest of the year

Coverage Stage 3 is what is known as the donut hole. It got this nickname because in the past Part D plans didn’t pay any part of your drug costs in this stage. You share of cost was much greater.

The donut hole has been closing for years, and was finally closed in 2019. Since then, your cost per medication has been capped at 25% in the Coverage Gap. If you’re in the Medicare donut hole, or Coverage Gap Stage, this is the cost sharing break-down for brand name drugs:

Plan pays 5% of full drug cost
Drug company provides a discount of 70% of full drug cost
You pay 25% of full drug cost

For generic medications, your plan doesn’t help out, but Medicare does:

Medicare pays 75% of full drug cost
You pay 25% of full drug cost

I always make sure my clients understand that they don’t have to actually spend $6,550 out of pocket to get out of the Coverage Gap. The 70% manufacturer discount counts towards the total. Any amounts you spent in earlier coverage stages count, too.

So, it’s good to keep in mind that although $6,550 seems like a big gap in your Medicare coverage, it’s not as bad as it used to be. You’re actually getting more coverage than it sounds like.

Choose A Plan To Cover Your Medicare Gap

In this article, we’ve reviewed the various gaps in Medicare. We went into the specifics of the Part A and Part B out of pocket costs. We also reviewed how people use Medicare Advantage, Medicare Supplement, and Prescription Drug plans to close, or reduce these Medicare gaps.

If you know you need to do something about your Medicare coverage, reach out to me for a free, no-obligation consultation. We’ll review your needs, and the plans available in your area. We can find you a plan, and get you enrolled 100% online, over the phone, and by email.
Give me a call or text today to get started. What do you think? What kind of plan are you using to close the Medicare gaps in coverage? Let me know in the comments, or tell me what other topics you’d like to see articles on.