Josh Mungavin, CFP®
Principal, Wealth Manager
Unforeseen healthcare costs can be one of the most destructive forces to an individual’s financial and retirement plan. With appropriate forethought, one may reduce the risk of the financial devastation that a large health care bill can cause. This article discusses the steps one should take to compare Medicare plans and some of the basic plan details with which one will need to be familiar in order to make an informed decision.
Please send this article out to friends and family so that they can forward it to the people in their lives that need this information. The following will be useful to anyone who is over 60, disabled, has kidney failure, or Lou Gehrig’s disease.
Medicare Part A
Medicare Part A is the “Hospital Insurance” portion of Medicare. For most people who have paid Medicare taxes throughout their working life, there is no premium for Medicare Part A coverage. If you do not qualify for premium free Medicare Part A it can be purchased for $426 per month (as of 2014). If you do have to pay and do not sign up when you are first eligible you will have to pay a 10% premium above your normal monthly payment for twice the number of years you have been eligible for Medicare.
Benefit Coverage
Hospital Inpatient Stays – Medicare Part A covers inpatient hospital overnight stays, including a semiprivate room, food, tests, blood (after you have paid for the first 3 units per calendar year), supplies considered medically necessary to treat a disease or condition, and doctor’s fees. For hospital stays Medicare pays covered costs as follows:
- All costs for the first 60 days after the deductible is met ($1,216 for 2014).
- All costs after a co-payment ($304 per day for 2014) for days 61-90.
- All costs after a co-payment ($608 per day for 2014) for days 91-150 if the patient has not used any of their Lifetime Reserve Days.
- No costs after 150 days.
Each person has 60 days categorized as Lifetime Reserve Days to provide some coverage if hospital stays should exceed 90 days; once the Lifetime Reserve Days have been used Medicare will limit hospital stay coverage to 90 days.
Skilled Nursing Facility Stays – Even though Medicare Part A is a “Hospital Insurance,” there are a few very notable things that are excluded such as custodial, non-skilled care, long term care and activities of daily living. It can, however, help pay for stays up to 100 days in a nursing facility if certain criteria are met:
- You must have been formally admitted to the hospital within the last 30 days for at least 3 days and nights (not counting the discharge date).
- The reason for the nursing facility stay must correspond to the reason for hospitalization or it must be a condition diagnosed at the hospital.
- You must require either five-day or six-day per week rehabilitation or seven-day per week skilled care.
- The care provided in the nursing facility must require skilled labor and the facility must be Medicare-certified.
Medicare will pay the first 20 days of a skilled nursing facility stay in full but the remaining 80 days require a co-payment of $152 per day (as of 2014). Medicare Part A’s 100-day clock resets after you go 60 days without receiving facility-based, skilled nursing services.
Home Health Care – Medicare Part A provides for some home health care under limited circumstances. A visit can be from a nurse, physical therapist, occupational therapist, speech therapist, or four hours from a home health aide. Medicare will also pay 80% of the Medicare-approved amount for durable medical equipment. Your doctor and home health team must review your plan of care as often as necessary, but at least once every 60 days.
In order to qualify for home health care coverage you must meet all the following conditions:
- You must be under the care of a doctor, and you must be getting services under a plan of care established and reviewed regularly by a doctor.
- You must need, and a doctor must certify that you need, one or more of the following.
- Intermittent skilled nursing care
- Physical therapy
- Speech-language pathology services
- Continued occupational therapy
- The home health agency caring for you must be approved by Medicare.
- You must be homebound, and a doctor must certify that you’re homebound. To be homebound means the following:
- Leaving your home isn’t recommended because of your condition.
- Your condition keeps you from leaving home without help (such as using a wheelchair or walker, needing special transportation, or getting help from another person).
- Leaving home takes a considerable and taxing effort.
Medicare pays your Medicare-certified home health agency one payment for covered services you get during a 60-day period. This 60-day period is called an “episode of care.” The payment is based on your condition and care needs.
Long-Term Care Hospitals – Medicare will cover some benefits you receive if you have to into a long term care hospital. Long term care hospitals specialize in treating patients who have serious conditions but potentially can improve and return to their homes. Under this arrangement eligible participants would be responsible for paying a deductible for the benefit period.
Under Medicare, you’re only responsible for one deductible for any benefit period. This applies whether you’re in an acute care hospital or a long-term care hospital.
You don’t have to pay a second deductible for your care in a long-term care hospital if:
- You’re transferred to a long-term care hospital directly from an acute care hospital
- You’re admitted to a long-term care hospital within 60 days of being discharged from an inpatient hospital stay
If you’re admitted directly to the long-term care hospital more than 60 days after any previous hospital stay, you pay the same deductibles and coinsurance as you would if you were being admitted to an acute care hospital.
Hospice Care – Medicare will cover some hospice benefits for those who are terminally ill. This coverage is normally provided in the patient’s home and does not include the cost of room and board where the patient lives, but if the normal caregiver needs a break, a hospice facility will be 95% paid for by Medicare. Medicare hospice care also provides outpatient prescription drug benefits for pain and symptom management with a $5 co-payment.
Where to Go For Extra Information
The Medicare Handbook http://medicare.gov/publications/pubs/pdf/10050.pdf
New Enrollee Checklist http://www.medicare.gov/welcometomedicare/checklist.html
The State Health Insurance Assistance Program (SHIP) is funded through grants to help provide information, counseling, and assistance to Medicare beneficiaries and their families with questions related to Medicare, Medigap, Medicare Advantage, Medicare Savings programs, Medicaid, Long Term Care Insurance, and other health insurance issues.
Your State Department of Insurance can be a good source of information with regard to Medicare policies available in your area.
Medicare provides informational resources online at www.Medicare.gov or over the phone at (800) 633-4227.
National PACE Association www.npaonline.org.
The Social Security Administration provides information on Extra Help www.socialsecurity.gov/extrahelp or by phone at (800) 772-1213.
Check out our next blog post for more on Medicare. As always feel free to contact Josh Mungavin with any questions by phone 305.448.8882 or email: JMungavin@ek-ff.com
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