Do you know how much a hospital stay will cost you under Medicare? Hospital benefits are provided by Medicare Part A. Costs for hospitalization can come in big chunks, and you’ll have to pay some of these out of pocket. Read on to find out more about Medicare Part A eligibility, coverage, and requirements for 2022 and beyond.
In order to understand how much you’ll end up paying for coverage, and how a private Medicare plan can help you save money, it’s important to understand how the Medicare program as a whole was designed.
Medicare became active in 1966 as part of President Lyndon Johnson’s Great Society legislative agenda. The legal bill that created Original Medicare split the program into two components: Part A, which provides hospital benefits, and Part B, which provides outpatient medical benefits.
By providing coverage in two separate “parts,” Medicare coverage was created to be flexible and customizable. In the past, many retirees received some element of health insurance coverage from their employer. In this case, they might not have needed Part B medical benefits. However, the “major medical” portion of Part A would enhance their retiree coverage. Or vice versa; some retirees might only receive major medical coverage from their employer, and they therefore needed the medical coverage from Part B. In this way, Original Medicare provides some flexibility and is not a one-size-fits-all program.
Importantly, no element of the program was designed to be free. Instead, American’s were expected to pay for part of the costs for coverage, in the form of taxes and premiums, and for the costs of service, in the form of deductibles, co-payments, and co-insurance. Understanding that you will be expected to pay out of pocket in Medicare will help shape your expectations for coverage and also help you choose the right private insurance option for your circumstances.
Medicare was designed to help older Americans (primarily retirees) access affordable (not free) health insurance and health care. As such, age is an important component of eligibility. Generally speaking, you won’t enter Medicare until you reach 65 years of age. However, there are a few ways that you might enter at an earlier age:
While most people move into Medicare when they turn 65, you’re normally not required to do so. If you have health insurance coverage from your employer (or your spouse’s employer), you can elect to delay taking Part B and stay on your employer plan. However, this is only possible if your employer has at least 20 employees.
When you delay taking Part B like this, you’re allowed to enroll when your employment ends and you lose your coverage.
So far, we’ve discussed the triggers for your entry into Medicare (age, illness, or disability). The question remains, though: who is eligible for Medicare? The answer is very simple. You are eligible to participate in Medicare if you meet one of these two criteria:
If you meet either of these criteria, you will be able to enter Medicare Part A and B when you meet the entry requirements we discussed above.
Since Part A provides hospital insurance, it’s no surprise that it would cover you in institutional settings like a hospital. Medicare Part A covers more than just hospitalization, though. With Part A, you’re covered for:
This is the bread and butter of Part A; hospital coverage. If you’re admitted to the hospital, Part A will be there to help you pay for your stay. Part A will cover you in a variety of hospital settings, including:
Part A will pay for the costs of your stay in the hospital, including:
Medicare will pay for your hospice care if you’ve made the decision to discontinue medical treatment intended to cure a terminal illness. Part A will help pay for the costs related to hospice in either an institutional setting or in your home.
Even though you’ll no longer be receiving medical treatment relating to the cure of your illness, you’re still entitled to medical care for other medical needs while you’re on hospice. Part A will cover you for these services while you’re in hospice:
There are many other services covered under hospice care. Part A will even pay for respite care; you can stay in an inpatient facility so that your care takers can have a respite from providing care for you.
You can receive your healthcare from Part A in your own home if you meet all of these requirements:
Most of the care you’ll receive is for physical or occupational therapy, but you can also receive speech-language therapy.
Skilled nursing care and nursing home care are covered in exactly the same way, so we’ll discuss them together. The first thing to know is that Medicare won’t provide any coverage for Long Term Care - care for help with Activities of Daily Living. This is generally tasks like getting help dressing, using the toilet, feeding yourself, and that kind of thing. Medicare won’t cover this at all. Of course, these are the kinds of services you’d receive in a nursing home. So, when does Medicare work in a nursing home?
Medicare Part A will cover medical treatment that you receive while you’re in a nursing home. Part A will also cover your stay in a skilled nursing facility while you recover from medical treatment. A classic example would be suffering a hip injury. You have surgery to repair it, but you’re not able to go home right away; you need rehabilitation care. But, since you also aren’t critically ill or in danger, you don’t need to be in the hospital, so you’re admitted to a skilled nursing facility. Part A will cover your expenses during your stay.
We’ve already mentioned that you’re expected to help pay for the cost of your Part A benefits. These costs come in two distinct forms:
Since Part A coverage isn’t free, you’re expected to pay for the right to use it. Most people pay for their Part A coverage during their working career through payroll tax deductions. Every time you receive a paycheck you have a small tax withheld for your Medicare coverage. Your employer matches the tax amounts that you pay. If you’re self-employed, you pay all the Medicare tax by yourself.
Just like for Social Security eligibility, you must pay these Medicare taxes for a certain period of time to qualify for premium-free Part A coverage. Usually this works out to ten years of full-time work. Obviously most people work for more than ten years, so most Americans qualify for premium-free coverage.
Premium-free simply means that you don’t pay a monthly premium for Part A coverage when you enter Medicare at 65 (or earlier, if you meet the requirements). But, since you’ve paid taxes for this coverage all of your working life, you’re simply pre-funding your coverage.
If you don’t work long enough to get premium-free coverage, you can still qualify if you’re married to someone who did qualify for it, even if your spouse has passed away, or if you’re divorced, as long as you haven’t re-married.
If you don’t qualify for premium-free Medicare Part A based on your work history or marriage, you can choose to enroll anyway and pay a monthly premium for your coverage. For 2022, there are two tiers of premiums:
The premium amount you pay is based on your work and payroll tax history.
The other kinds of costs you’ll face relate to actually using your Part A benefits. These costs include:
Before Medicare starts helping with the cost of Part A services, you’ll have to meet the deductible. For 2022, the Medicare Part A deductible is $1,556 . Once you pay the deductible, Medicare will cover the costs of your care, although for hospice care, you may be required to pay 5% co-insurance for various services. For hospitalization and skilled nursing care, Medicare will pay the rest of your institutional costs:
If your medical condition requires you to stay longer, you’ll begin paying daily co-payments:
For even longer stays, you will pay a daily co-payment of $778 for hospital stays longer than 90 days, as long as you have lifetime reserve days available. If you need more than 100 days in skilled nursing, you’ll have to pay full price because there are no lifetime reserve days for skilled nursing.
One tricky aspect of the cost for Part A care is that you can pay the deductible more than once in a year. This would happen if you need Part A services more than 60 days apart for unrelated medical conditions. While this is rare, it would technically be possible to pay the Part A deductible as many as 6 times in one calendar year.
This brings up an important point about Medicare. There is no limit to how much you can spend in any one year, unlike most other health insurance you’ve had during your life. This fact is a cause of concern to people, and one of the chief reasons people choose to use a private Medicare Insurance plan.
Medicare Supplement Insurance is one of the most popular options used to lower people’s out of pocket spending on Medicare services and procedures. Medicare Supplement Insurance is designed to help plug, or cover, some of the gaps in Original Medicare (the costs you’re expected to pay out of pocket). Because of this, it’s often referred to as Medigap coverage.
Medigap plans are issued by private insurance companies. These policies are designed to supplement your Original Medicare benefits. They do this by functioning as a secondary payer. When you use your Medicare benefits, Medigap plans will cover the amounts that Medicare doesn’t.
Medicare Supplement Insurance is issued in ten standardized “Plans” and each plan is tagged by letter, so the available plans are: A, B, C, D, F, G, K, L, M, and N. There are also high deductible versions of both Plans F and G. The benefits provided by each of these plans are slightly different. The benefits of each plan are also standardized, which means that the coverage for each plan (Plan A, for example) is the same across the nation, regardless of insurance company.
Medigap plans are designed to help lower your out of pocket costs for Medicare Part A and B. When it comes to Part A expenses, five of the ten Medigap plans provide full coverage of the Part A deductible. This means that if you’re admitted to the hospital or skilled nursing facility, you won’t be responsible for paying any part of the deductible if you have one of those five Medigap plans. The other five Medigap plans have varying levels of coverage for the Part A deductible:
All ten of the standardized Medigap plans will pay 100% of your daily co-insurance costs if you have longer hospital or skilled nursing care stays. In fact, all of the Medigap plans will provide up to 365 extra days of hospital coverage beyond what Medicare Part A typically covers.
The key to optimizing your coverage is to pick the standardized Medigap plan that covers the mix of costs that matter most to you. If you’re worried about hospitalization costs, you’ll want to pick one of the five plans that cover 100% of the Part A deductible (Plans B, C, F, G, and N).
On the other hand, if hospital costs are not very worrying to you, you may want to choose one of the plans with lower coverage of the deductible. Since there are so many standardized choices available, you’ll be able to find the right mix of coverage for your personal situation.
Once you know which standardized plan you need, you’ll want to compare premium costs among all the insurance companies in your area. Since the coverage is standardized, you can take advantage of price competition and choose a Medicare Supplement plan with an attractively low rate. If you want help doing this, you should considering working with a licensed health insurance agent.
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