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Medicare: Watch Your Back

Of interest: When you hit Medicare age, you will be shuttled into what looks like a single-payer system. But bear in mind: it’s NOT a single-payer system. It’s really a two- or three-payer system.

SDXB’s lifelong friend is dying of prostate cancer, a condition he’s been struggling with for several years. Recently he told SDXB that the costs he’s racked up will pauperize his widow. At one point, a hospital demanded they disgorge $9,000 up front, before he could be admitted for treatment.

That may be because he doesn’t have so-called “Medigap” insurance: a supplemental policy that picks up the costs Medicare won’t cover. Possibly, too, his prescription drugs have dropped him into the so-called “doughnut hole,” in which the victim of a serious illness has to cover Rx costs out of pocket after they hit $3,300 and until they reach an astronomically high ceiling.

Traditional Medicare, the safest option because it allows you to choose the doctors you will go to rather than limiting you to an HMO’s network, covers only 80% of most bills. A stay in a hospital can rack up tens or even hundreds of thousands of dollars in medical bills.

In the US, costs for treating major ailments vary by region. Rescuing you from a heart attack, for example, can cost as much as $92,000. Folks…20 percent of $92,000 is $18,400! Not many of us happen to have that laying around the house. And acute costs may be just the beginning. Treatment for most conditions of old age goes on and on and interminably on.

If you select traditional Medicare (Part A comes with the 65+ territory; the optional Part B covers doctor’s visits and outpatient experiences), you will also need to buy a couple of other policies if you want to be fully covered. These include a Medicare supplement policy (often called “Medigap”), which picks up the 20% that Medicare doesn’t cover, and a Part D policy to (partially) cover prescription drugs. These are supplied by private insurance companies, not by the government program called Medicare.

So now we have not one payer, not two payers, but three payers.

Yes. You can opt out of buying Part B, a Medigap policy, and/or Part D. But you do so at your extreme peril.

So, those who elect “traditional” Medicare so as to preserve their right to see a doctor of their own choice and who wish to be fully covered will end up with three-provider coverage: the U.S. government, a large corporation selling Medicare supplements, and another large corporation selling prescription drug coverage.

An alternative is to buy a Medicare Advantage plan, which is your basic HMO or PPO designed to collect your Medicare benefits in exchange for rationing your care. Medicare Advantage insurers usually sweeten the deal with dental and optometry benefits, which make those plans look more attractive to the unwary. Some, but not all, Advantage plans also include coverage for prescription drugs.

Does a Medicare Advantage plan keep costs down? Maybe; maybe not. Depends on the plan and the circumstances. In 2015, for example, almost half of these plans imposed limits on prescription drug coverage above $5,000.  For a victim of prostate cancer — just as an example — an androgen receptor inhibitor can cost $8,862.

AARP tells us that by law, “all [Medicare Advantage] plans…have annual limits on out-of-pocket costs.” What is this limit? Unclear. Says the redoubtable lobbying group and insurance provider for the aged:

Additional out-of-pocket expenses associated with Medicare Advantage plans depend on a variety of factors, including

• If the plan covers part of or all of your Part B monthly premium
• How much you pay for each service or health visit (copayment and/or coinsurance)
• Whether the plan has a yearly deductible that you must meet before it provides coverage
• What types of services you require and how often you require them
• Whether you join a plan with additional benefits such as vision, dental, or prescription drug coverage
• How much the plan’s maximum out-of-pocket limit is for medical services
• Whether you receive care from in-network health care providers

Some plans charge yearly deductibles. Some do not. Some plans charge copays for some benefits and services, and all Medicare Advantage plans are allowed to set their own coinsurance percentages and terms. In other words: good luck with that!

Only about 82 percent of Advantage plans cover Rx drugs. For some plans, your monthly premium may exceed the amount you’d pay for part D. Original Medicare has no out-of-pocket maximum. Unless you have Medigap coverage, you’ll keep paying for some part of as you use them. Medicare Advantage plans, by law, have an out-of-pocket maximum of no more than $6,700 per year. Once you hit that limit, the plan pays for all covered expenses.

And by the way, if you’re in a Medicare Advantage Plan that includes drug coverage, you must accept its terms for prescription drug coverage. Dare to join a Medicare prescription drug plan, and you’ll be expelled from your Medicare Advantage Plan and returned to traditional Medicare.

So how is SDXB’s buddy going broke despite a federal plan designed to protect the elderly from exactly that? Evidently he has traditional Medicare without a Medigap policy, or else he has a Medicare Advantage plan that doesn’t cover drugs and he failed to get a Medicare Part D (prescription drugs) plan.

The whole program is tricky, complicated, and loaded with land mines. You have to study it carefully and understand exactly what you’re doing — no small order! — to protect yourself from impoverishment should you face a medical problem that doesn’t carry you away quickly.

10 thoughts on “Medicare: Watch Your Back”

  1. Thank you for attacking this subject Funny….My Dad just passed after fighting lung cancer for 3.5 years. And this “Medicare calculus” will drive you crazy. And all this was presented to my folks in their 80’s who couldn’t tell you what they had for dinner last night let alone the limits on their “gap insurance” as well as prescription drug coverage limits. I used to be considered just about “half-way smart” and I find it challenging. The bills come in and the numbers make no sense and do not match up. Add to this that Medicare takes a loooong time to pay the bill and the gap insurance can’t pay until they get an outstanding balance…which triggers threatening letters…all while the loved one’s health declines. It’s sad. As if this isn’t crazy enough take a “peak” at Obamacare offerings in your neighborhood for the “working folks”. I did just that at the urging of a friend who claims to have gotten a sizeable subsidy. Met not once but twice with a “navigator” and DID read the fine print. The deductibles on these policies are crazy…one was over $13K yet the premium was still almost $900/month. Who has $13K sitting around to cover a deductible…every year? And the “fuzzy/gray area” of subsidies made me sit tight on my old “grandfathered plan”. Sorry to hear about SDXB’s friend. They need to concentrate on his wife, as his passing will be “life changing” for her. I’m learning this the hard way…..

    • The new Obamacare policies are scary. By involving the insurance companies (IMHO) the law seems to have given them free rein to gouge consumers. A thirteen THOUSAND-dollar deductible? That’s insane. You might as well be uninsured. How much was the premium for this make-believe policy?

      Medicare smothers you with paperwork, most of it incomprehensible. I suppose you could figure it out if you had all your marbles intact (by my age, most of us don’t) and you had nothing but time to sit at a desk and pore over the paper. When you’ve only got so many more years, months, or days left, nooo, that is NOT how you want to spend what remains of your time.

      The Mayo says it “does not accept Medicare assignment.” But in fact they do, by law, accept direct Medicare payments for hospitalization and certain other items. What their policy comes down to is simply that “does not accept Medicare assignment” means “does not accept direct-deposit from Medicare or Medigap insurers.” The Mayo bills Medicare and your Medigap and these worthies send YOU payment, which you are expected to forward to the provider.

      This means you receive an unending flurry of small and large checks — $50 here, $1500 there — that goes on and on and on and on and on. There seems to be no end to the flow of ditzy checks. I then have to deposit these checks and then charge or mail a check to the Mayo in those amounts. It’s an enormous waste of my time and a ridiculously inefficient way to cover a patient’s medical bills.

      I’ve given up even looking at the pounds of paper that come pouring into the house. I just stick each piece of paper in a (fat!!) file folder and hope to god the bills get paid. So far, eventually they have gotten paid. In fact, Medicare has sent me about $1100 more than the Mayo has billed me, meaning, I suppose, that eventually the Mayo will get around to updating its bills.

      The last time this happened, after all the dust settled I ended up overpaying the Mayo by about $23, which they refused to refund, saying they would apply it to future bills. Huh?

      So this time I set up a separate savings account and as checks from Medicare and Medigap come in, I stash them in there and just wait until a statement from the Mayo arrives. It’s an enormous hassle. But at least it DOES pay the bills without some “deductible” from a Monty Python Show…

      • Wait…I didn’t read your whole comment carefully. $900 a month for a policy with a $13,000 deductible? That can’t possibly be right! How many people are covered? If it was a family of 6, maybe… Who would sign up for such a thing? At $900, it would be cheaper to accept the fine and go bare.

      • My experience with the ACA was not good. I researched for about a year. The plan I speak of was a bit deceptive in that it was touted as having a $6500 deductible per person BUT both of us would have to reach $13K altogether. in expenditures before coverage kicked in. After the $13K was spent there was no out of pocket and coverage was 100%. The cost was $900 before subsidies. And the navigator was a bit uncertain with the subsidies based on my income source. I chose to stay put

  2. My mom is going through this now. She is opting for medigap because if you decline it when you’re first eligible, you have to go through a long insurance underwriting application process in case of any new pre existing conditions.

    She is going with a local Medicare plan (cheaper, but she has to use local docs–does cover emergencies out of area) plus a drug plan and a medigap. All in all, her monthly bills are going to be around $250 a month, and that doesn’t include her non generic med costs. Medicare isn’t cheap! She’s lucky that she has a small pension that’ll easily cover all medical costs so she doesn’t have to eat into SS income for health costs. But not everyone has that option which is scary.

    • When you factor in the $200/month for hospitalization, which is automatically deducted from your Social Security check, the total does seem pretty stiff. It’s more than what I paid when I was working at the Great Desert University for a top-of-the-line policy that covered just about everything, including meds, and (toward the end there) wildly more than the state-sponsored PPO that did exactly the same for about $70 a month.

      However, my understanding is that under the Affordable Care Act, that plan is no longer available and the new plans are insanely expensive.

      Medical care in general is not cheap, at least not in this country.

      • It is crazy….and then when you take a look at the invoices, see the amount the Doc’s bill for and what Medicare pays….it’s breath taking. It would be funny if it wasn’t so sad. I seem to remember my Dad’s cardiologist billing $600….and Medicare agreeing to pay less than $100 and the gap insurance paid like $18. I agree Medicare is no longer the deal it once was. The health system is a mess BUT I have no idea how to fix it…..

  3. This is an interesting article, but my Medicare experience is quite different. My husband and I each have just under $100 monthly taken from our Social Security. We pay just under $100 each for our Medicare Advantage plan. We have no deductible, but we do pay a co-pay for care. We have Part D. I have a very expensive prescription which sends me into the doughnut hole each winter, but I still don’t pay the entire amount-just a little over 1/3. When I worked, my employer paid most of my insurance premium, but when I retired I could not afford anything close to the premium he paid. We are in our 80’s now and fortunately can still manage to navigate the insurance maze. It really helps that we have a Medicare Advantage plan – we receive a monthly statement detailing what has been paid to whom, but we never receive anything at all from Medicare. Finally, I think that medical expenses and insurance rates vary according to where you live.

    • This is extremely good news.

      I think you came in to Medicare about 15 years ahead of me; probably the cost was a little lower then. They’ve been raising the prices in tiny increments, often applied to new enrollees.

      And yes…from what the pharmacists here report (they have a lot of information from Medicare that they dispense to people who know to ask about it), the price of Medigap varies not only by the company but by the part of the country and even the part of the state. Same is true of Medicare Advantage programs.

      Boy, would it be nice to have someone run interference with all that paperwork! That alone would be worth a premium! 😀

      Personally, I’m HMO-averse, having seen what happened to my mother in a Blue Cross HMO. It was truly hideous and unconscionable — she suffered terribly and died horribly because of the cost-cutting measures inherent to HMOs. She still would have died had we been able to take her to a doctor of our choice who would not have denied anything was wrong with her, but with ordinary palliative care (and common decency…) she wouldn’t have suffered the way she did.

      But that’s my quirk, based solely on my own experience. Others evidently have better luck — many people sing the praises of Advantage programs.

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