Medicare: Compare Costs and Coverage

Jolie

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A Closer Look at Medicare Part A


Your share of Part A costs


Part A pays most of the cost of hospital stays lasting up to 60 days. But if you have a very long stay, you should expect to pay a large share of the cost.

What’s my share?


In Part A, you’ll pay a deductible for each “benefit period.” You’ll also pay a daily copayment after the 60th day of a long hospital stay.

How does this work?


A benefit period begins when you enter the hospital and ends when you have been out of the hospital for 60 days in a row. If you’re in and out of the hospital several times within a few weeks for the same condition, that’s still one benefit period.

In 2010, the deductible is $1,100. In addition, if your hospital stay lasts longer than 60 days in a benefit period, you’ll pay a substantial copayment for each day between 61 and 150.

Part A limits the number of long hospital stays (stays of more than 90 days) it will pay for. When you join Part A, you’ll get a “lifetime reserve” of 60 days. Each time you stay in a hospital more than 90 days, you can use lifetime reserve days to cover the number of days you stay beyond 90. Once you’ve used up your lifetime reserve, Part A will pay only for the first 90 days of any hospital stay. And that’s subject to the normal deductibles and copayments.

After 90 days, you’re responsible for paying for your own care. Part A also limits the number of days in a psychiatric hospital it will pay for in your lifetime.
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A Closer Look at Medicare Part B


Your share of Part B costs.


In Part B, you’ll pay a share of the cost of your care as you receive it. You’ll pay the same share whether you need a little care or a lot.

You’ll pay your share as a deductible, copayments, and coinsurance. In 2010, your Part B deductible is $155 per year. For coinsurance, in general, Part B pays 80 percent of the cost and you pay the remaining 20 percent.

There are no limits on your out-of-pocket spending for cost sharing in Part B. If you have a chronic condition that requires a lot of care, or you have a serious illness, your cost-sharing amounts may be substantial.

What are “usual and customary” fees?


The “Medicare-approved” amount for a service is usually different from the amount a health care provider would charge a non-Medicare patient for the same service. That amount is often referred to as the provider’s “usual and customary” fee. A provider’s invoice may show the usual and customary fee, but that amount is not used to calculate the amounts either you or Medicare will pay.
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A Closer Look at Medicare Part C


In Medicare Advantage plans, the company that offers the plan sets the premium and decides on the cost sharing. You’ll need to look at the details of each plan you’re considering.

Your share of Part C costs.


Most Medicare Advantage plans use a combination of deductibles, coinsurance, and copayments to share the costs with you. These cost-sharing arrangements will usually apply to all of the services the plan covers—hospital stays, doctor’s visits, drug coverage if you have it, and so on.

How does this work?


You will need to investigate the details of a plan to get the full story on its cost sharing. Plans vary widely, and their cost sharing usually works quite differently from the cost sharing used in Medicare Parts A and B.

For example, in Part A, your cost sharing for a five-day hospital stay would be your $1,100 (2010) deductible. In a Medicare Advantage plan, you might pay a $150 per day copayment for each day in the hospital. This is just an example, and each plan may vary.

Out-of-pocket limits.


Limits on your cost sharing are another way Medicare Advantage plans may differ from Part A and Part B. In Part A and Part B, there are no limits on your out-of-pocket spending for cost sharing. And in some situations, like extremely long hospital stays, your coverage under Part A ends entirely, and you become responsible for paying all of your own costs.

In contrast, some (but not all) Medicare Advantage plans offer a feature that caps your out-of-pocket spending for cost sharing like copayments and deductibles in any given year. A plan that offers this feature may limit your out-of-pocket spending for cost sharing to $3,000, for example.

Drug cost sharing


Cost sharing for drug coverage that is built into Medicare Advantage plans generally works in ways that are similar to cost sharing in standalone Part D plans.

TIP


These costs vary from plan to plan. Shop around for a plan that best fits your needs.
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A Closer Look at Medicare Part D


In Part D, you’ll pay a share of the cost of the medications you take. Each plan that provides drug coverage, whether it’s a standalone plan or a Medicare Advantage plan with drug coverage built in, will include cost sharing.

Your share of Part D costs.


Each plan that provides drug coverage will share costs a little differently. Look at the details of a plan you’re interested in to see how its cost sharing works.

Here’s an example.

Example: plan with $0 deductible.


STEP 1


You share costs with the plan, usually in the form of copayments, until your combined total hits $2,830 (2010). This figure can vary by plan. This step is sometimes called the “initial coverage period.”
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STEP 2


You pay 100 percent of the plan’s discounted drug costs until your yearly out-of-pocket drug costs hit $4,550 (2010) (the “coverage gap” or “doughnut hole”). Plan pays $0.
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STEP 3


You pay a small copay or coinsurance amount on all drugs until the end of the year. Plan pays the rest (catastrophic coverage).
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How does this work?


In Part D, there is no “Medicare-approved” price. Each company negotiates its own prices with pharmacies and drug manufacturers. Your copayments and coinsurance are calculated using the plan’s price for the drug and guidelines set by Medicare. The price you pay is usually discounted because you’re part of a big group purchase.

Prescription drug coverage also typically uses cost sharing in which you are required to pay 100 percent of the plan’s price for the drug, and the plan does not share your costs, for a certain period. This is called the “coverage gap” or “doughnut hole.”

Getting the most from a Part D plan.


You can find a Part D plan that’s right for you if you shop carefully. It’s easy to focus only on your premium amount, but there are other things to look at when you choose a plan. For example, you should also look at your estimated out-of-pocket spending. That depends on the plan’s cost sharing (deductibles, copayments, and coinsurance) and the plan’s prices for the drugs you take.

You should also check the plan’s formulary to see if it covers the drugs you take. What’s a formulary? It’s a list of the drugs a plan covers. Each Part D plan has its own formulary.

Before you choose a plan, look at the plan’s formulary to see if it covers the drugs you take. If it doesn’t, another plan that does cover the drugs is probably a better fit.

Tiered formulary.


You can often save money on your drugs if you remember there’s usually more than one drug available to treat a specific condition. Many drug plans have what’s called a “tiered formulary.” That means the plan has divided the drugs in its formulary into groups, and some groups will cost you more money than others. For example, a generic version of a drug may have a lower copayment than a brand-name version of the same drug.

Step therapy.


Some plans with tiered formularies have special requirements for certain drugs. One of these requirements is called “step therapy.” With step therapy, you must first try a less expensive drug to see if it works for you. You may “step up” to a more expensive drug that treats the same condition only if you and your doctor can show that the less expensive drug didn’t work for you.

What if my drugs aren’t on the formulary?


Sometimes you can’t find a plan that includes all of your drugs. Or your plan may change its formulary to exclude one of your drugs. A plan can change its formulary after giving you notice, but a change that excludes a drug you are already taking usually will not affect you until the next year.

When your drugs aren’t on the formulary, talk to your doctor. Your doctor may be able to help you find another drug that does the same thing as the drug you are currently taking. Or your doctor may be able to request your plan make an exception for you. Plans have an exceptions process that allows doctors to request a specific drug that’s not on the formulary when there’s proof that no other drug is effective.
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A Closer Look at Medigap Insurance


Shopping for a Medigap policy


It can pay to shop around for a Medigap policy. Even though the federal government defines standard benefits for the plans, prices vary among companies. You may find that two companies charge very different prices, or premiums, for identical coverage. Several factors can affect your premium. First, prices reflect marketplace conditions. As health care costs in your state rise, you may see increases in your Medigap premium.

Second, Medigap insurers use several different methods of pricing their policies. This is called “rating.” Different rating methods can affect your premium, too. To find out what plans are available to you, visit the Medicare website. Or you can call your state’s State Health Insurance Assistance Program (SHIP) to get a list of plans offered in your state. This program can also give you free counseling about choosing a Medigap policy.

Medigap policies are private insurance, and the companies that offer them are regulated by the state you live in. You can call the State Insurance Department in your state to find out more about a company that offers Medigap policies in your state.

How Medigap policies work.


Different plans, or types, of Medigap policies cover different types of costs. Let’s assume that Allan, Carlos, and Joseph are all 66 years old, and each has just had a heart attack.

Each of them uses Medicare Part A and Part B, plus a Medigap policy. All have already satisfied the Part B deductible for the year. Allan has Plan A, Carlos has Plan C, and Joseph has Plan J.

Cost sharing under Medicare Part A and Part B.


All three men spend 15 days in the hospital, followed by 22 days in a skilled nursing facility. After each gets home, he visits the doctor twice. The doctor doesn’t accept the assignment. Here’s the cost sharing for each, followed by examples showing what each plan covers. All of these examples use 2010 figures.

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