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Understanding the Gap in Original Medicare and Choosing a Supplement

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Because of the Baby Boom following World War 2, 10,000 people across the United States turn 65 every day. Reaching that milestone birthday often means signing up for Medicare. Established in 1965, Original Medicare provides hospital and medical insurance for eligible Americans. There are gaps that exist in Original Medicare coverage that can cause hundreds or thousands of dollars of out of pocket expenses for beneficiaries. Most folks fill in the gaps with an additional insurance policy, but many still do not understand exactly how their insurance works.

First, it is important to understand the gaps in Original Medicare. Part A of Medicare is provided to eligible Americans at no cost and covers inpatient hospital stays. Inpatient hospital means coverage for the room, bed, meals, etc. when someone is admitted as an inpatient, not just under observational care, in a hospital. It does not cover seeing the doctor while in the hospital or outpatient hospital procedures. Part A also covers hospice care, some skilled nursing, and some home health care.

With Original Medicare, a beneficiary can be subject to bills of hundreds or thousands of dollars for a stay in the hospital. When admitted under Part A of Medicare, first a patient is responsible for a deductible. This deductible is subject to change, generally an increase, every year and is payable per benefit period, subject to four benefit periods per year. The deductible covers up to 60 days in the hospital. If the hospital stay lasts longer than 60 days, a per-day co-payment is required for the next 30 days. If the hospital stay lasts longer than 90 days, a Medicare beneficiary is eligible for 60 Lifetime Reserve days. These days also have a per-day co-payment and can only be used once in a beneficiary's lifetime. They do not regenerate on a yearly basis.

Most folks, approximately 70%, will require post-hospital recovery care in their lifetime. Medicare has built in some coverage for skilled nursing care, but only about 4% of people will qualify for this care in their lifetime. Original Medicare requires a beneficiary spend 4 days and 3 days in the hospital, require skilled nursing care seven days per week, need skilled care, not just intermediate or custodial care, and have a doctor prescribe the care. If all those conditions are met, Part A of Original Medicare covers 100% of the first 20 days of skilled nursing care and then an additional 80 days of coverage after a per-day co-payment is paid by the beneficiary.

Medicare Part B provides coverage for doctors services, outpatient hospital procedures, and medical services and supplies. There is a monthly premium for coverage under Medicare Part B and can vary based on income. Part B has an annual deductible that is subject to change every year. Once that deductible is satisfied, Part B picks up 80% of additional expenses, leaving 20% for the beneficiary to cover. There is no cap or ceiling on the amount that a Medicare beneficiary can spend each year in that 20%. It is very important to understand these gaps before looking to fill them with a secondary plan.

Once these gaps are clear, next you must consider the level of coverage you require. First, look at the coverage you had while working. What did you like about it and what did you dislike? Were there networks of doctors that you could visits and others that you could not? Did you require referrals to see specialists and were they hard to obtain? Was there a deductible to pay before coverage kicked in? Was there cost sharing to pay after the deductible? Did your coverage change from year to year? Especially since the passing of the Affordable Care Act, most folks have seen significant changes to their health insurance coverages and out of pocket expenses.

Another important consideration is your health and your family health history. There are no health questions for folks that are turning 65 and taking part B of Medicare for the first time. No pre-existing conditions can disqualify someone during their guaranteed issue enrollment period. So people with significant health issues may consider supplements that provide more coverage in exchange for a higher premium. People with a good health history may opt for a lower premium and higher cost sharing on the back end if problems arise later. When choosing a supplement, it's important to look for a plan you want to keep for life because after the initial enrollment period, there can be health questions asked to switch plans.

It is also important to research the companies you are considering. While plans are federally mandated and required to offer specified coverage without changes, the companies offering the plans can differ greatly, not just in the premium you pay to the company but in the service you receive. With 10,000 Americans turning 65 every day across America, new companies are trying to capitalize on a prime opportunity. Look for a company with longevity, a history of paying claims on time, and no sanctions from CMS, the Center for Medicare and Medicaid Services. In the doctors office, billing specialists can provide some good directions on companies that pay their bills on time without hassles. Ask companies what kind of customer service you can expect – will you have a personal agent or a 1-800 number to call with questions or concerns. What care do you want to receive from your company?

There are many resources available to folks turning 65, it is important to research all your options before making a decision. There is no one-size-fits-all best plan when it comes to filling in the gaps in Original Medicare and by following the advice listed above, you can be on a good start to finding the best-for-you plan.

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