Skip to content

5 Tips for Calculating Out-of-Pocket Medicare Costs

Estimating your costs with Medicare is not always an easy thing to do. Between the parts of Medicare and your supplemental options, there are many things to know regarding your out-of-pocket expenses. Many people mistakenly think Medicare is free once they reach the age of 65 and they’re shocked to find out that not only do they have to pay a monthly premium, but Medicare only covers a certain amount of their services. This also means they might consider purchasing an additional plan to help lower their out-of-pocket costs.

As you begin your Medicare journey and learn more about the cost of Medicare, here are five tips you should consider as you calculate your out-of-pocket with Medicare.

Know how much Medicare will pay for Part A Services

Did you know your inpatient hospital costs, skilled nursing facility expenses, and hospice fall under Medicare Part A? Part A covers more than just your room and board when you’re an inpatient in the hospital. However, Medicare Part A doesn’t always cover your costs at 100%.

When you are first admitted as an inpatient, you must pay the Part A deductible of $1,556 this year. Once you reach that amount, Medicare Part A will cover all Part A costs for the first 60 days of your admission. After you’ve been there for 60 days, you will begin paying a daily copay of $389 in 2022 until day 91. On day 91, you start using your lifetime reserve days. You only have 60 lifetime reserve days, and you start paying $778 per day while you’re in the hospital when you use those days.

Part A deductible

The Part A deductible is per benefit period, not annual. A benefit period starts the day you are admitted to the hospital and ends when you have been discharged for 60 days. That means you could owe the Part A deductible multiple times during the year.

Know how much Part B pays

Your medical services such as doctor visits, physical therapy, durable medical equipment, surgeries, and more are covered by Medicare Part B. An important note to remember is that there is no cap on Part B expenses. Medicare Part B will pay 80% of the Medicare-approved cost for a service, and you are responsible for the 20% remaining balance. Since there is no cap, you will pay out 20% of the cost of all your services, no matter how expensive that gets.

But, before Medicare pays 80% of the cost, you must pay the annual deductible of $233 in 2022.

Understand what Medigap plans cover

As you may have realized, you are responsible for many out-of-pocket costs with Medicare. This is when a Medigap plan can help! Medigap plans are secondary insurance plans you purchase from a private insurance company. Rather than paying the 20% coinsurance and the deductibles, your Medigap plan would pay those for you.

You can choose from ten standardized plans, and each plan covers the Medicare costs differently. One of the most popular plans is Medigap Plan G. The only amount it doesn’t cover is the Part B deductible, but once you pay that, Plan G will cover all your other Part A and Part B costs for you.

Research Advantage plan details and maximum out-of-pocket limits

If you don’t choose a Medigap plan, you could choose a Medicare Advantage plan. Advantage plans are an alternative way to receive your Medicare Part A and Part B benefits. Instead of getting those benefits through the federal government, you would get them through the Advantage plan.

You must stay enrolled in Part A and Part B, but the plan will determine your cost-sharing. Your services will have a set copay or coinsurance amounts you would pay whenever you have that service. However, these plans provide a maximum out-of-pocket (MOOP) limit which helps cap your out-of-pocket expenses. Once you reach your plan’s MOOP, the plan will cover your costs 100% for the remaining of the year.

The cost-sharing amounts, MOOP, and premium of Advantage plans will vary depending on where you live.

Grasp the structure of Part D plans

Part D is a world of its own. It can be confusing and overwhelming and takes time to understand. One thing to ensure you know is the Part D structure. There are four stages of Part D plans.

The first stage is the deductible stage. In 2022, that deductible can be as high as $480. After that is met, you will move into the Initial Coverage stage. In that stage, you will pay either a copay or a coinsurance of the medication. After you reach $4,430 in 2022, you move into the coverage gap stage and pay 25% of the cost of all your drugs. Once your cost-sharing reaches $7,050, your cost-sharing drops down to 5% coinsurance. An important thing to know is there is no cap for Part D plans.

In summary

The best place to start is with the four parts of Medicare and the difference between Medigap and Medicare Advantage. Once you understand what every part covers and how they cover services, you can calculate your expenses.

Related Posts