Medicare has one important difference when compared to most other health plans – Medicare Parts A and B do not have a cap on out-of pocket costs. These costs can add up quickly, especially for chronic or long-term illnesses. Premiums and most deductible and co-insurance situations are straightforward, but some costs are not. These Medicare hidden costs, or less obvious costs, include:
- Non-covered Treatments – Medicare is not comprehensive, and many seniors do not realize how many forms of treatment are uncovered. Uncovered items include eyeglasses/eye care, hearing tests/hearing aids, cosmetic surgery, and dental care, some types of foot care, long-term care, and secondary wellness checkups beyond one annual visit.
Some exceptions to these cases are covered. The CMMS (Centers for Medicare and Medicaid Services) has a booklet and online file summarizing items and services that are not covered, and the exceptions.
- Deductibles for High-Cost Treatment – The standard deductible is 20%, which is not bad for a $1,000 bill for X-rays, but possibly devastating with a $100,000 chemotherapy bill.
- Out-of-Network Charges – Depending on your coverage, your network of doctors may be limited. You will pay full cost for medical services outside of that network.
- Refusal of Assignment – Some doctors do not accept Medicare reimbursement (they refuse to be assigned Medicare's lower payment) and will expect full payment. They will still see you either way. However, it is your burden to verify that they accept assignment; otherwise, you will be stuck with the bill.
- Hospitalization Status – If you are hospitalized in observation status, you are being assessed for your need to be admitted for a longer stay. This should be for 24 hours or less, but hospitals can stretch this to three days. Your medications, treatments, and tests fall between emergency and hospitalization status. You're in medical coverage limbo without even realizing it.
Worse, you must have three consecutive days of inpatient status at a hospital before recovery time in a skilled nursing facility is covered. You may have no idea you had been classified under observation status until you are in the nursing facility, stuck with the costs of your nursing stay and significant hospital bills that you had no reason to expect – and the hospital can reclassify you after the fact for up to one year. Vigilance is your only recourse.
- Extended Stays – For extended stays in hospitals (60+ days) or skilled nursing facilities (20+ days), co-insurance kicks in for a period; after that, you are responsible for all costs. Costs can quickly spiral here.
- Late Signup Penalties – If you fail to sign up for Part B coverage, there is a 10% permanent penalty for each 12-month period you delay. Part D has late signup penalties, and there are specific windows for other signups. Check www.medicare.gov to verify the signup dates for your preferred plans.
- Donut Hole – Medicare Part D contains a $1,400 gap where prescription drug coverage runs out before catastrophic coverage begins, known as the "Donut Hole.” You are responsible for these costs.
- Hospitalization Personal Comfort Items – Medically necessary items are covered by Part A but things considered personal comfort items are not, such as TVs and radios. If you aren't sure if something is included in your coverage, ask.
How do you minimize these costs? There are three major avenues:
- Planning and Preventative Care – Take advantage of all preventative care possible, and understand your medical history and weaknesses/tendencies to make the most informed choice of plan for your needs.
- Medicare Advantage or Medigap Policies – These are private insurance programs coordinated with Medicare. Medicare Advantage combines Parts A and B, usually part D prescription drug coverage, and various added benefits. Medigap is supplementary insurance to Parts A and B. You can have one or the other, but not both.
Either path offers a variety of coverage for some of the above situations, for a premium. Medicare Advantage does cap out-of-pocket expenses; if you can afford the premiums, this option provides the greatest peace of mind.
- Education and Vigilance – Keep up with the rules and never assume that everything is covered. Make sure your loved ones are aware so they can take charge if you are not in suitable medical shape to do so yourself.
Medicare is one of the most successful – and treasured – programs ever instituted by the federal government. You paid into it for years, so you deserve to reap its many benefits. At the same time, it’s important to understand what Medicare does not cover, so you can intelligently plan to cover the hidden costs in Medicare yourself.