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April 7, 2016

Just Having Medicare Alone

Just Having Medicare Alone

There are still a sizable percentage of people over age 65 that have Medicare by itself but no additional supplement coverage be it a Medicare supplement or Advantage type plan. Obviously, there are some savings to this approach in terms of premiums but there’s also risk involved. Let’s take a look at what we’re gaining and losing by just having Medicare alone.

Keep in mind that Medicare does provide a baseline of coverage by itself but we need to distinguish between Part A and Part B. If we really want to discuss the lowest priced plan configuration, it’s generally to just have Part A Medicare which most people do not need to pay premium for since they have paid into Part A during their life. For this reason, in the current scheme of things (which may change into the future), Part A will be “free” to most seniors turning 65 or pre-65 disabled individuals. What does this “buy” you? Well, Part A is primarily concerned with hospital based care which really is the place that big bills can accumulate very quickly in today’s health care world. Part A will pay 80% of the bills after a deductible that generally runs north of $1000 (indexed to go up each year). So we have no monthly premium but were looking at between $1000-2000 (over course of next decade) annually if we have facility based coverage. We then pay 20% of the charges. Let’s look at some common situations and determine how this might work out.

Let’s say we need an MRI taken in a hospital after a fall to determine the source of pain in a knee. An MRI might run $600 with a Medicare provider. You’re likely going to pay this full amount since you have a deductible. Now let’s say that you have a torn ACL which needs to be repaired. That’s where the real issue is. The surgery may run $12K now. You would pay the rest of the deductible amount required (we’ll use $1200 to make it easy) or $600 and then pay 20% of the remaining cost or just over $2000. We’re now looking at roughly $3200 out of pocket or just under $300 monthly. Let’s look at a more serious situation. More involved cancer treatment can run $50K annually pretty quickly and a heart bypass might run $100K all told. Some rough estimates put your exposure at about $12K for the prior and $22K for the latter. For chronic issues, you might these types of numbers each year but we now have a rough look at potential exposure just for Part A with no supplement, Part B coverage, or other supplement.

Part B works the same way but generally with lower numbers since it deals with physician-related expenses which should generally be lower than hospital or facility based care by a significant factor. These expenses could be anything from an office visits (let’s say at $70) to a surgeon’s expense ($1000’s of dollars). You can opt in to Part B coverage so that you are only responsible for the deductible and 20% co-insurance. This does require a separate premium. Of course, there’s the cost of out-patient prescription coverage which you will pay in full with just traditional Medicare Part A.

Let’s look at the savings we can expect. Part B might run about $150 monthly depending on your income. An F plan at age 65 might run about $125 monthly depending on area and carrier. A Part D prescription plan might run $30 monthly. All told, we’re looking at roughly $300/monthly. That’s $3600 annually. Now you may be inclined to take the above risks and save the money but you have to look at the context in which you’re making that decision. On average, a person’s health expenses double with each decade of their life and a considerable percentage of total lifetime expenses occur after age 65. That’s probably not the time to take this particular bet especially in light of today medical inflation. A combination of increased medical needs at escalating prices is not the time to just have Medicare by itself.

An article by Dennis Jarvis

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