Once we've tackled the Medicare Part A and Part B deductibles, we need to look closely at the most important gap in Medicare coverage, co-insurance. It's interesting. With all types of insurance, people are generally concerned with the first dollar coverage as they're more like to feel that. Dental's a perfect example, people are willing to pay a dollar to get a dollar back (if lucky) for dental insurance but they rate it as very important since they're guaranteed to use. They're looking at the small dollars up front...not the big picture which is how the policy treats bigger bills versus how much you're paying for that protection over a year's time. Medicare is no different with people focused on the Deductible up front while the co-insurance is really the financial boogeyman. So let's not be fooled into thinking small picture and dive into the Medicare co-insurance and how to protect from what could be huge bills.
First, what is co-insurance? Co-insurance essentially means that you are splitting the cost usually in the form of a percentage. For example, the carrier may pay 80% and you pay 20% of the certain medical costs. This is exactly what Medicare does. Once the Part A (Hospital or facility based care) deductible or the Part B (physician) deductible is met, you then start paying 20% of the charges while Medicare picks up the other 80% of the costs for covered benefits usually for the rest of the calendar year. This deductible and co-insurance typically resets Jan 1st of each year. The 20% sounds great and relative to where other health insurance are on the market, it is! There's a lurking problem though if you just have straight Medicare.
What happens if have $50,000 worth of bills in a calendar year? Once the deductible is met, you may be liable for 20% of this charge (minus the deductible of course) which leaves you with an exposure of $10K. That's a much bigger issue than the Part A or Part B Medicare deductible. Much bigger. So how do we protect against this risk? Medicare supplements are custom fit to address this exposure. The 20% coinsurance is a core benefit of Medicare supplement insurance plans. We detailed why the F plan is the plan of choice on the market (as well as with us) and it solidly covers the 20% co-insurance at a affordable cost. It's also the least expensive Medicare supplement plan that covers excess charges, another un-capped risk that's lurking at the center of Medicare. Why does capping the 20% coinsurance and excess charge matter so much?
The medical costs roughly double with each decade of a person's life. Age 65 is no different and in fact, medical utilization, a fancy word for how much health care a person consumes, accelerates to a point that a vast majority of a person's total lifetime health care is generally incurred in the last 6 months of life. This is not the time to gamble that you will keep your medical costs relatively low and plain Medicare will suffice. When you're looking to save just over $100/month, the downside is considerable and you may not be able to qualify later on if health changes. The odds are stacked against us in the bet in our 60's, 70's and 80's.