Should I Stick With Original Medicare?

Choosing a Medicare plan isn’t a once-in-a-lifetime experience, it’s something you really need to be doing every year.  Just as your financial situation, health and even living arrangements change, so do the benefits and premiums of Medicare insurance policies.  Hopefully, this post will give you some things to think about if you’re considering staying on original Medicare for your hospital and doctor coverage.  This is known as, “Going Bare with Medicare.”  Future posts will provide an overview of hospital and doctor coverage when considering Medicare Supplement and Medicare Advantage plans, and when they’re up I’ll link them in blue.

Protect Your Savings!

At its core, any insurance product should really serve one primary purpose:  Provide you financial protection against exposure to high-dollar claims. Think about your car insurance… no one in their right mind has a $250 or even a $500 deductible anymore… and if you do, you’re paying entirely too much for car insurance!  The days of first dollar insurance coverage, especially in the health insurance field are long, long gone.  Just look at the Affordable Care Act (ACA) plans that were rolled out a few years back.  The average (annual!) deductible for an individual in 2016 is now over $5,700 and more than $11,000 for a family!   I wouldn’t be alone in arguing that those deductible levels are borderline insane, but the point remains; first dollar coverage is over!

Anyway, back to the point of the article.  Staying, “Bare with Medicare” isn’t a bad way to go… and about 20% of the population who have Medicare don’t have any additional coverage.  It’s true Original Medicare (parts A and B) works for a lot of people, but it also has plenty of gaps… gaps that could expose you to high-dollar claims, however unlikely.  Let’s review a few of them.

You Need a MOOP

First of all, Original Medicare has deductibles and coinsurance, and no MOOP.  By far my favorite acronym, the MOOP stands for “Maximum Out Of Pocket.”  That’s a fancy way of saying under Original Medicare, you have no annual or lifetime cap on how much you’ll pay for healthcare.  Once you meet your Part A and Part B deducible (every year, BTW), then you’ll pay coinsurance (a percentage of all additional charges) up to…. well, forever.  There’s no MOOP!  On the other hand, all Medicare Advantage plans must have a MOOP, and none have one higher than $6,700 annually in 2016 (More on those plans in Choosing a Medicare Plan Part 3).

Let’s say you’re hospitalized and have Original Medicare A and B only.  In 2016, you’ll first pay a deductible of $1,288.  As long as you’re not in the hospital for more than 60 days, you’re all set.  However beginning day 61 through day 90 you’ll pay an additional $304 per day.  If you do the quick math, a 90 day hospital stay will cost you a minimum of your $1,288 deductible, plus 30 days X $304 ($9,120) = $10,408!!!

That’s huge.  How likely is it you’re in the hospital for 90 days?  Highly unlikely.  More likely is a) you’ll be dead or b) you’ll be moved out to a nursing home or a Skilled Nursing Facility (SNF).  Not trying to be morbid, just realistic.

If we assume you end up in a Skilled Nursing Facility, then Medicare will cover your stay at 100% for days 1-20.  Days 21-100 will cost you $152 per day in 2016.  The price tag for a (SNF) stay that lasts exactly 100 days is $12,008!   Anything longer for 100 days, and you’ll be picking up 20% of the entire tab for every day you’re in the facility.   Once again, there’s no MOOP!

Worst-case scenario: If you’re in the hospital for exactly 90 days, then get moved into a Skilled Nursing Facility, stay there for 100 days, you’ll have a bill totaling $22,416!

Going back to our original premise, first and foremost insurance should provide you financial protection.  How much financial protection is up to your personal risk tolerance, health status and thickness of your wallet. I think it’s safe to say most people shouldn’t be purchasing super-rich insurance products that offer first dollar coverage.  That is of course unless you simply like the peace of mind giving all of your money to insurance companies for first dollar coverage instead of keeping it in your own wallet!

Not Covered Under Original Medicare A and B:

  1. Routine eye exams & glasses (except after cataract surgery, but who wants that?)
  2. Dental insurance & dentures
  3. Outpatient prescription drugs prescribed by your doctor (Part D covers this)
  4. Gym memberships or fitness classes
  5. Weight management programs
  6. Routing hearing tests
  7. Custodial care (help with bathing, dressing, using the bathroom & eating) at home or in a nursing home
  8. Long-term care (fancy phrase for nursing homes and in-home assisted living)
  9. Acupuncture
  10. Cosmetic Surgery
  11. Most chiropractic services
  12. Most care while traveling outside the United States

The Takeaway

Going “Bare with Medicare” isn’t for everyone, but it’s a fine solution that has worked literally for hundreds of thousands of Medicare beneficiaries since 1966!  Odds are that you’ll never come close to being in the hospital for more than 60 days in any one stay, and it’s highly unlikely you’ll be in a Skilled Nursing Facility for more than 20 days.   I’ve highlighted a few worse-case scenarios, but the real problem is the fact Original Medicare has, you guessed it, no MOOP!  And that’s precisely the reason you’re probably better off served by purchasing some type of supplemental policy or Medicare Advantage plan that offers an annual MOOP limit.

Readers, what’s been your experience going “Bare with Medicare?”

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