How much does it really matter to invest in a Medicare plan with a low Maximum Out-Of-Pocket? On the other hand, should I just stick with what you call Bare-with-Medicare?
To answer your question, we need to explain a MOOP. This is essential to why you want to invest in a great Medicare Insurance plan and not pinch pennies on your medical insurance.
What is a MOOP?
Any insurance professional will tell you that an insurance product should provide financial protection for you and your family and heirs from catastrophic events. In other words, at a bare minimum, insurance should shield you from bankruptcy and financial ruin.
In every other personal insurance, I can think of, there’s always, always, something called a MOOP, which is a Maximum Out Of Pocket clause. These are either episodic or annual. But basically, a MOOP is financial protection should you have a bad health year accompanied by very expensive medical bills. It limits how much money—worst case scenario—you’d have to pay out of your pocket during a year. In insurance speak, these are also called Annual Maximums, stop-loss amounts, annual plan maximums, or some other variation of those terms, but the concept is the same. Once you spend a certain amount, you’re done paying out of your pocket, and the insurance company covers 100% beyond that amount.
Let’s say you get cancer. You’re in and out of the hospital; you’re seeing multiple doctors, undergoing chemotherapy, using very expensive injectable drugs, and doing physical therapy over the course of several months. I’ve seen many examples of cancer treatments running bills well over $1,000,000 in just a few months.
When you have (or have) medical insurance through your employer, those plans typically come with deductibles, coinsurance amounts, and copays. But after you pay a certain amount of money towards these in a given year, you stop paying, and the insurance company pays 100%.
What is the MOOP for Original Medicare?
Original Medicare doesn’t have a MOOP. I don’t know why. It doesn’t make any sense why it doesn’t. So if you’ve got Original Medicare and no other Medicare insurance on top of that or in place of that, you have no annual or lifetime cap on how much you could pay.
There’s simply no limit to how much you can be charged if you get really sick and you only have Original Medicare, which is why many people buy other Medicare insurance. Think about it. It doesn’t make any sense. When you buy homeowner’s insurance, and your house burns down, you typically pay your deductible, and the insurance company pays 100% of the cost of replacement or rebuild. When you buy car insurance and total your car, you’ll usually pay your deductible. The insurance company pays for a new one or cuts you a check for 100% of its residual value.
In other words, insurance in those situations limits your maximum out-of-pocket responsibility to a certain dollar amount or a certain percentage. I can’t come up with any other examples in the wild, wonderful world of insurance where there’s simply no cap—no limit on the amount of out-of-pocket you could potentially be on the hook for except if you stay on Original Medicare Parts A and B with no additional medical insurance like a supplement or Medicare Advantage.
Here’s a scenario to consider.
If you have Bare-with-Medicare and are hospitalized for 100 days, you’ll owe around $15,000 for that one visit.
Then, of course, there are going to be follow-up doctor’s visits for which you must pay your annual Medicare Part B deductible plus 20% of each doctor’s visit and prescription drugs. The list goes on. It’s not too hard to see how a bad health event that requires a long hospital stay could result in you owing your hospitals and doctors more than $50,000. Of course, that example doesn’t even factor in the cost of items not covered by Original Medicare, such as eyewear, dental procedures, your Part D prescription costs, and other medications or physical aides you may need. And those don’t even count towards the MOOP if you’re Bare-with-Medicare.
Today, approximately 25% of all people on Medicare go Bare-with- Medicare and stick with Original Medicare for their health insurance coverage. Knowing what I know, I certainly wouldn’t, especially without a MOOP.
I hope this helps!
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Author Bio Matt Feret is the author of the Prepare for Social Security -The Insider’s Guide and the Prepare for Medicare – The Insider’s Guide book series and launched PrepareforSocialSecurity.com to help people get objective answers to questions about Social Security and Medicare. Matt is also the host of The Matt Feret Show. He has held leadership roles at numerous Fortune 500 Medicare health insurers in sales, marketing, operations, product development, and strategy for over two decades.