Cost of Aging: Supplemental Health Insurance - Your Cost Beyond Medicare

By Mark Olshaker | Care of the National Aging In Place Council
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Medicare is what many people think the Affordable Care Act – AKA Obamacare – should have been: a single-payer system in which the government takes responsibility for a wide range of medical, hospital and drug costs. Since its inception in 1966, Medicare has been a boon to many millions of American seniors. But like most government programs, it is full of complex rules and regulations, and not intuitive or easy to understand. 

A practicing pediatrician in Maryland, who also has a law degree, recently was approaching Medicare age. As she began the process of converting her own health coverage, she admitted to being overwhelmed, commenting, “I’m a doctor and a lawyer. If I need help understanding and getting through all this, I can’t imagine what the average person goes through.” 

Indeed, Medicare is a machine with a seemingly countless number of moving parts. It generally kicks in at age 65, but if you are working for a company with 50 employees or more that offers health insurance, you can stay on that plan as long as you work and Medicare will act as a secondary insurer. This is only one of the many “if then” conditions of coverage, and terms like “generally” will be liberally sprinkled throughout this brief overview, so please don’t take it as definitive. The best place to start, although prepare to spend a fair amount of time there, is medicare.gov.

For home healthcare, Medicare covers: skilled nursing, generally up to 28 hours a week; skilled therapy services, including physical, speech and occupational therapy; medical social services ordered by your physician; medical supplies; and durable medical equipment.

Now for the “fine print.”

Medicare is divided into four “parts.” Part A covers inpatient hospital care, skilled nursing facilities, hospice, lab tests, surgery and home healthcare. Part B covers doctor visits, needed medical equipment, and other out-patient services. Part D covers prescription drugs.

A, B, D? Hmm. It seems as if we missed one. Actually, Part C – AKA Medicare Advantage – refers to plans offered by private companies and approved by Medicare. These are similar to HMOs and bring together all the services offered in Parts A, B and D.

Now here’s where it gets even more complicated. Part A generally is free to participants, though for long hospital stays there are both deductibles and co-pays. Part B premiums currently begin at $104.90 per month and are on a sliding scale up to an annual income of $214,000. If you are also receiving Social Security benefits, the premium may be taken directly from your monthly payment. After you meet your deductible, Medicare typically pays 80 percent of expenses. Part C costs vary by company and state, but as one example, Kaiser Permanente’s highly rated programs average about $4,000 a year in Washington, D.C.; more if you have complex drug needs.

 Part D has a separate premium, which is also keyed to income and ranges from $12.70 per month to $72.90. But Part D has the notorious “donut hole,” which means that after you and your plan have spent around $3,300 on prescription drugs, there is a “coverage gap” before payments start again. A large determinant of how much you will pay under Part D is whether all of your regular pharmaceuticals are generic or whether any are under patent. For someone taking the cholesterol medications Lipitor and Zetia, for instance, Lipitor will only cost a few dollars a month since it is now marketed under the generic chemical name atorvastatin, while Zetia (chemical name ezetimibe) remains a patent drug and can cost more than $100 for the same supply. 

What all this means is that for most seniors, Medicare alone isn’t enough. So for Parts B and D, “supplemental” or “Medigap” policies are offered that make up some or most of the difference. You need a separate policy for B and D. Nearly everyone has seen ads for AARP’s Medicare supplemental plans, insured by United Healthcare. But there are many others, including the various Blue Cross companies. There are ten standardized Medigap plans available, and costs vary depending on what they cover and where you live. The same is true with Part D drug plans. 

For those whose incomes are insufficient to pay for Medicare services and their families, Medicaid steps in. It is funded through a combination of federal and state government resources, and while all states currently participate, the levels vary widely. The Affordable Care Act substantially expanded eligibility and resources for all American citizens and legal residents up to 133 percent of the poverty line, but the Supreme Court ruled that states do not have to adhere to that metric. When an individual is covered by Medicare and Medicaid – known as a “dual eligible” – Medicare always pays first, with Medicaid picking up the difference. There is also a provision for those who do not normally qualify for Medicaid, but may become “medically needy” because of the financial burdens of a particular illness or injury. 

As with many factors in our society, the wealthy and the poor are “accounted for.” For the rest, Medicare takes care of most healthcare costs for most seniors, but its website estimates annual out-of-pocket costs for people in good health at around $7,000, and more for people with “high-cost conditions.” A reverse mortgage is one way to cover those often-unavoidable expenses.