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Seven Strategies to Minimize Your Medicare Out-Of-Pocket Costs

Medicare health insurance coverage

Knowing the expenses you might encounter for Medicare services can help you avoid spending too much on out-of-pocket costs. 

Medicare provides high-quality health coverage, but it comes at a cost, just like any other insurance plan. While many people receive their Medicare Part A premiums free of charge (if they or their spouse worked for ten years in a taxable Social Security job), all are at the mercy of Medicare Part B payments. Add to that the cost of the copayments, deductibles, premiums, coinsurance, and even late payment penalties – and you’ll face a lot of out-of-pocket costs when you get Medicare coverage.

Fortunately, learning what costs to expect allows you to find strategies to minimize them and protect yourself.

How much would Medicare Beneficiaries have to Pay Out of Pocket?

According to the Kaiser Family Trust, the average Medicare benefactor paid around 5,460 dollars in out-of-pocket costs in 2016.

The amount varied depending on several factors, including:

  • People who needed an inpatient hospital stay paid a higher rate ($7,613).
  • People who did not have supplemental insurance paid a higher premium ($7,473).
  • Long-term care facility residents paid more ($19,632).
  • Women received a higher salary than men ($5,748 vs. $5,104).

To get an idea of how much you would pay, you must first decide whether you intend to register in the Original Medicare plan (Part A & B) or Medicare Advantage (Part C). The former is traditional health insurance, administered by federal agencies, while the latter is controlled care plans (e.g., PPOs and HMOs) run by private insurance companies.

Although both types of Medicare will cover the same health services, some Medicare Advantage plans provide additional benefits. If you have Original Medicare coverage, you can also enroll in a Part D prescription medication plan. You can also choose the Medicare Advantage plan that includes Part D benefits.

In 2020, the CMS (Centers for Medicare and Medicaid Services) reported that 37.6 million people were enlisted in Original Medicare, and 24.4 million had Medicare Advantage coverage. Your decision is crucial because it determines how much money you would spend on out-of-pocket costs. 

Seven Perfect Ways to Minimize Your Medicare Out-of-Pocket Costs

You won’t avoid all out-of-pocket expenses, but you can do your best to keep them to a minimum. Most importantly, you can prepare for them and assume them to avoid unexpected medical bills. What you can do is as follows:

1) Enroll on Time

Sign up for Medicare coverage on time to avoid late penalties because you may be obligated to pay some of those penalties for the duration of your Medicare plan. It is critical not to miss these deadlines.

Part A and Part B Coverage

  • The IEP (Initial Enrollment Period) begins three months before your 65th birthday and ends three months after. You have the right to delay registration in Part B as long as you possess group health coverage through your current company. If this is the case, you may need to stick to specific special enrollment periods to avoid overdue penalties (keep in mind that if your organization has fewer than 20 workers, you’ll need to register in Part A as well as Part B, as Medicare will give primary coverage and your company’s plan would be secondary). 
  • You may also be eligible for the Medicare program if you have a disability. Precisely, you can register in Medicare after 24 months of getting SSDI benefits. People with ALS are qualified as early as they begin receiving SSDI. In contrast, people with end-stage renal disease can immediately apply after their fourth month of treatment at a clinic if they start receiving dialysis at home or stay in a medical center for a kidney transplant.

Part D has the same Initial Enrollment Period as Parts A and B. You can postpone enlisting in Part D and avoid a penalty kick as long as you maintain creditable coverage, which is coverage equivalent to a standard Medicare Part D plan. In that situation, you have 63 days to enroll in Part D coverage after your other creditable plan expires. If you are not sure whether your existing coverage is creditable, contact your health insurance plan to find out.  

2) Select the Best Medicare Doctors

Pick doctors who not only accept Medicare for payment but also “accept assignment” whenever possible. This means they agreed only to charge Medicare-approved rates for their care services.

Alternatively, doctors who refuse assignments can charge almost 15% more than Medicare recommends. If you registered in a Medicare Advantage plan, you should also select a physician in your plan’s network. Otherwise, their services may be completely uninsured. 

Applicants who also have Medicaid insurance should seek care from doctors who accept Medicaid plans (and, if applicable, their Medicaid-managed care plan).

3) Inquire about Your Hospital Instructions

Not all hospital stays are charged the same, even if you stay overnight. When you’re in the hospital, talk to your doctor about your orders, whether inpatient or observation.

Part A coverage kicks in when you’re admitted as an inpatient; however, Part B coverage pays when you’re placed under observation. As a result, you will end up paying more because you spent the single Part A premium for an inpatient stay (the Part A deductibles are $1,484 per benefit period in 2021). 

Hospital orders may also affect if a Medicare plan will cover your stay in a skilled nursing facility (SNF). (To get covered for the qualified nursing facility stay, you must be an inpatient in the medical center for at least three days before transfer.)

4) Keep an Eye out for Billing Mistakes

Check the accuracy of your Medicare bills. It is useless to pay for services that were never provided or for other billing errors. If you have any concerns or questions, please get in touch with your doctor’s billing office.

If a Medicare claim is denied, ask the physician or hospital to double-check to ensure it was coded correctly and invoiced.

5) Think about Medicare Supplement Plans

Consider a Medigap program, also known as Medicare supplemental plan, to help you save money on expenses that Original Medicare does not cover. Depending on the coverage you choose, they will support your Part A/B coinsurance, Part A deductible, and even healthcare in a foreign country.

However, they can increase your out-of-pocket costs because the plans require a monthly premium. You must determine whether or not a Medigap policy will save you more money in the long run.

6) Examine Medicare Savings Programs

Check out Medicare Savings Programs if you can’t afford your Part A/B premiums, deductibles, coinsurance, or copays. Similarly, if you are unable to afford your Part D expenses, search for Extra Help. These programs (based on your financial situation) can minimize or eliminate some of your costs. (Eligibility rules vary slightly by state; click on your state on the map to learn more.)

7) Negotiate, Negotiate, Negotiate   

If your hospital, doctor, or laboratory facility does not cover a specific service you require, negotiate with them. There’s no guarantee they’ll agree, but they might offer you lower rates, as they frequently do for people who don’t have insurance.

Remember, if Medicare or a Medicare Advantage plan withholds coverage for a service (even if you appeal the decision), you are only liable for Medicare’s rate for that service. Typically, you can find the rate for Part B services online by going to your Part B Medicare insurance agency website. This amount is frequently much lower than the billed charges of a provider. 

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