which in 2020 is $198.
These dollar limits are the total cost of the services received in a year — including what Medicare pays (80 percent of the Medicare-approved amount) and what you pay (20 percent). Medicare may continue to cover these services beyond the annual limits if you have a condition that requires ongoing therapy, such as extensive rehabilitation for stroke or heart disease. To get this exception, your therapist must justify the need when she bills Medicare. If the total cost reaches $3,000 in a year, Medicare automatically reviews your case.
www.medicare.gov/Pubs/pdf/10988-Medicare-Limits-Therapy-Services.pdf.
Chapter 3
Understanding What You Pay Toward Your Costs in Medicare
IN THIS CHAPTER
What will Medicare cost you, and how much will it save you? That’s the killer question for people just coming into the program. In a way, the answer really depends on where you started out. Did you have low-cost insurance from an employer when you were working? Then Medicare may seem expensive in comparison. Were you paying through the nose for an individual policy that didn’t actually provide much coverage? Or perhaps you just couldn’t find insurance that you could afford? In those cases, Medicare probably seems like the promised land.
This point bears repeating: Medicare isn’t free. Some people do think that the Medicare payroll taxes they pay while working will net them totally free health care after they hit 65. Sorry, not so. In fact, on average, Medicare is said to cover only about half of beneficiaries’ total health-care costs if they have no extra insurance.
In this chapter, I explain the way in which all the various costs of Medicare — premiums, deductibles, and co-payments — may hit your pocket in each of the parts of Medicare. I also go into detail about the higher-income premiums for Part B and Part D because you need to know whether they affect you and, if so, by how much. (However, you may be able to lower some of those costs, a topic I delve into in Chapter 4.) Finally, I explain why some people may pay different premiums than others in certain years and the instances when you need to pay Medicare taxes while receiving Medicare benefits.
Boning Up on Premiums, Deductibles, and Co-payments
Premium: A premium is an amount you pay each month to receive coverage. In other words, it’s your entrance ticket to the program.
Deductible: A deductible is an amount you pay before coverage kicks in. You can think of it as a kind of down payment before getting the goods.
Co-payment: This amount is what you pay as your share of the cost of each service you receive. Strictly speaking, co-pays are fixed dollar amounts (such as $20), whereas coinsurance is the correct term when your share is a percentage of the cost (such as 20 percent). But because coinsurance is too wonky for words, I use co-pays in these pages.
If you had insurance in the past, you probably paid a single premium for all your health care and a single deductible for the whole year (maybe a hefty one if you were in a high-deductible plan), with co-pays for each service. But Medicare, of course, is divided into four parts, each with its own costs and charges. The following sections explain each set of costs under Part A, Part B, Part D, and Medicare Advantage (Part C) plans. Finally, Figure 3-1 shows the costs for Parts A, B, and D at a glance. Note: The costs in the chart are for people enrolled in traditional Medicare plus stand-alone Part D drug plans. Medicare Advantage plan costs are different and vary among plans.
© John Wiley & Sons, Inc.
FIGURE 3-1: 2020 premiums, deductibles, and co-payments at a glance.
Part A costs
Part A covers nursing care, room, and meals in a hospital or skilled nursing facility (such as a rehab center or a nursing home); home health services; and hospice care. The following sections describe the possible out-of-pocket costs that you may pay for those services. Note: The costs in the following sections apply if you’re enrolled in the traditional Medicare program. They’ll likely be different if you’re in a Medicare Advantage health plan such as an HMO or a PPO — see the later section “Medicare Advantage costs.”
Premiums
You don’t pay premiums for Part A coverage if you or your spouse paid enough in Medicare payroll taxes to earn at least 40 credits (sometimes called quarters) while working. If you don’t have enough credits through your own or your spouse’s work record, you can buy Part A services by paying premiums for them: in 2020, $458 a month if you have 30 to 39 credits and $252 if you have fewer than 30 credits. These amounts tend to go up or down a little each year. (I explain work credits in more detail in Chapter 5.)
Deductible
Part A doesn’t have an annual deductible but rather applies a deductible to each hospital benefit period. This unit of time begins when you’re first admitted to a hospital and ends only when you’ve been out of the hospital for 60 days. Huh? Yes, this timeline is a weird concept that I explain thoroughly in Chapter 14. All you need to know here is that the deductible for each hospital benefit period is $1,408 in 2020 (it goes up a little each year) and that after you’ve met it, Medicare picks up the whole tab for up to 60 days.
