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The Importance of a Good Medicare Supplemental Policy (Part 2)

                Last week I was telling you about a call I received from Mary.  Her husband, John had a heart attack which led to other medical complications.  Long story short he had been in the hospital for 4 months and was now close to exhausting his Medicare coverage under Part A, exposing them to hospital bills in the tens of thousands of dollars or more.  How is that possible?

                Let’s look at how Medicare Part A coverage works.  Medicare will cover up to 90 days of hospitalization for a single benefit period.  There is a deductible of $1316 for days 1 thru 60.  Days 61 thru 90 carry a coinsurance charge of $329/day.  For the first 90 days of John’s hospital stay the out of pocket cost to Mary and John was $11,186.

                If a hospital stay lasts more than 90 days, there are an additional 60 days of coverage under a lifetime reserve.  As the term “lifetime” suggests, this is a onetime 60 day term.  John is in danger of running thru all his lifetime days.  These additional 60 days of coverage also come with a coinsurance charge of $658 per day.  That totals $39,480 out of pocket.  Mary and John will have to pay $50,666 of his hospitalization, a sizeable sum.

                As bad as that may be, it’s small in comparison to the “tsunami” that is coming if his hospital stay extends beyond day 150.  That’s because Medicare provides no coverage after Day 150, which is when Medicare supplemental policies, known as Medigap policies, kick in.  These policies plug the “gaps” in Medicare coverage.  A good Medigap policy will provide an additional 365 days of hospital coverage as well as providing other coverages such as, for example, paying the coinsurance charges for rehabilitation in a subacute facility for days 21 thru 100.  It could also cover John’s $50,666 of deductible and coinsurance charges for the first 90 days.

                Mary, however, told me that John does not have this additional coverage which he neglected to secure.  If he reaches Day 151 in the hospital he is responsible for the enter cost.  His entire hospital bill could easily reach into the hundreds of thousands of dollars, wiping out their nest egg of savings.  What other options do they have?  John could apply for Medicaid to cover his care.  Of course, that means he and Mary will need to meet Medicaid’s financial needs based requirements which won’t be so easy.

                The lesson to be learned here is that a Medicare supplemental policy is important for every Medicare eligible American to have.  In today’s world, with advances in medical care resulting in the treatment of conditions that in the past resulted in death, we are seeing more extended stays in a hospital, subacute or long term care facility.  The cost of that care is more than the average person can afford for long.  That’s why the failure to plan ahead could wipe out your life savings as Mary and John are now realizing.