When it Comes to Medicare and Medicare Advantage, What is a Benefit Period?
Understanding your insurance is crucial. It’s amazing to me how many people accept that they have insurance and feel protected, until it’s time to use it and learn they have some serious deductibles, coinsurance or copays to pay. Suddenly, savings are depleted, things are sold, or financing is used to pay even bills as small as $1,000.
If you don’t understand your insurance plan and all it’s moving parts, how can you prepare for those expenses and make sure you receive the care you need? It’s the small details that add up to devastate many people’s retirements. One of those is not understanding the benefit period.
Depending on your insurance and coverage, a benefit period will have disparate financial impact (it’s different for everyone). A benefit period starts the first day you are hospitalized and lasts for 60 days. What does that mean for you?
If you’re on Original Medicare, you have a $1,484 deductible per benefit period for 2021. Unlike Part-B, which has a $203 deductible for the entire year, if you have more than one benefit period in a year, you will pay this deductible for each new benefit period.
What this means is that if you are hospitalized, you must pay that deductible before Medicare pays 80% of the remaining bill (you must then pay the remaining 20%, this is known as you coinsurance). A copay is a flat fee you pay for a service. A coinsurance is a percentage you of the total bill.
Now, when you’re discharged from the hospital, if you are readmitted within the 60-day period for the same illness, you don’t need to pay the deductible again. However, if you are readmitted on day 61, whether for the same illness or not, you must pay the deductible again. With Original Medicare, you will always have to pay the 20% coinsurance.
If you have Medicare Advantage or a MediGap supplement, it’s a bit different. Each plan has a different inpatient hospital daily copay. Many have no deductibles or coinsurances for inpatient hospital stays, but they have daily copays for a set number of days. For example, one plan may have a $100 daily copay, for the first 4 or 6 or 7 days. Another may have a $125, $250 or even as high as $395 daily copay for the first 4 days – the number of days vary by plan.
So, if we take a middle of the road, $200 per day copay for the first four (4) days of a hospitalization, that means if you are in the hospital for four (4) or more days, you will owe $800 to the hospital. If you are readmitted within the 60-day benefit period for the same reason (very important), you DO NOT have to pay the copay. However, a different reason or day 61, you must pay it again.
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There are two things you can do to avoid being in a financial bind: budget and save or have hospital indemnity insurance.
Budgeting is straightforward, make sure you save monthly for the eventually and do not touch the money. Easier said than done. When life happens, if you’re on a fixed budget, it’s hard not to use that money for immediate needs. And if you don’t save enough in time, you still have some of a financial bind.
Hospital indemnity insurance, on the other hand, offers a cost-effective solution for almost any budget. What it does is pay you a flat cash amount for each day you’re hospitalized, for a set number of days you choose.
For example, if you chose a daily amount of $250 for up to six (6) days (you can go as high as 10), and you’re hospitalized for the full six (6) days, you would receive $1,500. If we continue with the previous example, you owe $800 for your stay. That leaves a surplus of $700 for you to save for the next hospitalization or pay for non-medical expenses like travel. Whatever the case, it’s your money to do with what you will.
You can cater your policy to meet your specific needs. For example, Joe Shmuckatelly wants to get a hospital indemnity policy. His inpatient copay is $125 per day for days 1 through 4, which would total $500 for a 4-day or greater stay. There’s always the possibility that Joe may need an ambulance to get him to the
hospital, so that’s a concern as well. Joe buys a hospital indemnity policy that pays him $250 a day, and chooses six (6) days total, giving him $1,500 if his stay is six (6) days or greater. However, he also adds an ambulance rider for $1, so that if he does need an ambulance, he gets $200 for his ambulance copay.
Joe has a fall at home and broke his hip. He calls an ambulance and is hospitalized for seven (7) days. His ambulance copay is $200, and his benefit period hospital copay is $500. Joe received $1,700 (because of the ambulance rider). He pays his bill and has $1,000 remaining.
However, due to the nature of his injury, he needs a walker and special shoes, which the combined cost is $250. He pays his bill and still has $750 remaining. Joe decides to save that for any future emergencies.
Joe was hospitalized again 90 days later, for 11 days; this time no ambulance was needed. He received $1,500 again. His bill was $500, leaving a remainder of $1,000. Along with the previous $750, he now has $1,750 in savings for emergencies. Joe paid approximately $480 ($40 per month) for the year for his policy (prices vary by age), so it paid for itself and provided an additional $1,270 after all bills were paid for any non-medical expenses that may arise.
Somethings you must be aware of. Hospital indemnity policies typically have a look back period of sic (6) months. What that means for you is that if you were hospitalized within the last six (6) months or have a diagnosis that any reasonable person would expect a surgery for within the last six 96) months, you do not qualify for the policy.
You want to make sure you have an active policy, since you never know when you may need it. And when you know you WILL need it, it’s too late to order it. Make sure you get all your questions answered. Look at your unique situation and needs and speak with your Medicare Advantage professional. For the typical cost of a policy, it’s worth having one at all times.