Doug’s 93-year-old mother, Miriam, had a tough January and February 2018. After a nasty fall in her apartment, she spent 4 days in the local hospital. From the hospital, her doctor ordered her sent to a skilled nursing facility (SNF). She spent 43 days recovering in the SNF. She was finally discharged but would require the use of a walker for several more months. When Doug picked her up, they both were in for a surprise.
Miriam owed $3,852.50 as her share of the cost for her stay in the SNF. Doug had assumed the total bill would be paid for by Medicare or by his Mother’s Medicare Supplement policy. Doug was wrong. His mother could not afford to pay the full amount of what she owed so Doug helped pay the bill.
What was Doug’s error? He never asked his Mom exactly what type of Medicare Supplement policy she owned. He knew she had a Medicare Supplement policy but not the type of policy nor the type of coverage it provided.
As it turned out, Miriam was covered by a Plan A Medicare Supplement plan. In Illinois, the monthly premium was $169. The more popular Plan F (which provided more comprehensive coverage) would cost her $343 per month for a monthly “savings” of $174. Miriam is on a fixed income and purchased Plan A to save money. Unfortunately, the insurance agent did not do a good job of explaining the differences between Plan A and the other Medicare Supplement plans
One big difference between Plan A and Plan F is the coverage provided for a SNF stay. Medicare Part A does pay a limited amount for a SNF stay. As long as the stay at the SNF is preceded by a 3-day stay at a hospital, Medicare pays 100% of the cost of the stay for days 1 through 20. For days 21 through 100 Medicare pays the cost minus a daily co-payment, paid by the beneficiary, of $167.50. Miriam’s 43-day stay at the SNF included 23 days that she was responsible for the co-payment or 23 days times $167.50 equals $3,852.50. Note that after 100 days in a SNF, Medicare (nor the Medicare Supplement Plan) does not pay any portion of the cost.
What could Doug – or any adult child of a Medicare-enrolled parent - have done to avoid the unexpected bill from the SNF? Ask your Mom or Dad if they have a Medicare Supplement plan and, if so, what plan is it? Is it Plan A or Plan B? Neither of these plans cover the SNF co-payments that Miriam owed when she was discharged. All the other plans cover the co-payments due after a SNF either at 100% (Plans C, D, F, G, M, and N) or at 50% (Plan K) or 75% (Plan L). The monthly premium savings from selecting Plan A quickly disappeared with just one stay in the SNF!
To understand the differences among the policies a good source is 2017 Choosing a Medigap Policy: A Guide to Health Insurance for People with Medicare available here.
Your parents can change their Medicare Supplement plans anytime during the year. They do not have to wait until the Annual Enrollment Period (AEP) that lasts from October 15 through December 7.
Keep in mind, that applying for a Medicare Supplement plan can be a problem if your parent has a preexisting health condition. The insurance company can refuse to issue a policy if your parent is not in either their Initial Enrollment Period (IEP) or Special Enrollment Period (SEP). The IEP lasts for seven months – the three months before your mom or dad turn age 65, the month in which they turn age 65, and the three months after the month in which they turn age 65). The SEP lasts for eight months after health insurance coverage provided by an employer is lost.
In some states (such as New York) Medicare Supplement policies are year-round open enrollment or offer additional open enrollment periods (California). In other states, some insurance companies will issue a Medicare Supplement policy without asking health questions. A good insurance agent can help you find the right policy and the right company in the state in which your mom or dad live. It is best to work with an agent that represents several companies, not just one.
Proper planning for Medicare coverage is no longer a “one and done” process – it is a dynamic process. The coverage decision your parents made when they turned age 65 may not be the best choice now. There are opportunities during the year to make changes to your parent’s (or to your) Medicare coverage. A good financial adviser can be a resource as health and coverage needs change.
Note that Medicare itself is divided into four distinct parts — Part A covers hospitalization, Part B covers doctor bills and durable medical equipment (for example, Miriam’s walker), Part C is often referred to as Medicare Advantage which is an alternative way for Medicare beneficiaries to be covered under Medicare and Part D which covers prescription drugs. In Miriam’s case, she is covered by what is often referred to as traditional Medicare — Part A, Part B, Part D and a Medicare Supplement plan.
Medicare Supplement plans are offered by private insurance companies. Medicare beneficiaries are not required to purchase Medicare Supplement plans. The plans offered are regulated by the Centers for Medicare and Medicaid Services (CMS) and by the state insurance departments.
There are ten Medicare Supplement plans each designated by a letter —A, B, C, D, F, High Deductible Plan F (HDF), G, K, L, M and N. Coverage under each plan is standardized.
When someone says he or she is covered by Medicare Part A the reference is to Medicare itself. Miriam is covered by Medicare Part A and a Medicare Supplement Part A.
Jim is a CPA and financial planner. Jim’s practice focuses on helping his clients think about and plan for the costs of health care in retirement. He has written over 100 articles on health care costs in retirement and a book on Medicare for the American Institute of Certified Public Accountants (the AICPA). He is currently writing a book for the AICPA on the impact of chronic and terminal illness on retirement plans. He lives in Glen Ellyn with his wife, 3 children and 2 Beagles.
CPA and Financial Planner
James Sullivan , MS, CPA, PFS