The first question we tackled was whether she should purchase a supplemental insurance plan.
This is the first in a series of articles about Health Insurance Options. For the background see Overview.
Supplemental Insurance Coverage
Supplemental insurance basically covers the costs that your primary insurance does not cover. For Medicare Part A this includes the annual deductible of $1260. There are also co-pays for prolonged hospital stays or extended stays in a skilled nursing facility. A supplemental plan would pay some or all of these patient responsible amounts.
A supplemental plan may also pay some of the costs associated with Medicare Part B. I will cover the details of what Medicare Part A and Part B cover in more detail in another post but basically Part B covers doctor’s office visits.
Finally, some supplemental plans include a prescription drug benefit. With these plans you pay a co-pay for prescriptions. They are often tiered based on the drug prescribed. 1st Tier drugs often have a low co-pay, $0-$10; Tier 2 drugs may have a $20-$30 co-pay; Tier 3 drugs may have a $50 co-pay. Each plan has their own pricing structure and they don’t all tier drugs the same way.
The lowest cost supplemental plan she could purchase was a UnitedHealthCare plan for $380 per month. That plan covers her and her husband. This plan offers supplemental coverage for Part A, Part B, and a prescription drug benefit. $380 is not cheap, so we wanted to figure out what she was going to be getting for this price.
Medicare Part A basically covers hospital care. There is a $1260 deductible and daily co-pay of $315 after Day 60. That goes up to $630 per day after Day 90. These are the numbers for 2015 and they change every year.
So if she were to need a hospital stay for any reason she would be responsible for the first $1260. I don’t bill for hospital services but I would guess that is less than one day’s charges for a hospital stay. So virtually any hospital stay is going to cost her $1260. A supplemental plan would pick up this charge.
Staying in the hospital longer than 60 days is very rare these days. Most medical problems can be stabilized within this time frame and discharge home or transfer to another facility is usually possible in less than 2 months. Rarely, prolonged stays are necessary and if this occurs the daily co-pay of $315 would then kick in. At $315 a day, another month in the hospital would run about $9,450 in co-pays after Medicare Part A pays their part. This situation is unlikely to occur but if it did, it would be expensive. Again, the supplemental plan would pay this portion.
So a supplemental plan is basically worth $1260 for hospital care unless something terrible happens. Then it might be worth $10,710. If we double that, since the plan covers her and her husband, the value is $3320 for hospital care.
Doctor’s Office Benefit
Most of the medical care individuals need is provided outside the hospital, in a doctor’s office. Medicare Part B pays for these services. Part B has a yearly deductible of $147 and a co-pay of 20%. That means that a $100 doctor’s office visit is paid $80 by Medicare Part B and the patient owes the remaining $20. The supplemental plan includes a $25 co-pay for primary care and a $40 co-pay for specialists. So to go see her primary care physician 4 times a year would cost her $100 in co-pays. If she sees her cardiologist twice a year that is another $80 for a total cost to her of $180 for her doctor’s office visits WITH supplemental insurance plan. If she were to simply go see her doctor without the supplemental insurance, only Part B coverage, she would be responsible for 20% of the charge. Most primary care office visits cost around $100. A specialist might be $200, depending on how complex the problem is and what they are treating. Most of the time it is actually closer to the same $100 the primary care physician gets but we will round up here just make sure we are not estimating too low. The same 4 primary care visit and 2 cardiologist visits would run $800 total, 80% of which is paid by Medicare Part B. That leaves $160 that she owes WITHOUT the supplemental insurance. I was surprised to see this but in this case the supplemental insurance actually ends up costing her more for her office visits.
Prescription Drug Benefit
The cost of prescription drugs can be scary. The list price of some of these medication is staggering. Prescription drug benefit plans make these drugs more affordable with a fixed co-pay which can range from $10 for generics to $50 or more for brand name drugs. In this case there are about 8 prescriptions per month for both her and her husband that we need to consider. Some of these are generic Tier 1, some Tier 2, and one is Tier 3. The co-pays for all of these prescriptions is $215 WITH the supplemental plan. Initially looking at the cash list price for these medications totaled somewhere in the $1000 per month range. But there are ways to save on prescription drug costs if you know where to look. There are two websites that I recommend to my patients regularly- GoodRX.com and HelpRX.com. Both of these sites are free and can provide significant savings on prescription drugs costs. Using GoodRX we were able to find all 8 of the prescriptions at local pharmacies for a cash price of $302 WITHOUT the supplemental plan.
So the supplemental plan saves her $87 is this case.
Based on the above breakdown we can estimate the value of this supplemental plan
Doctor’s visit – no value
Prescription drugs – $87
Hospital care – $1260 if one is hospitalized, $3320 if both are hospitalized
Total Value = $3407
Total Cost = $4560 ($380 per month x 12 months)
The most likely scenario is they are both seen by their doctors in the office and continue their current medications. If this happens, the value of the supplemental plan is $87, with a sticker price of $4560.
If one of them is hospitalized, the value of the supplemental plan increases. If they are both hospitalized in the same year, they get the maximum value from the supplemental plan.
In the worst case (both get hospitalized for less than 60 days) the supplemental plan costs about $1153 more than it is worth, almost $100 per month.
I told her I didn’t think it was worth it to buy this plan.
In the next post I will cover Medicare Part A in more detail