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Medicare Hospital Coverage: Benefit Periods, Lifetime Reserve Days, and Other Things You Should Know

Last updated March 17th, 2020

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Medicare Parts A and B (also known as ‘Original Medicare’) cover most Americans over the age of 65 and provide many valuable hospital and medical insurance benefits, keeping healthcare costs manageable for retirees. However, Original Medicare doesn’t pay for everything, and if your health takes a turn for the worse, Medicare beneficiaries can still find themselves looking at massive medical bills.

The Limits of Medicare Hospital Coverage Under Part A

While Medicare does a great job of keeping healthcare expenses affordable for America’s senior citizens, there are limits to Medicare hospital coverage. For example, the cost of long-term hospitalizations can snowball for Medicare beneficiaries who spend multiple months in the hospital due to serious illness or injuries. If you have Medicare Part A coverage, here’s what you can expect to pay out-of-pocket during an extended hospital stay:

  1. Deductible: Medicare Part A has a $1,340 deductible per benefit period for inpatient hospital stays (in 2018). Effectively, this means a Medicare beneficiary admitted to the hospital will need to pay $1,340 out-of-pocket before Medicare will begin to cover the cost of their hospital care. (Remember that a benefit period is the time period during which a patient is hospitalized for an extended stay. It starts on the day you’re admitted to the hospital and ends when you’ve out of the hospital for 60 days in a row and didn’t receive any Medicare-covered skilled care throughout all 60 days). Total out-of-pocket cost = $1,340
  2. Coinsurance Payments: In addition to their Part A deductible, Medicare beneficiaries who spend more than 60 days in the hospital will need to pay $335 per day in coinsurance for days 61 – 90 of their hospitalization. Total out-of-pocket cost (for hospital stay > 60 days): $335 x 29 days = $9,715
  3. Lifetime Reserve Day coinsurance payments: In addition to their Part A hospital coverage, Medicare allocates 60 Lifetime Reserve Days to individuals upon their enrollment in Medicare. If someone with Medicare coverage needs to be hospitalized for longer than 90 days, (s)he can draw upon their lifetime reserve days –  these are  additional days that Medicare Part A will pay for when a beneficiary needs to be hospitalized for more than 90 days in a single benefit period. While lifetime reserve days provide an extra safety net of hospital coverage, they do not replenish each benefit period, as deductibles do; Medicare beneficiaries are limited to a total of 60 reserve days over the course of their life. If you need to spend more than 90 consecutive days in the hospital and choose to draw upon your store of lifetime reserve days to cover your inpatient hospital day, you will pay $658 per day, for each “lifetime reserve day” you use. Total out-of-pocket cost (for hospital stay > 90 days) = $670 x 60 lifetime reserve days = $40,200
    1. Your remaining lifetime reserve days can increase in cost each year.

As you can see, even Medicare coverage you could pay tens of thousands of dollars out-of-pocket in the event of a lengthy hospitalization. And while spending more than three consecutive months in the hospital is unusual, hospitalizations of this duration are not unheard of – especially for seniors who are severely ill or injured.

Medigap Fills Medicare Coverage Gaps

Fortunately, Medicare beneficiaries seeking a measure of financial protection in the event of a long hospitalization can purchase a Medigap insurance policy. Also known as Medicare Supplement, Medigap plans are designed to absorb healthcare costs not covered under Original Medicare (Parts A and B).

To avert having to pay tens of thousands of dollars out-of-pocket during an extended inpatient hospital stay, some Medicare beneficiaries purchase Medicare supplemental insurance (Medigap plans A-N). These Medigap plans cover the cost of Part A coinsurance; plus, they also provide beneficiaries with 365 additional lifetime reserve days. Some Medigap plans also cover Medicare beneficiaries’ Part A hospital deductible and other Medigap plans pay for healthcare expenses which Original Medicare does not cover, such as out-of-hospital prescription drugs. You can take a look at the differences between Medicare Supplement plans here.

To be sure, most people don’t spend more than a few days in the hospital. However, this benefit is especially useful for patients who have chronic illness and require long-term hospital care, who might otherwise worry about running out of coverage. Purchasing a Medigap policy prevents them from racking up costly hospital bills, should they need to be hospitalized for longer than 90 days in any one benefit period.

Other Points to Consider: Lifetime Reserve Days

  • If your hospital costs are slightly higher than the coinsurance amount you’d pay for using lifetime reserve days ($670 in 2018), you may want to save your lifetime reserve days for future hospital stays that could be more expensive.
  • If you decide to use your lifetime reserve days and later change your mind, the hospital must approve your decision.
  • If the cost of daily hospital care is less than the cost of daily coinsurance for lifetime reserve days, you will be responsible for the cost of your hospital care, but you will not exhaust any of your lifetime reserve days.
  • If you are in a Medicare Advantage plan, your hospital deductible, coinsurance, and benefit period will probably be different. Call your plan provider to find out what your out-of-pocket costs would be for hospitalizations and what rules you have to follow in order to get coverage (for example, getting pre-authorization for any hospitalization).

Should You Buy a Medigap Policy?

If you think there is a good chance you will face many out-of-pocket costs that a Medicare Supplement plan may cover, then purchasing a Medigap may be worth the cost of its monthly premium. There are up to 10 Medicare Supplement plans available in most states, labeled A, B, C, D, F, G, K, L, M and N. Consider which benefits you may need and which Medicare Supplement plan has those benefits.

The bottom line? If you have Medicare coverage and want to make your healthcare expenses more predictable, you may want to explore your Medigap options and choose a plan that fits your needs and budget.

Taking the Next Steps

If you expect to spend some time in the hospital, a Medicare Supplement or Medicare Advantage plan can help offset some of your costs. Consider joining most people with Medicare in adding additional coverage to your Original Medicare.

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