Medicare 101: Avoiding Hidden Fees

For over 50 years, Medicare has provided health insurance to Americans once they reached the age of 65. Although many expect their medical bills to be covered at this point, the truth is that there are still costs associated with Medicare. Expected costs include coinsurance and monthly premiums, but there are other situations where you could end up paying more money unexpectedly. Fortunately, you can minimize your out-of-pocket expenses by staying informed on these hidden costs.

When Your “Free” Checkup isn’t Free

Medicare B covers one free checkup every year. If you’re feeling great and the doctor doesn’t find any issues, you can expect your “free” visit to actually be free. However, if your doctor decides to offer services or order tests that aren’t considered preventative,  you officially step outside of the realm of “preventive” and right into the world of “treatment.”

Many services you might not have expected to be performed are still covered. Unfortunately, there’s no guarantee behind this. You may also face costs if medical professionals perform a test more often than Medicare allows. Either way, you might not walk out with a zero balance. Ask your doctor if there are options that will keep you within the limits of Medicare.

Deductibles Can Become Prohibitive

Even when Medicare works exactly as it’s supposed to, you can still be caught off guard by billing statements you receive in the mail. This is because, while the standard 20 percent deductible might not seem like much, it can become prohibitive if treatment is too expensive.

If one were to look at the cost of a CT scan – around $1,200 – a 20 percent deductible might not sound like it’ll break the bank. A kidney transplant, on the other hand, can cost upwards of $300,000. No matter how great someone is at saving money before retirement, paying tens of thousands of dollars in expensive treatment costs will never come easy.

Out-of-Pocket Expenses Have No Limit

With many health insurance plans, there is a preset annual limit that consumers have to pay out of pocket. This isn’t the case when it comes to Medicare. Even if you’ve spent $20,000 or more out of pocket due to the 20 percent deductible, you’ll still have to keep paying that deductible. Fortunately, there are ways to avoid financial ruin in these circumstances.

Whether you have to undergo a single expensive treatment or your recurring healthcare needs just become too expensive, supplemental insurance policies can help bridge the gap. Nearly 25 percent of Medicare recipients have some form of “Medigap” coverage. This makes it crystal clear that the hidden costs of Medicare are a serious issue for many retirees.

Issues with Medicare Part D

If you have noticed your prescription drug costs going up with Medicare Part D, you’re not alone. Unfortunately, it seems that there may be a sinister reason behind this. When your drug costs are low, the plan has to pay around 75 percent of the costs. If your out-of-pocket reaches $5,000, though, the government moves in and covers 80 percent of costs through reinsurance.

This means private insurance plans have no real incentive to negotiate lower drug prices. In fact, they save money when consumers are pushed into the high out-of-pocket range. There’s no guarantee that this is behind your particular prescriptions’ rise in prices, but it’s important to know you have other options if things get too expensive.

Those who were formerly in the Armed Forces, for instance, can receive prescription coverage through the Veterans Administration. Others get supplemental coverage through former employers. Still others utilize the Social Security Extra Help/LIS program. The trick is to compare each option to see which works best for you.

Hospital Stays Fall in the Gap

If you are placed in the hospital under observation status, Medicare Part B will typically keep your costs low. Of course, this is only if you’re in the hospital for less than 24 hours. Unfortunately, some hospitals may keep you under observation for up to three days. If this is the case, you’re essentially receiving hospital care without Medicare Part A keeping the prices in check.

This can become an even larger problem if you end up moving to a skilled nursing facility. Your inpatient hospitalization status must reach three consecutive days before nursing facility care is covered. If you were classified under observation status at the hospital without knowing it, your nursing home stay might not be covered at all.

Fortunately, hospitals can reclassify your status for a period of time after your discharge. This makes it imperative to remain alert of your bills and classification during hospital stays.

Late Enrollment Penalties

Some people don’t initially think they need Medicare because they’re still working. Others simply overlook the fact that they need to sign up. Whatever the reason, failing to sign up for Medicare Part B during the 7-month signup period will result in penalties. Unfortunately, these aren’t one-time fees. If you miss the enrollment period, you’ll face penalties for the rest of your life.

For every 12-month period you fail to sign up, you’ll see a 10 percent increase in your monthly premium. This means that someone will face a 30 percent higher premium if they don’t sign up within three years. If you are receiving health insurance through an employer, though, you have eight months to sign up once that coverage ends.

Save Money by Staying Informed

Medicare is a great social safety net that helps older Americans combat increasing healthcare costs. If you’re not careful, though, hidden costs can sneak up and put a much larger dent in your wallet than you ever expected. Stay informed about current news related to Medicare, and always understand which costs are covered and which aren’t. This will ensure your money can go where it’s really needed.