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Medicare offers quality healthcare coverage but, like any insurance plan, it comes at a price. While many people get their Medicare Part A premiums for free (if they or their spouse worked 10 years in Social Security-taxed employment), everyone is on the hook for Medicare Part B premiums. Add to that the cost of deductibles, copays, coinsurance, and even late penalties – and there are many out-of-pocket costs you will face when you are on Medicare.
Fortunately, when you know what costs to expect, you can find ways to minimize them and protect yourself.
According to the Kaiser Family Foundation, the average Medicare beneficiary spent $5,460 in total out-of-pocket costs in 2016.
To get a sense of how much you could pay, you have to first decide whether you want to enroll in Original Medicare (Part A and Part B) or Medicare Advantage (Part C). The former is traditional Medicare, run by the federal government, while the latter are managed care plans (e.g., HMOs and PPOs) run by private insurance companies.
Both types of Medicare are required to cover the same services, but some Medicare Advantage plans offer additional benefits. If you enrolled in Original Medicare, you can also sign up for a Part D prescription drug plan. Alternatively, you can pick a Medicare Advantage plan that also has Part D benefits.
According to the Centers for Medicare and Medicaid Services (CMS), 37.6 million people were enrolled in Original Medicare and 24.4 million people had Medicare Advantage coverage in 2020. Your choice is important because it affects how much you will pay in out-of-pocket costs.
You cannot avoid all out-of-pocket costs, but you can do your best to minimize them. Most importantly, you can plan and anticipate them so you can avoid surprise medical bills. Here’s what you can do:
Enroll in Medicare on time to avoid late penalties, especially because you could get stuck paying some of those penalties for as long as you have Medicare coverage. It is important to not miss these deadlines.
Choose doctors – whenever possible – who not only accept Medicare for payment but who also “accept assignment.” This means they signed a contract to charge no more than Medicare-approved rates for their services.
Doctors who do not accept assignment, on the other hand, can charge up to 15% more than what Medicare recommends. If you enrolled in a Medicare Advantage plan, you also want to be sure to pick a doctor in your plan’s network. Otherwise, their services may not be covered at all.
Enrollees who also have Medicaid should visit doctors who also accept Medicaid (and, if applicable, their Medicaid managed care plan).
Not all hospital stays are billed the same – even when you stay overnight. Ask your doctor about your orders, inpatient or observation, when you stay in the hospital.
When you’re admitted as an inpatient, Part A coverage kicks in; when you are placed under observation, Part B pays. Because you pay 20% for each service under Part B, you might end up paying more than if you paid the single Part A deductible for an inpatient stay. (In 2022, the Part A deductible is $1,556 per benefit period).
Hospital orders could also affect whether or not Medicare will pay for your stay in a skilled nursing facility. (In order to have coverage for the skilled nursing facility stay, you need to be an inpatient in the hospital for at least three days prior to transferring to the skilled nursing facility.)
Check your Medicare bills for accuracy. Paying for services that were never provided or for other billing errors is wasteful. Do not hesitate to reach out to your doctor’s billing office if you have questions or concerns.
If a claim is denied by Medicare, ask the doctor or hospital to double-check to see if it was properly coded and billed.
Consider a Medicare supplement plan – also known as Medigap – to save on expenses not covered by Original Medicare. Depending on the plan you choose, they can help to cover your Part A deductible, Part A/B coinsurance, and even healthcare you receive in a foreign country.
That said, the plans add to your out-of-pocket costs, since they also require a monthly premium. You have to decide whether a Medigap plan could save you more money in the long run.
Look into Medicare Savings Programs if you are unable to afford your Part A/B deductibles, premiums, copays, or coinsurance. Likewise, check out Extra Help if you are unable to afford your Part D expenses. These programs, which are based on your financial situation, can decrease your costs or eliminate some of them altogether. (Eligibility rules vary somewhat from state to state; select your state on this map to learn more).
Negotiate with your doctor, hospital, laboratory facility, etc., if they do not cover a specific service you need. There’s no guarantee they will agree but they could potentially offer you lower rates, like they often do for people who do not otherwise have insurance.
Keep in mind if Medicare or a Medicare Advantage plan denies coverage for a service (even after you appeal the decision), you are only responsible for Medicare’s rate for it. You can usually find the rate for Part B services online by visiting your Part B Medicare Administrative Contractor (MAC’s) website. This amount is often much lower than a provider’s billed charges.
Tanya Feke M.D. is a licensed, board-certified family physician. As a practicing primary care physician and an urgent care physician for nearly ten years, she saw first-hand how Medicare impacted her patients. In recent years, her career path has shifted to consultant work with a focus on utilization review and medical necessity compliance. She currently works as a physician advisor at R1 RCM, Inc., where she performs case reviews for hospitals nationwide.
Dr. Feke is an expert in the field, having Medicare experience on the frontlines with both patients and hospital systems. To educate the public about ongoing issues with the program, she authored Medicare Essentials: A Physician Insider Reveals the Fine Print. She has been frequently referenced as a Medicare expert in the media and is a contributor to multiple online publications. As founder of Diagnosis Life, LLC, she also posts regular content about health and wellness to her site at diagnosislife.com.