Does Medicare only cover 60% to 80% of medical costs

There is an old adage when it comes to Medicare that it only covers roughly 60% to 80% of medical costs and the remaining costs becomes the burden of the insured, or you, but is this old adage correct?

The answer lies within a myriad of questions and answers, but in reality, for some and perhaps many, the true is answer is that Medicare can cover close to 100% of all medical costs throughout retirement, excluding premiums, as long as there is a right mixture of:

1. Coverage
2. Health conditions.
3. Knowledge of the system.

What is needed to be known about Medicare:

Within Medicare there are 2 types of coverage, which are 1. Original Medicare and 2. Medicare Advantage Plans.

1. Under Original Medicare, the insured is responsible for obtaining their own coverage which consists of:

• Part A: coverage for hospital stays. There are no premiums for those who qualify, which is just about everybody, but there is a deductible per hospital visit ($1408 in 2020) as well as a co-pay for hospitals stays.
• Part B: coverage for physician visits. In 2020 the premium is $144.00 a month. Part B also includes an annual deductible of $198.00 for those who use its coverage as well as 20% co-pay and 15% Excess Charge that physicians may charge.
• Part D or prescription drug coverage. The cost of this coverage is based on the types of medications the insured is currently using. In 2020, for those of average health the monthly premium, including the deductible, is roughly $69.18 on a national average. The premium can be considerably less for those who take minimal medications or conversely more expensive if the insured is prescribed many different medications.
• Supplement Coverage or Medigap Plans: these plans are designed to cover the costs that are included in Parts A and B. In 2020 there are 8 different plans available with Plan A containing the least amount of coverage and Plan G being the most robust.
  • For the most robust coverage, Plan G, all costs within Parts A and B, excluding the Part B premium and Part B Deductible, are covered. The premium for a Plan G Medigap Plan in 2020 on a national average, blended for gender and tobacco use, is $1781.0 a month.

Please note that under Original Medicare there are no requirements to purchase any Part of Medicare, but there are late enrollment penalties for delaying coverage in Part B and Part D. This late enrollment penalty is compounding and perpetual, meaning the longer one delays the bigger the penalty becomes and that penalty is assessed each year after enrollment happens.

How does Original Medicare cover all costs for medical incidents?

Under the rules of Medicare if a person is admitted as an inpatient in a Medicare recognized facility for a medically necessary need, with the above stated coverage, then Medicare will cover all costs of that incident with the exception of the Part B Deductible of $198.00 in 2020.

Thus, for those who are considered to be fully insured under Original Medicare there will be only a $198.00 charge which is the Medicare Part B Deductible

Where there are the out-of-pocket costs under Original Medicare:

Besides premiums for coverage the majority of out-of-pocket health costs come in the form of preventive care as Original Medicare does not provide coverage for Dental, Optometry, Podiatry or even Routine Physicals, though there is Annual Wellness Physical but this physical does not go in depth as there are no diagnostics run.

The other possible out-of-pocket cost is in terms of prescription medications. If there is a medication that is prescribed, and that medication is not included in the Part D list of covered medications (formulary) then the insured bears the burden of the cost of the medication.

2. The other option a retiree has for health coverage is Medicare Advantage Plan (MA Plan)

MA Plans are administered by private insurance companies and are regulated by the Centers for Medicare Services (CMS) and often referred to as the PPO or HMO health plans as they are built around a network of healthcare providers.

These plans are designed to compete with Original Medicare and provide retirees with an alternative for health coverage.

They must at least provide the exact same benefits as Medicare Parts A and B and may also provide additional benefits that are not included in Original Medicare, like preventive care coverage for Dental, Optometry and Routine Physicals.

Unlike Original Medicare, MA Plans may provide prescription coverage within the health plan which can help alleviate the cost of that coverage as well the responsibility of remembering to pay that premium too.

Often, within MA Plans if an insured utilizes the healthcare professionals inside the network costs are minimal. The issue, though, is if outside the network care is provided, then the insured may bear the full burden of that cost.

Due to MA Plans being varied by the structure of the private insurers the ability to project costs is limited, but many do come with a maximum out-of-pocket cost for care as long as the insured stays within the network.

Because of this design and variations of possible health plans the probability that Medicare only covering 60% to 80% of costs for care may actually be realized.

So, does Medicare only cover 60% to 80% of medical costs?

Again, the answer depends on the type of coverage one has in retirement, how it is utilized and what type of care is provided. The other factor is one’s health. The better health one has the less preventative care may be needed and vice versa.

A breakdown:

• Original Medicare:
  • Covering majority of expenses:
    • For those who are considered to be fully insured under Original Medicare while only receiving care in a Medicare recognized facility as an inpatient for a medically necessary need then there is only the cost of that Part B Deductible ($198.00 in 2020) as well the premiums for coverage.
  • Not covering majority of expenses
    • For those enrolled in Original Medicare who are prescribed medications not covered on the Part D formulary or those engaging in preventive care like Dental or Optometry then Medicare may only cover 60% to 80% of medical costs.
• Medicare Advantage Plans:
  • Covering majority of expenses:
    • With MA Plans if the insured utilizes the healthcare professionals within the network as well as the medications listed on the formulary the ability to minimize out-of-pocket costs for care can be achieved.
  • Not covering majority of expenses:
    • By not accessing the providers within the network cost could be the responsibility of the insured.

Given the knowns about Medicare that old adage of it only covering 60% to 80% of medical costs throughout retirement can be debunked for those who opt to elect the right coverage, utilize the healthcare system in a knowledgeable way and minimize preventative care.

For more information on the pros and cons of both Original Medicare and Medicare Advantage Plans click here.