Working out Medicare

I have my Medicare card and become covered as of November 1.  People who I have told have asked what other insurance I have, and their basic question is, what medical expenses need coverage by other insurance.  Today I try to unpack the answers provided by Medicare on the government's website.

Part A covers hospital expenses with certain limits.

Your costs in Original Medicare

• $1,340 ($1,364 for 2019) 
  deductible
   for each 
  benefit period
   .
• Days 1–60: $0 
  coinsurance
   for each benefit period.
• Days 61–90: $335 ($341 for 2019) coinsurance per day of each benefit period.
• Days 91 and beyond: $670 ($682 for 2019) coinsurance per each "lifetime reserve day" after day 90 for each benefit period (up to 60 days over your lifetime).
• Beyond 
  lifetime reserve days
   : all costs.

Clearly, in any given year, my costs could range from zero to:

$1,364 + ($341 x 30) + ($670 x 60) = $(1364+10230+40200)= $51,794.

However, the above extreme would exhaust my lifetime benefits (I think).  Given that most years will not feature hospital visits, and given that we have savings and home equity that could cover a catastrophic illness, supplemental insurance is not required.  However, it is worth investigating what additional coverage we could get at what cost.  For example, if a $1,200/year premium would cover most of the potential $50k out-of-pocket costs for an extreme year plus the 'beyond lifetime reserve days,' the cost could be rationalized.  Taking this further, in the extreme case over the next 30 years, we would have paid ($1,200 x 30 =) $36,000 to get no benefits if we go into the hospital for less than 60 days.  On the other extreme, we experience two trips (one for each of us) that goes 90 days, for a total of over $100k.

In all of my experience, including people I have known, 90 days in the hospital is extremely rare.  It is almost unknown I would say.  My conclusion it is unwise to insure for costs that exceed 90 days in the hospital simply because the risk of the occurrence is small, and out capacity to cover the most likely of the least likely is still very good.  

Coverage for a more likely (but still, low risk) situation is a stay in a Skilled nursing facility.  Again, one must assess the instances that would exceed 100 days, because up to 20 days is no cost, and for the next 80 days, the cost is $10k.  Again, in my experience, such an occurrence is extremely rare and unlikely to justify the cost of monthly premiums.

Your costs in Original Medicare

You pay: 

• Days 1–20: $0 for each 
  benefit period
   .  
• Days 21–100: $167.50 ($170.50 for 2019) 
  coinsurance
   per day of each benefit period.
• Days 101 and beyond: all costs.

Last but not least is the kind of care my mother had in the last 20 months of her life.  This is a nursing home, and it cost on the order of $4k per month.  It is unclear to me how this was paid.  Was it the private health insurance, Social Security, or a combination?  How it is that I do not know this is an amazing lack of attention.  However, if we can assume no health insurance coverage for the cost, we can use our estimated Social Security payment of around $3,600 as a base for such care.  This leaves a small amount to cover the remaining part, and this would surely come from our home equity plus savings.  

Getting back to the topic, I am becoming comfortable with the idea that getting extra coverage outside of Medicare is unnecessary and unlikely to be of value.  In addition, the major emphasis of advertising for supplemental insurance is for prescription drug coverage, a topic of zero interest to me.  Pursuing insurance to cover incidents outside of what is covered by Medicare is akin to worrying about other exceedingly rare occurrences.