The coverage gaps of original Medicare are commonly referred to as the “Medicare Gap.” Although Medicare provides vital health care coverage to 44 million U.S. adults ages 65 and older (“seniors”), contrary to common belief, Medicare actually does not cover many common and essential health care expenses. In fact, Medicare has significant gaps in what types of healthcare services it does cover and places significant limits on how much of the covered services it will actually pay for. According to AARP, the Medicare Gap leaves the average senior each year responsible for $6,168 in out-of-pocket healthcare costs, and the top quarter of seniors responsible each year for an average of $14,123 in out-of-pocket healthcare costs. This article explains the major gaps in original Medicare and why the Medicare Gap is top concern for seniors today.
Why Original Medicare Has a Medicare Gap?
Original Medicare is individual insurance provided by the federal government primarily to seniors. It includes Medicare Part A (hospital insurance) coverage and Medicare Part B (medical insurance) coverage.
Medicare Part A pays for hospital stays and inpatient care, but there are many hospital-related coverage gaps in Part A coverage. The gaps in Medicare Part A coverage that drive significant out-of pockets costs to seniors include:
- Common personal expenses while hospitalized, like TV, phone services, or a private room, are not covered;
- Care that helps with daily life custodial activities, like eating and bathing, are not covered;
- Hospital stays beyond certain set number of days are not covered; and
- Care outside of the United States is also not covered by Medicare Part A.
Most significant, Part A also charges a deductible and copay to Seniors for many of the hospital services that can it does cover, and these out-of-pocket charges can be several hundred dollars for each day in the hospital.
Medicare Part B is the other half of Original Medicare and it covers doctor services, emergency medical services and some preventive care. Common gaps in Part B coverage that drive significant out-of pockets costs to seniors include:
- Eye exams, eyeglasses or contact lenses are not covered;
- Hearing tests or hearing aids are not covered by Medicare Part B;
- Dental exams, cleanings, X-rays or routine dental care are not covered by Medicare Part B;
- Routine foot care is not covered by Medicare Part B; and
- Prescription and over-the-counter drug costs are also not covered by Medicare Part B.
Most significantly, part B also place very large deductible and co-insurance obligations on the senior. The most detrimental of these cost burdens on seniors is Part B’s 20% cost sharing obligation.
Why Medicare Part B 20% Cost Sharing is Big Concern for Seniors
The core of the Medicare Gap is the Part B cost sharing. Medicare Part B pays only 80% of the cost for most health services after the senior has paid the deductible; seniors must pay the remaining 20% of all costs. Most importantly, there is no out of pocket maximum that will protect the senior who is subject to a serious health condition or illness. That means a senior with only original Medicare is subject to unlimited financial exposure if the senior has a serious accident or a chronic condition such as heart disease, cancer, and diabetes. Accordingly, original Medicare coverage alone is not sufficient health coverage for the typical senior.
How Senior’s Solve the Medicare Gap
To limit risk exposure to the Medicare gap, most seniors obtain supplemental insurance coverage that fills in the coverage gaps of original Medicare and that caps a senior’s maximum out-of-pocket costs. The major forms of supplemental coverage designed to address the Medicare gap are Medicare supplement insurance (Medigap) plans, Medicare Advantage plans, and Medicare Part D (prescription drug coverage) plans. These plans are sold by private insurers and if purchased correctly they can meet health care needs not met by original Medicare and solve the Medicare gap.
Bruce Telkamp is an independent authority and frequent writer on healthcare and medicare market trends. The view of this article and others article written by Mr. Telkamp are his own.
Senior Health and Medicare Market Authority
Bruce Telkamp is a leading authority in how seniors use and supplement their Medicare health coverage. Telkamp’s contributions include essential work with health insurance companies and regulators that enabled the first completely online sale of a health insurance plan in 2000, expanding from the exclusive domain of “wet” signatures on paper health insurance forms to the scalable world of digital ecommerce, and launching the first nationwide private Medicare exchange in 2010. Mr. Telkamp served for six years as CEO and Founder of HealthPocket, Inc. and AgileHealthInsurance.com (NASDAQ: BFYT). From 2000 to 2012, Mr. Telkamp served as Executive Vice President of Marketing and Business Operations at eHealth, Inc. (NASDAQ: EHTH), where he oversaw all marketing, operations, carrier relations, and regulatory functions. At eHealth, Mr. Telkamp designed and launched the eHealth’s private Medicare exchange in 2010, which is the core of eHealth’s business model today. Before his work at eHealth, Mr. Telkamp was an intellectual property and Internet privacy attorney with Wilson Sonsini Goodrich & Rosati. Mr. Telkamp has a law degree with Honors from the University of California, Hastings College of the Law and a B.A. with Honors in economics from the University of California, Los Angeles (UCLA). Mr. Telkamp is a member of the California Bar, has held health insurance licenses in all U.S. states, and is a recognized authority on innovation and cost trends in the U.S. healthcare and health insurance markets including Medicare. Mr. Telkamp has also served on public and private boards of various companies in the U.S. health insurance and Medicare markets.