Medicare Hospital Coverage: Benefit Periods, Lifetime Reserve Days, and Other Things You Should Know

Updated on: October 18th, 2020

Reviewed by Frank Lalli

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What Are the Limits of Medicare Part A?

Medicare beneficiaries are admitted into hospitals around 10 million times a year, on average. Fortunately, Medicare Part A hospital does a pretty good job of keeping America’s senior citizens healthy at reasonable costs. But there are exceptions. Patients face a sizable deductible as well as coinsurance. Worse, the cost of long-term hospitalization can snowball for Medicare beneficiaries who spend more than two months in the hospital due to serious illness or injuries. If you have Medicare Part A coverage, here’s what you can expect to pay out-of-pocket during an extended hospital stay.

What You Need to Know

Medicare Part A has several out-of-pocket costs if you are admitted into a hospital.

If you need to be hospitalized for longer than 90 days, you will use lifetime reserve days. There is only a set amount of these you can use.

You can can buy back used Lifetime Reserve Days if an insurer steps covers the hospital cost.

Deductible

Medicare Part A has a $1,408 deductible per benefit period, which begins the day you are admitted for an inpatient hospital stay. Effectively, this means a Medicare beneficiary admitted to the hospital will need to pay $1,408 out-of-pocket before Medicare begins to cover the cost of his or her hospital care. Remember that a benefit period ends when you haven’t received any in-patient care for 60 days. Total out-of-pocket cost = $1,408.

Coinsurance Payments

In addition to the Part A deductible, Medicare beneficiaries who spend more than 60 days in a hospital stay will be billed $352 per day in coinsurance for days 61 through 90 of their hospitalization. Total out-of-pocket cost (for a hospital stay over 60 days): $352 x 29 days = $10,208.

Lifetime Reserve Day coinsurance payments

In addition to the usual Part A hospital coverage, Medicare allocates 60 Lifetime Reserve Days each to individuals when they enroll in Medicare. If Medicare patients need to be hospitalized for longer than 90 days, he or she can draw upon their Lifetime Reserve Days. Lifetime days are additional days that Medicare Part A will pay for when a beneficiary needs to be hospitalized for more than 90 days in a single benefit period. Think of them as a safety net for an extended hospital stay.

However, those days are finite. They can only be used once. They accumulate, rather than replenish with each benefit period as deductibles do. Medicare beneficiaries are limited to a total of 60 reserve days per lifetime. If you need to spend more than 90 consecutive days in the hospital and choose to draw upon your store of Lifetime Reserve Days, you will pay $704 per day for each day you use, as opposed to around $3,000 a day with no insurance. Total out-of-pocket cost for a hospital stay over 90 days = $704 x 60 lifetime reserve days = $42,240. Also, note that your remaining lifetime reserve days will almost surely increase in cost each year.

As you can see, even with original Medicare Part A coverage you could end up paying tens of thousands of dollars out-of-pocket in the event of a lengthy hospitalization. And while spending more than three consecutive months in the hospital is remote – the average stay is less than five days – lengthy hospitalizations for dire illnesses or injuries do happen.

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How Can Medigap Insurance Protect You

Fortunately, Medicare beneficiaries seeking financial protection against a long hospitalization can purchase a Medigap insurance policy. Also known as Medicare Supplement Insurance, Medigap policies are designed to pick up the healthcare costs not covered under Original Medicare Part A and Part B.

To avoid perhaps paying tens of thousands of dollars out-of-pocket during an extended hospital stay, more than 30% of Original Medicare beneficiaries purchase Medicare Supplement Insurance (Medigap policies A-N). These policies cover the cost of Part A coinsurance; plus, they provide beneficiaries with 365 additional lifetime reserve days. Some plans also cover Medicare beneficiaries’ Part A hospital deductible. Others pay for healthcare expenses that Original Medicare does not cover, such as out-of-hospital prescription drugs.  

To be sure, most people don’t spend more than a week in the hospital. However, Medigap coverage is especially helpful for patients who have a chronic illness and therefore run the risk of needing extended hospital care. Purchasing a Medigap policy can protect them from racking up costly hospital bills, especially if they need to be hospitalized over 90 days in any one benefit period.

Highlights

Medigap picks up the costs not covered under by Original Medicare.

Other Points To Consider About Lifetime Reserve Days

  • If your hospital costs are only somewhat higher than the $704 coinsurance amount you’d pay for using Lifetime Reserve Days in 2020, you may want to save your days for future hospital stays that could be more expensive.
  • If you decide to use your Lifetime Reserve Days and later change your mind, the hospital must honor your decision, while accepting your payment for your stay.
  • If the cost of your daily hospital care is less than the cost of daily coinsurance for Lifetime Reserve Days, there is good news and bad. In that case, Medicare will not deduct any of your Lifetime Reserve Days. But you will be responsible for the daily cost of your hospital care.
  • If you are enrolled in a Medicare Advantage Plan, rather than Original Medicare, your hospital deductible, coinsurance, and benefit period will probably be different. Call your plan provider and ask what your out-of-pocket costs would be for hospitalizations and what rules you have to follow in order to get coverage (like perhaps needing pre-authorization for a hospitalization).
  • Patients have the option to buy back their used Lifetime Reserve Days within 90 days of being discharged, or even longer if an insurer steps forward to cover the hospital days.

Should You Buy A Medigap Policy?

If you think there is a reasonable chance you will face stiff out-of-pocket costs that a Medicare Supplement plan would cover, then purchasing a Medigap policy may be worth the roughly $150 a month premium you’ll be charged. There are up to 10 Medicare Supplement plans available in most states, labeled A, B, C, D, F, G, K, L, M, and N, though Plan C and Plan F are no longer available to new Medicare enrollees. Decide on the plans’ benefits you may need and then find a Medicare Supplement Plan featuring those benefits.

The bottom line: If you have Medicare coverage and want to keep a lid on expenses, explore your Medigap options and choose a plan that fits your needs and budget.

Taking The Next Steps

If you land in the hospital, a Medicare Supplement or Medicare Advantage plan could offset a chunk of your costs. Consider joining the tens of millions with Original Medicare who have added supplemental coverage for their financial protection and peace of mind.

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