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Medicare Part A Basics

Today’s featured video introduces Medicare Part A, what it covers and how the inpatient benefit works. Medicare Part A covers both hospital and skilled nursing facility inpatient services and part-time home health services following an inpatient stay. Medicare Part A also covers hospice services.

Although what Medicare Part A covers is fairly straightforward, very few understand how Part A works to cover inpatient services, so we want to review that important issue. It is important because the protection Medicare Part A provides is much less comprehensive than the coverage most people have before going on to Medicare. A person on Medicare Part A cannot have a benefit of more than 150 hospital days or 100 skilled nursing facility days at a single time. The reason this is not more of a problem is because these benefits are structured in a way that benefits replenish AND most people have additional hospitalization coverage through either a Medicare supplement or an Advantage plan.

Non-Medicare plans, which are Affordable Care Act compliant (most plans for that matter), have UNLIMITED hospitalization coverage. As a result, people quite ironically enter their older years of life with less hospital coverage than they enjoyed prior to going on to Medicare. As a result, it is important to understand this issue in order to plan to have additional hospitalization coverage in place.

So how does it work? The days you spend in a hospital (150 day maximum) or skilled nursing facility (100 day maximum) are subtracted from your total days. Then, once you remain outside a hospital or skilled nursing facility for 60 days, your benefit days replenish. One point to keep in mind is that if one uses more than 90 hospital days in a stay, then that permanently reduces one’s hospital days to below the 150 maximum. The last 60 days of the hospital benefit are called “lifetime reserve days” which is a very good name for them because they don’t replenish if you use them.

This fact is a reason we believe everyone should have additional hospital coverage either through a supplement or Advantage Plan. It is not common to exhaust one’s Medicare Part A coverage, but it happens and can be financially devastating. We had a family come to us after the death of a family member on Medicare. She had exhausted Medicare Part A, had no other hospital coverage and remained for months in the hospital, which ultimately billed her estate $800,000 for her care. During the period Medicare was in effect, she had been discharged and readmitted but never out of the hospital for the 60 days necessary for her benefit to replenish.

Please also note that Medicare only covers skilled nursing facility inpatient stays after a three-day hospital stay. It wasn’t that long ago that this was a terrible problem for unwitting patients who remained at a hospital admitted under observation. Medicare covered the stay but under Part B, so these stays did not meet the three-day inpatient stay requirement. These patients ended up with bills from the skilled nursing facility they thought Medicare would cover. Communication among facilities and patients has improved and we haven’t recently seen this problem.

Finally, Medicare Part A is often referred to as “free” which is not accurate. Workers earn premium-free Medicare by paying Medicare taxes usually through payroll with holdings throughout their entire working lives. If their spouses haven’t paid Medicare taxes long enough to earn premium free Part A on their own work record, they are also eligible for premium free Part A on the working spouse’s or former spouse’s record as long as the marriage lasted long enough. Hence, most Americans are eligible for premium free Part A but not everyone.

How hospitalization coverage is structured under Medicare is radically different than individual and group plans, so keep that in mind when you transition onto Medicare. Thanks for your interest in this important topic.