Earlier this week, I wrote about an individual who is piling up million dollar months on a PPACA Qualified Health Plan in Iowa. My initial focus was on the how PPACA enabled these types of claims on the individual market now as there is no underwriting for QHP’s and no lifetime or annual limits. Under the pre-PPACA rules, this individual either would never have been allowed to buy insurance or would have hit their lifetime maximum a year ago.
This is also an excellent teaching example of the limits of Medicare and how it differs from the individual and small group QHP rules. This is a corner case but those can be the best illustrations at times.
Under the QHP, the individual is responsible for their full out of pocket maximum. Assuming they bought a Bronze plan, they have a maximum exposure of $6,850. They hit that number sometime around the first shift change on New Year’s Day. After that, their family pays nothing beyond the monthly premium for the rest of the year of care.
Medicare is a lot fuzzier. Let’s start with some assumptions. Let’s assume they have traditional Medicare with no supplemental policy. They have a minimally qualified Medicare Part D drug plan. Let’s also assume they are spending quite a bit of time in the hospital (probably intensive care) with several specialists spending at least 30 minutes a day with the patient. Let us also assume half of their monthly bill is prescription drugs.
Medicare Part A has a $1,288 deductible that is met on the first day. The next sixty days of hospitalization are no cost. Hospital Days 61-90 $322 co-pays per day for slightly more than $12,800. After that the individual is either going to a skilled nursing facility at $161 per day for SNF Days 20-100 ($16,100) or is going into their lifetime reserve hospital days ($644 per lifetime reserve day for 60 more days or $38,000). After 250 days they are SOL and paying full price to either the hospital or the skilled nursing facility if they need any more inpatient care. They’ve run up $68,000 in personal responsibility payments just for inpatient care. And their benefit is exhausted by October. This is the case in Year 1, if it is a multi-year case, their benefit in Year 2 is gone in August in the best case scenario.
Now let us also assume that they are seeing three specialists per day (which is a very low estimate if they are in the ICU). Each specialist is getting $200 from Medicare of which the Part B co-insurance is 20%. So each day, the patient is running up $120 in medical bills. Over the course of a year that is another $44,000 in co-insurance.
If drugs cost $500,000 per month and they have a basic Part D plan with no extra help, they will pay a 5% co-insurance on everything above $7,000 per year. In Year 1 that means they’ll be on the hook for $300,000. In Year 2, they qualify for extra help so they’ll pay a $7.40 co-pay per brand name prescription. So Year 2 their prescription costs go down to the high four figures to the low five figures.
This is a worse case Medicare scenario.
If the individual has Medicare Advantage or a full Medicare Supplemental policy, their total exposure is capped from anywhere between $3,500 to $7,000 depending on what they bought.
However this should be a good illustration of the limitations of Medicare as it is currently built.