Health Insurance in your Senior Years –

Medicare and Other Options—

A Case Study

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Terry (68) and Drew (67) are a couple on the go and are relatively healthy. They both have Medicare, prescription drug and a supplemental medical (Medigap) policy. After reviewing health care expenses and explanation of benefits (EOB) documents from last year, Terry noticed that there is an individual deductible for part A of $1340 and for Part B of $366 (2 x $ 1706 = $3,412). Because of the Medicare Supplemental F policy, the only additional out-of-pocket expenses will be for copayments for their medical costs.

Each family member visited their primary care physician four times (including the annual checkup). They pay $20 copayment to see this doctor for each visit; Terry determined they paid 8 copayments (8 visits).

Drew has allergies and visits an allergy specialist once a year and has prescription drugs to help manage the allergies. Drew pays $30 for the office visit once a year and $15 for 90-day prescriptions four times per year.

Terry and Drew wear glasses and go to the optometrist once a year for a checkup and each get new glasses. The vision copayment is $30 and the glasses cost $300 each.

Terry and Drew each go to the dentist once per year with a copayment of $30.

Terry pays a total of $268/month for the Medicare Part B premiums, $70 (2x$35)/ month for prescription drug coverage and lastly pays $380/month (2x $190) for Medicare Supplemental Type F policy. Terry also pays $80/month for dental insurance premiums for both of them.

Although Terry has an emergency fund, Terry plans to set aside money for the full deductible and other out of pocket costs. Terry also realizes that with Medicare and the supplemental insurance policies there is no out-of-pocket maximum; maximizing savings will be important.

Activity—Help Terry determine the monthly amount needed to cover fixed and flexible out-of-pocket costs? Use the information above and the worksheet on the next page to help Terry out.

Note: The worksheet used in this case study comes from the Smart Use Health Insurance—Estimating Health Care Expenses document. It can be found at: http://extension.umd.edu/insure. We will be using the Box 1 of this document to estimate Terry’s health care expenses and determine how much needs to be saved each month. We will be using Box 3 of this document to determine Terry’s Total Annual Health Care Costs.

These materials are copyright and license protected by University of Maryland Extension

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Using the information from the case study, fill in as much of this worksheet as you can to document known and estimated health care costs.

When you are done, use the information to calculate the monthly and annual costs on the next page.

Fixed Health Care Costs (use the amount you pay each month)

Health Insurance Premium $__________

Vision Insurance Premium $__________

Dental Insurance Premium $__________

Prescription Insurance Premium $__________

Medicare Premium $__________

Medicare Supplemental Insurance Policy (Medigap) $__________

Now, add all the items under Total Fixed Health Care Costs to get

Total Monthly Fixed Health Care Costs $__________

Now, multiply Total Monthly Health Care Costs x 12 to get

Total Annual Fixed Health Care Costs $__________

Annual Deductible (if you have a family plan, use the family amount) $__________

Out-of-pocket Maximum (if you have a family plan, use the family amount) $__________

Flexible Health Care Costs

Office visit copayments ( ___ number of visits X ___ copayment amount) $__________

Specialist visit copayments ( ___ number of visits X ___ copayment amount) $__________

Specialist visit copayments ( ___ number of visits X ___ copayment amount) $__________

Medical supplies and equipment $__________

Hospitalization expenses $__________

Prescription drug copayments

(___ number of prescriptions X ___ copayment amount) $__________

Medical related travel (mileage, lodging food - See IRS Pub 502.) $__________

Other qualified medical expenses $__________

Urgent Care / Emergency Room Copayment $__________

Dental preventive visit copayments

( ___ number of visits X ___ copayment amount) $__________

Dental services and products (braces, oral surgery, etc.) $__________

Vision exam copayments ( ___ number of visits X ___ copayment amount $__________

Vision services and products (glasses, contacts, etc.) $__________

Other non-qualified (not covered) health care expenses (i.e. Vitamins) $ __________

Total Flexible Health Care Costs $___________

(Add all the items under Flexible Health Care Costs)

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Using the information from the case study, fill in as much of this worksheet as you can to document known and estimated health care costs.

When you are done, use the information to calculate the monthly and annual costs on the next page.

Fixed Health Care Costs (use the amount you pay each month)

Health Insurance Premium $

Vision Insurance Premium $

Dental Insurance Premium $____ 80___

Prescription Insurance Premium $____70___

Medicare Premium $____268___

Medicare Supplemental Insurance Policy (Medigap) $____380___

Now, add all the items under Total Fixed Health Care Costs to get

Total Monthly Fixed Health Care Costs $ 798

Now, multiply Total Monthly Health Care Costs x 12 to get

Total Annual Fixed Health Care Costs $ 9,576

Annual Deductible (if you have a medicare supplement plan that covers it) $ __0_____

Out-of-pocket Maximum (medicare and medicare supplement plans don’t have limits) $ no limit__

Flexible Health Care Costs

Office visit copayments ( 8 number of visits X $20 copayment amount) $ 160

Specialist visit copayments ( 1 number of visits X $30 copayment amount) $ 30

Specialist visit copayments ( ___ number of visits X ___ copayment amount) $__________

Medical supplies and equipment $__________

Hospitalization expenses $__________

Prescription drug copayments

( 4 number of prescriptions X $15 copayment amount) $ 60

Medical related travel (mileage, lodging food - See IRS Pub 502.) $__________

Other qualified medical expenses $__________

Urgent Care / Emergency Room Copayment $__________

Dental preventive visit copayments

( 2 number of visits X $30 copayment amount) $ 60

Dental services and products (braces, oral surgery, etc.) $__________

Vision exam copayments ( 2 number of visits X $30 copayment amount $ 60

Vision services and products (glasses, contacts, etc.) $ 600

Other non-qualified (not covered) health care expenses (i.e. Vitamins) $ __________

Total Flexible Health Care Costs $ 970

(Add all the items under Flexible Health Care Costs)

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Use the figures from the previous page to determine Terry’s known costs, monthly savings and total annual out-of-pocket costs.

Box 1 - How much do I need to set aside monthly over and above my premium payments to save for health care costs?

How much do I need to have monthly to cover my known Fixed and Flexible health care costs? Knowing this amount will help you determine a

spending plan that builds in known health care costs and helps you to save for the deductible.

For many health care plans you need to pay the deductible before the plan starts to pay a share of your health care expenses. You need to have

money set aside for this amount. Most plans offer an individual and family deductible amount so if you have a family plan, you’ll want to use the

family figure. Use this figure in the calculation below.

By adding together the Deductible and the Total Flexible Health Care Costs, you will be able to calculate the Annual Total Known Costs for the

year. Use the figures from page 1 of this document. This provides a minimum amount you need to save to cover the Known Costs.

Add together the:

___________________ + ___________________________ = _______________________

Annual Deductible + Total Flexible Health Care Costs = Total Annual Known Costs

By dividing the Total Annual Known Costs by 12, you will determine how much that needs be set aside each month for upcoming flexible costs.

To determine estimated monthly costs:

______________________________ ÷ 12 = $ _______________________________

Total Annual Known Costs ÷ 12 = Monthly Amount to Set Aside Over and Above the Monthly Premium

Box 3 - What is my Total Annual Heath Care costs? Can I afford this plan?

Estimating total out-of-pocket costs can help you decide if this is the right health plan for you and your spending plan. You can add the Total Fixed

Cost figure from the top of page 2 and the Total Annual Known Costs calculation from Box 1. Once you know this number, you can decide if this

plan is affordable for your spending plan. If not, you may need to consider a different plan that has a lower deductible, copayments and premium.

Add together the:

________________________________ + ________________________ = __________________________

Total Annual Fixed Health Care Costs + Total Annual Known Costs = Total Annual Out-of-Pocket Costs

(From top of page 2) (From Box 1))

Can I afford this plan? Choosing a plan based on premium alone is not smar t. Often the lower the premium you pay, the more likely the deductible, cop ayments and coinsurance

amounts will be higher. It’s important to incorporate how you use health care services in your decision about plans. The more you use health care services, the higher your costs will be. Some

people choose a higher premium plan with lower deductible so that the costs are more known and, therefore, predictable for their spending plan. Determining if you can afford a plan, means

knowing how you spend your money and creating a spending plan. The spending plan should build in health care premiums and savings for other out-of-pocket costs.

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Use the figures from the previous page to determine Terry’s known costs, monthly savings and total annual out-of-pocket costs.

9,576 10,546