Very illuminating numbers for those interested in the “real” cost of Medicare co-pays, not the nonsense the insurance industry is using to scare you.
{{ Outpatient cancer care makes up 60% to 70% of health care costs over the last 6 months of life, which is when one becomes eligible for hospice benefits under Medicare.
Using CMS data, 84,744 Medicare beneficiaries with a cancer diagnosis were identified as having died between January 1, 2016, and December 31, 2019, and Medicare Standard Analytic Files were abstracted for their paid claims during their last 6 months of life.
The average total Medicare Part B payments per treated beneficiary rose by 12.0% between 2016 to 2019, from $14,487 to $16,227. }}
So 20% of that is about $3,000 – and your last year of life typically has the highest medical expenses.
And you want me to pay over $2,000/year for a Medigap plan for a decade or two because I might incur a $3,000 co-pay in my last year of life? The arithmetic on that just doesn’t make sense.
Of course, it wouldn’t make sense if one could be certain that the decades prior to the last 6 months of life (regardless of disease that was the proximate cause of death) were filled with rude good health and minimal medical care. Not everyone is fortunate enough to have such “compressed morbidity” and, in fact, get struck with surprise diseases such as Wendy and my husband and require high end care (much of it available as an outpatient) to get back on their feet. You have to actually reach the last 6 months of your life to incur any medical bills during that period, right??
My husband, in fact, was back at work at about 6 weeks post Bio-Bentall procedure…taking care of pre and post liver transplant needs of a good many patients who were Medicare beneficiaries, oftentimes on an outpatient basis.
No, that’s what you’re not understanding, You don’t need to be in “rude good health”. The vast majority of Medicare beneficiaries aren’t encountering the crushing bills like you see in for-profit, unlimited price gouging, pre-age 65 medical care.
For most of the people posting here that have same savings, if you have a sick spell, the medicare co-pay will likely be less than the cost of the cruise you’re too sick to go on.
Vanguard has a good document that illustrates the arithmetic. Check out the chart on page 6, Figure 2.
For a high risk, 65-yr-old woman, at the 95% percentile of the cost distribution, the difference between having Medigap and going bare with just Medicare is $6,300/yr. Like I said, “the cost of a cruise”.
Now if I had a long history of a medical condition that was costing me $100,000/yr pre-age 65 (and maybe 25% of that under Medicare.) Then getting full coverage Medigap Plan G makes sense. But few people are in that boat.
You see a similar misunderstanding when people evaluate Social Security, underestimate their longevity, and “take the bird in the bush” at age 62 rather than wait for the much larger benefit at age 70. For a higher income American of average health, it’s like flushing $100,000 down the toilet.
What you’re not understanding is that whilst it’s fair to say that a good many Medicare beneficiaries might profitably…or not be at too much financial risk …go without a supplemental plan, basing your statements on what your eyelid surgery and colonoscopy cost you is a poor argument…obviously important enough for you to dip into your funds for, but not really necessary on a life saving/life altering basis. A lot of folk probably wouldn’t even bother with or without any third party payments.
As more and more procedures that were formerly hospital based (requiring admission and a few days stay) can and are safely done on ambulent, outpatient basis AND newer diagnostics etc introduced, these Part B costs have a very real potential to rack up significant expense. Was Wendy’s outpatient procedure even available when you had your eyelid surgery, for example ? (trick question, I know…you probably don’t actually know in practical terms what Wendy’s procedure actually involved…which is kind of my point). Or my lapiplasties, come to that.
Husband and I…and Wendy so far, I guess…have certainly got our money’s worth from our supplemental plan. Lucky us…not!
These threads (this and Wendy’s Medigap) are actually very useful with the arguments you’re repeating because it does bring home the mechanics of how Medicare works for folk who don’tunderstand or haven’t yet given the matter any thought…specifically that a Medicare supplemental isn’t likely to be useful for Part A/inpatient hospital costs and that outpatient Part B no longer automatically means “elective” or the low hanging fruit that can easily be paid for out of pocket…or skipped totally if one feels like it.
Personal risk tolerance isn’t just about balancing out best case scenario, random numbers…or even statistical likelihood, come to that…but also the severity of the consequences if you guess wrong.
When I decide whether to buy insurance or self-insure, I focus on the worst case not the average. On average, insurance is always a bad deal. That’s how they afford the fancy offices and high salaries.
The question is whether you can afford the worst case. I don’t buy extended warranties on my appliances but I do buy fire insurance on my house. Both bad deals, on average, but I prefer to avoid a total loss of the value of my house.
You, intercst, are in the fortunate position of being able to cover extremely large worst case medical expenses. Many are not. I suspect even a $1M medical hit to your portfolio would still keep your withdrawal rate below 4%.
So I’m more interested in some worst case examples of medicare expenses than the average.
{{ For a high risk, 65-yr-old woman, at the 95% percentile of the cost distribution, the difference between having Medigap and going bare with just Medicare is $6,300/yr. Like I said, “the cost of a cruise”. }}
And you’re highly unlikely to be in the 95% percentile (i.e., 1 out of 20) every year. Wendy’s surgeon has told her that her heart is now good to age 90, so it will likely be a while (if ever) that she has another high cost year.
But the insurance industry is going to scare you, saying you need to be prepared for those costs year after year, and then charge you an extra “skim” of 20% on top of that. It’s madness if you let them, and have the resources to cover it (i.e., “the cost of a cruise”.)
Of course. But the reason I’m so fortunate is that my day job when I was working was “Cost Engineering” (i.e., looking at billion dollar projects in the oil & gas industry and seeing where the company was getting screwed.) Applying that same methodology to my personal costs like home ownership (i.e. rent vs.buy), investment costs (minimize the skim), and insurance (auto, home, or health – they’re all screwing you) is what built my fortune. At least 1/3 of what the average American family spends in a year is someone screwing them. It’s scandalous.
Yes, my husband’s surgeon/intervention cardiologist and other members of his care team reassured my husband similarly. Thing to remember, though (or be aware of if you weren’t already)…these are not necessarily intervention free years. From the perspective of the post surgical surveillance as well as any other issues that might occur.
My husband, for instance has had 6 monthly CT angiography and ultrasonography over the 5 years post surgery period…checking for all manner of things that can and do go wrong with these complex procedures on occasion. My husband’s HALT, for example…picked up on his final scheduled 5 year visit. Assuming similar costs to Wendy’s outpatient charges, I make that VERY good value for the cost of his supplemental plan.
Right, you won the lottery of poor health and beat the insurance company, but for a couple of year’s premiums, likely not over your lifetime.
The insurance company’s actuaries have enough statistical and mathematical horsepower to make sure that the vast majority of policyholders do not, and then charge you an extra 20% on top for the privilege of screwing you. This is the kind of thing you do all the time in “Cost Engineering” (i.e., does it make sense to insure a risk, or retain a risk and cover it yourself?)
At the very least, you should be evaluating if it makes sense to buy a "High Deductible Medigap Plan G for $600/yr with $120 siphoned off to “skim” vs. $2500 to $3000/yr for regular Plan G that covers everything from the first dollar with $500 to $600 being skimmed off to the insurer.
The High Deductible plan had a $2700 deductible on your annual 20% copay Medicare costs for 2024. Most Medicare beneficiaries never meet the $2700 deductible and are likely saving at least a $1,000/yr with the high deductible plan. And then, if they do have a year with a $10,000 20% annual Medicare copay (very unusual) their cost is capped at the $2700 deductible and everything above that is 100% covered.
You want to limit the pot of money that the insurance company gets to skim from. Few people save money on their lifetime healthcare costs by adding an insurance company’s overhead & profit to a doctor’s bill or hospital charge – it’s just arithmetic.