COVID-19: A Tsunami of Out-of-Pocket Costs?

Look, I get it. In the midst of the COVID-19 outbreak, no one really wants to worry about out-of-pocket costs associated with the pandemic. Our focus needs to be on flattening the projected curve of the outbreak so the healthcare system doesn’t get overwhelmed. There isn’t a ton of use for hospital bean counters like me at times like this. So I am doing my best to just stay out of the way.

But I have to ask. If these projections are correct, what about the tsunami of out-of-pocket costs that might come with an influx of inpatient hospital stays?

I have to believe the COVID-19 pandemic has the potential to leave buckets of out-of-pocket costs in its wake. The government has already dealt with out-of-pocket costs associated with diagnostic lab testing for a patient with COVID-19. Those tests will be free for everyone according to the now signed version of H.R. 6201, FAMILIES FIRST CORONAVIRUS RESPONSE ACT. Frankly, several large commercial payers in addition to Medicare already stepped up to pay for those tests. This bill simply codifies it into law for all payers and builds in some protection for the uninsured.

But what about the costs of treating a patient for COVID-19? Therapeutic services, if you will. It’s a pretty big distinction and one we need to start talking about. Particularly for Medicare patients, a high-risk demographic where Medicare Part A will likely foot some of the bill.

Now, I am going to try and carefully draw this up. My goal here certainly isn’t to add to the concerns we all already have about this pandemic. But with the government taking unprecedented action against the virus, I thought drawing some attention to this might help us get a proactive fix in place for potential out-of-pocket costs on cases related to COVID-19. While we’re at it, maybe we could go ahead and fix a longer-term issue that leads to exploding out-of-pocket costs to Medicare beneficiaries who experience extended hospital stays. So, let’s go ahead and take a look at the out-of-pocket costs that have the potential to come along with an extended inpatient Medicare Part A stay.

Before We Start

I need to go ahead and set this up here to make sure we are all on the same page. The last thing I want to do is alarm someone who is adequately covered. The scenario I describe below is specific to a Medicare beneficiary on traditional/original Medicare with no supplemental coverage.

Medicare Advantage plans that replace traditional/original Medicare generally have a max out-of-pocket built-in. In 2020, that max-out-of pocket limit comes in at $6,700. Not small change, but decent protection. For those who stay with original Medicare, supplement plans offer some protection to those beneficiaries by picking up out-of-pocket costs after traditional Medicare pays. As we learned in the comments below, about 80% of Medicare beneficiaries have some sort of supplemental coverage.

But what about those patients who only have traditional/original Medicare Part A coverage?

An Inpatient Medicare Part A Stay

I’m not clinical. I have no idea what the average length of stay would look like for a COVID-19 patient. At this point, I am not sure clinicians even know that. I have to assume it would be much less than 60 days. This study from China put the average at 11 days.

But I also think it is fair to assume there is potential for a patient with other conditions to see some extended stays in the hospital.

The out-of-pocket costs for the Medicare Part A program are not exactly simple. Let’s take an unexpected very serious hospital stay that is medically necessary and covered by Medicare Part A.  

In 2020, Medicare Part A comes with a deductible of $1,408 for days 1 through 60 in the hospital. Medicare Part A covers everything else. Now, considering we don’t even have to pay premiums to the Medicare Part A program, I happen to consider this small price to pay for spending up to 60 days in the hospital.

But to the average retired senior living on $18,036 in annual Social Security benefits, they just saw 7.8% of their 2020 income leave their pocket.

The $1,408 Medicare Part A Deductible in the flesh

On day 61, things get interesting.  

When we go beyond day 60 we are on the hook for $352 each day in the hospital up through day 90. That’s $10,560 out-of-pocket for days 61-90. These are called coinsurance days. 

Now, when we hit day 91, we start tapping into our lifetime reserve days. These are non-renewable and we only get 60 of those for our entire life. In 2020, we have to pay a $704 coinsurance for each of our lifetime reserve days spent in the hospital. That’s another $42,240 and gets us through day 150.

On day 151 Medicare puts us out on the street holding us responsible for all costs of care with no max out-of-pocket protection.

To summarize, in 2020, a 150-day stay at a hospital in America will run a traditional Medicare Part A beneficiary about $54,208 out-of-pocket. I don’t have enough cash to flash a picture of $54,208, and I certainly can’t fit that much in my pocket. So you will have to use your imagination.

$1,408 (day 1 – 60) + $10,560 (day 61 – 90) + $42,240 (day 91 – 150) = $54,208

Here is the table directly from Medicare.

Exploding Medicare Part-A out-of-pocket costs

Don’t worry, though. It is extremely unlikely the hospital will literally roll your bed out to the street on day 151. But they will continue to charge a retail price for room and board which is generally well over $1,500 per day plus any ancillary services being provided. It will be even more than that in the ICU. The hospital is then tasked with trying to collect these balances when their focus should be on patient care.

The Part A Deductible Also Resets

The Medicare beneficiary is responsible for the Medicare Part A deductible for inpatient services for each benefit period. The “benefit period” resets when the patient has not been an inpatient of a hospital or skilled nursing facility for at least 60 days.

So if we can manage to stay out of the hospital for 60 days but land back in later in the year, everything resets except for our lifetime reserve days. In theory, we could pay the $1,408 deductible twice in one year. This is pretty backward compared to how most deductibles work in the commercial insurance market and could certainly happen to a COVID-19 patient who ends up back in the hospital later this year. That scenario could pull over 15% of their 2020 social security income out of their pocket.


This isn’t a new problem. At my old health system, I would pretty regularly see patients tapping into their coinsurance days and sometimes their lifetime reserve days. It wasn’t even an academic medical center where you would expect to see more complex cases. I also know the 150-day scenario isn’t actuarially likely, but I thought I would take the time to call it out.

Philosophically, I think I am technically on board with some form of out-of-pocket costs in the regular world. It keeps market pressures on the system. But that all goes out the window when we are in a crisis. In a national emergency, the government has unprecedented authority. Authority they could use to potentially flatten the out-of-pocket curve that comes with the Medicare Part A program.

Although they have already taken steps to protect patients from out-of-pocket costs from diagnostic testing to see if a patient has the virus, we still need to get measures in place to protect aging loved ones from a potential wave of out-of-pocket costs resulting from therapeutic inpatient services. While we’re at it, let’s fix this archaic $54,208 hospital stay problem. The Max Out of Pocket crew is here to try and make that happen, but I need your help to spread the word. If you know anyone we can get this information in front of, I would be much appreciative.

Max writes over at the intersection of healthcare and personal finance at a place called Max Out of Pocket


3 Responses

  1. Dragon Guy says:

    Thanks for sharing this Max. It is crazy to think standard Medicare doesn’t have any out of pocket maximums. Are there numbers out there showing how many people in Medicare don’t have a supplemental plan or are not in an Advantage plan?

    • Max OOP says:

      These are both great questions and something I should have added for some context. I sometimes struggle with these posts since there are so many moving parts. I have given up on several topics because they just get too bogged down with details and are about as entertaining as reading the dictionary. That is part of the underlying problem with all of this.

      It seems like the payor mix for my last two health systems was about 15% Medicare Advantage, but that’s off the entire patient population. Every market is a bit different though. According to KFF about 34% of Medicare beneficiaries were on Medicare Advantage in 2018.

      A decent chunk of the population has some sort of supplement covered whether is be Medicaid or another payer source like a true Medigap plan. About 20% of my market has no supplement coverage and that is in line with national numbers. That is the population most at risk for the scenario described above.

      Then again, if Medigap plans are picking up the tab on some of these, we would technically be paying that risk through premiums to the plan. I will make an attempt to look at those numbers soon so you can model that out as well.

  2. Dragon Guy says:

    Thanks! Interesting statistics there. Let’s hope this doesn’t become a big risk for those without the extra protections.

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