My friends over at the Medicare program make adjustments to patient out-of-pocket costs every year. This information is usually released in November for the next calendar year. With the new year rolling in, I thought there was no better time than today to take a look at the 2020 Medicare Part A Deductible.
The Medicare Part A Deductible is increasing by 3.23% for the calendar year 2020. This $44.00 increase will put the Part A deductible at $1,408. But what is the Medicare Part A Deductible and why do we care?
Medicare Part A Deductible = $1,408 for 2020
Here at Max Out of Pocket, we like to keep track of any and all out-of-pocket costs. Even those that might occur for us in the future.
Keep in mind, this post is only reflective of the traditional Medicare Part A program. If someone has elected a Medicare Advantage plan, it completely replaces traditional Medicare and these numbers no longer apply. That said, this is still good information to know if we are comparing a Medicare Advantage plan to the traditional Medicare program.
What Is The Medicare Part A Deductible?
Max likes to use the bucket analogy for all things finance. The same goes for the Medicare Part A Deductible Bucket. We need to fill this bucket up before Medicare starts paying for our Part A services. But what are Part A Services?
Medicare is a complicated program. As such, we need to make sure we completely understand the services covered under the Medicare Part A program before we can worry too much about the deductible that comes along with it.
Medicare Part A is hospital insurance for Medicare beneficiaries. It is probably most well-known for covering services provided on an “inpatient” basis in the hospital. It covers a few other skilled services I never want to use like hospice, home health, and skilled nursing care.
Unfortunately, Medicare Part A doesn’t cover the entire cost of the inpatient hospital stay. They conveniently pass some of that cost onto the Medicare beneficiary. So an inpatient hospital stay will usually come hand-in-hand with the Medicare Part A Deductible.
How Long Does The Medicare Part A Deductible Cover Us For?
As I said, for the calendar year 2020, Medicare beneficiaries will owe $1,408 for their Medicare Part A Deductible.
Generally, for the calendar year 2020, the patient will be on the hook for this first $1,408 of the inpatient hospital bill during the “benefit period”. This is the Medicare Part A deductible. The benefit period only lasts for 60 inpatient days. So once the Medicare beneficiary ‘fills up’ their $1,408 bucket, Medicare covers them the rest of the way until they hit day 61.
If the hospital stay goes on beyond 60 days, things get a little more complicated. Since most hospital stays are less than 60 days, we are going to stay away from those longer periods of care for today. We will cover what happens if we are sick enough to go beyond the 60-day mark in another post.
The patient won’t pay anything more than the $1,408 assuming all the days are medically necessary. They even cover “self-administered drugs”, a pain point for Medicare beneficiaries who receive outpatient services in the hospital setting.
There is one thing to note here though. When the hospitalist or physician does rounding on the units, those charges are filed to Medicare Part B. Since those are considered Medicare Part B services, the patient will get hit with a 20% coinsurance on those services. In other words, these services are not included in the Medicare Part A stay or deductible.
How Much Does The 2020 Medicare Part A Deductible Usually Increase?
From 2010 to 2020 the Medicare Part A Deductible bucket has increased by a total of $308. This represents an average increase of about 2.5% per year during a time period where inflation has been relatively moderate. From 2004 – 2007 we were seeing +4% increases annually.
Here is some history of the Medicare Part A Deductible Bucket.
It is hard to predict where this number will go from here. In the spirit of college football bowl season, the Max Out of Pocket blog will go ahead and put in a prediction that the 2021 Medicare Part A Deductible will come in at $1,451. This is based on recent historical increases and some general intuition from Max.
My prediction is once I hit Medicare age in 2049 the Medicare Part A Deductible will come in at about $3,000 per hospital stay. We all know the program will look much different by then.
At some point, healthcare costs became the largest budget line for a lot of households in America. This put understanding these costs at the forefront of personal finance.
Even though I am more than 30 years out from becoming eligible for the Medicare program, I still watch numbers like this one every single year. Not only does it help me with long term planning, but I also have family members already eligible for the Medicare program who sometimes need help figuring this stuff out.
Nobody likes to be in the hospital. But when we do have an unfortunate or unexpected hospital stay, we can now plan for some of the costs that come along with it. Assuming someone is ordered inpatient by a qualified practitioner and a Medicare beneficiary, we can expect to get hit with a $1,408 deductible in 2020. This assumes the hospital stay is 60-days or less.
*There are several nuances to the Medicare program that can’t always be anticipated. Please work with your hospital and Patient Navigators to make sure you completely understand your stay in a hospital. A small blog like this is never responsible for unexpected medical expenses you might incur in the hospital setting.