How Does a Hospital Indemnity Plan Work with Medicare? A Case Study

Meet Grace — a 65-year-old woman with a Medicare Advantage plan. Though her plan is great, it leaves her with a copay of $250 per day for the first five days of an inpatient hospital stay. Should you recommend that she buy a hospital indemnity plan?

Hospital indemnity insurance often provides beneficiaries with predetermined benefit amount upon a qualifying health event (e.g., an inpatient hospital stay). This benefit can help the policyholder pay for deductibles, copays, lodging, and more. You can continue reading about the basics of hospital indemnity insurance here. Now, let’s take a look at if this extra coverage would make sense for someone on Medicare, like Grace.

Out-of-Pocket Concerns & Coverage

Grace’s health insurance agent had a lot of concern about the $250 per day copay she’d owe if hospitalized, so he recommended that she buy a hospital indemnity plan. The hospital indemnity plan that Grace purchased said it would provide her with a $250 benefit each day for the first six days she is inpatient at a hospital. Since Grace’s agent informed her that she also had a $200 copay for an ambulance ride, she added on a $200 ambulance rider to her plan. Together, they were able to design a hospital indemnity plan to fit her specific needs for less than $30 a month!

A Health Event & the Payout

One day Grace suffered a major health event that required her to take an ambulance to the hospital. The episode kept her in the hospital for four whole days. Due to the copays associated with her Medicare Advantage plan, Grace was responsible for covering $1,000 for her hospital stay and $200 for her ambulance ride, a bill totaling $1,200.

Was the Hospital Indemnity Plan Worth Purchasing?

Grace was retired and living on a fixed income at the time of the event. With her other monthly expenses, she simply wouldn’t have been able to afford an unexpected $1,200 hospital bill — that is without hospital indemnity insurance. Luckily, Grace had her hospital indemnity plan in place to help her out. It paid her $250 for each day she was inpatient, as well as $200 for her ambulance ride. This totaled $1,200 worth of benefit, leaving her responsible for $0 in copays. She was totally covered! And since she didn’t have to worry about any financial burden, she could focus on her recovery and getting back to feeling more like herself a little faster.

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Will every Medicare client you work with be like Grace? No, but many could be in a similar situation. We find that having hospital indemnity insurance is usually worth it for Medicare Advantage members, especially those with a Medicare Medical Savings Account plan. The biggest question is: Can your clients afford to pay an unexpected hospital bill without it?

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