Medicare beneficiaries who need to go into the hospital can expect their benefits to pay for the cost of their stay — up to a point. First, you will need to meet a deductible before your Medicare benefits kick in. Then, Medicare will pay 100% of your first 60 days in the hospital. If you need to stay longer, you will need to pay a coinsurance amount, but Medicare will pay for your next 30 days. After 90 days in the hospital, you may need to use your Medicare lifetime reserve days to avoid paying for the entire cost of your continued stay.

Understanding what Medicare lifetime reserve days are and how they work can help you determine when to use your reserve days and whether you need supplemental insurance on top of your Medicare benefits.

How Medicare Part A Hospital Benefits Work

Though Medicare will cover 100% of a portion of your hospital stay, there are rules about how benefit periods are defined, when Medicare coverage takes effect and for how long.

The Benefit Period

Medicare determines how much it will pay for your hospital care depending on the number of days you will need inpatient care during the "benefit period." This benefit period is defined as the time you are in either a hospital or skilled nursing facility because of a specific illness or injury.

The benefit period begins on the day you enter the hospital or nursing home as an inpatient and continues until you have been home from the hospital for 60 consecutive days.

For instance, let's say a Medicare beneficiary suffers a stroke and needs inpatient care. Their benefit period would begin the day they're admitted to the hospital. After several days, they are released to go home. If this patient needs to return to the hospital for more stroke-related care within 60 days of discharge, then they're considered to be on the same benefit period.

However, if the patient does not return to the hospital until more than 60 days have passed, the next hospital stay will be considered a new benefit period, even if they return because of the same stroke that prompted the original inpatient care.

Since Medicare only covers a certain portion of your stay during any one benefit period, it's important to understand when those benefit periods begin and end.

The Deductible

For each benefit period, you will need to meet a deductible payment before Medicare begins paying for your hospital stay. If you have three separate benefit periods in a single year, you will have to meet the deductible each time before the Medicare Part A benefits begin paying for your inpatient care.

As of 2022, the deductible is set at $1,556. This is an increase from the 2021 amount of $1,484. The deductible amount increases every year on January 1.

100% Coverage of the First 60 Days

Once you have met your deductible for the benefit period, Medicare will then cover 100% of your inpatient care for 60 days. Specifically, the Medicare coverage will pay for 100% of the following costs:

• Semi-private room (Unless your doctor deems it medically necessary, Medicare Part A will not pay for a private room.)
• Meals
• General nursing and doctor care
• Drugs administered in the hospital

Additionally, the coverage does not include private nursing, personal care items (such as socks) or a television or phone in your hospital room if the facility charges for these items separately.

Be aware, however, that staying overnight at a hospital or skilled nursing facility does not necessarily mean you are an inpatient and therefore eligible for Medicare Part A coverage. Unless a doctor has formally admitted you to the hospital, you may be considered outpatient and on the hook for your medical costs.

Partial Coverage of Days 61-90

If you need inpatient care for more than 60 days during any one benefit period, Medicare will no longer pay for 100% of your costs. From days 61-90 of your stay during a benefit period, you will be required to pay a daily coinsurance amount, while Medicare will pick up the rest of the cost.

As of 2022, the coinsurance is set at $389 per day, though this amount increases every year on January 1, just like the deductible.

Medicare Lifetime Reserve Days

Medicare beneficiaries who require inpatient care for longer than 90 days during a single benefit period have reached the end of Medicare's coverage. Patients in this position have two choices: they may pay out-of-pocket for their medical care after the 90th day, or they may use some of their 60 Medicare lifetime reserve days.

Lifetime reserve days are additional days of inpatient care that Medicare will help you pay for if you have stayed in the hospital for more than 90 days in any one benefit period.

To use a reserve day, you will have to pay a coinsurance amount set at $778 as of 2022. In addition, you may only use each reserve day once. After you have used a reserve day, it is gone forever.

Deciding when to use your lifetime reserve days depends on your financial situation and health prognosis. Medicare beneficiaries who have exhausted their lifetime reserve days will have to pay all of their medical costs incurred after reaching the end of coverage for any one benefit period. However, after 60 consecutive days out of the hospital, returning to the hospital will be considered a new benefit period, which means Medicare will again cover your care.

Keeping Medicare Affordable

Medicare Part A is designed to help keep medical costs affordable for retirees. However, many beneficiaries may struggle financially with required deductible per benefit period, the 60-day limit to 100% Medicare coverage, the 90-day limit to coverage with a daily coinsurance amount and the limit of 60 lifetime reserve days with a higher daily coinsurance amount.

There are several options for helping keep Medicare more affordable. These include Medicare Supplement (also known as Medigap) plans and Medicare Advantage plans. You are not legally allowed to carry a Medigap and a Medicare Advantage plan at the same time. This means you will have to decide which of these types of plans will work best for your needs.

Here's how these plans can affect your need for Medicare lifetime reserve days.

Medigap

Medigap plans may differ in what coverage they offer, but all of these plans are required to cover Medigap Part A if they offer any coverage at all. What this means is any Medigap plan you purchase will include coverage for coinsurance and hospital coverage for up to 365 days after Medicare Part A benefits have been exhausted.

This means you can rely on your Medigap coverage to pay for your hospitalization for up to a full year, even after you have used up your lifetime reserve days.

Medicare Advantage

Medicare Advantage works like traditional health insurance. While some plans have deductibles and others do not, all Medicare Advantage plans have an out-of-pocket spending cap, which cannot legally exceed $7,550, not including prescription drugs.

With a Medicare Advantage plan, you will not have to pay more than that maximum out-of-pocket amount (which may be lower than the $7,550 legal maximum), no matter how many days you spend in the hospital.

There are limits to Medicare Part A's hospital coverage. Understanding those limits, including the rules about lifetime reserve days, can help you make the best decisions for your medical coverage and financial needs.