David Chen was seriously injured in a snowboarding accident that broke both his

Question

David Chen was seriously injured in a snowboarding accident that broke both his legs and an arm. His medical expenses included 7 days of hospitalization at $800 a day, $9,100 in surgical fees, $7,800 in physician's fees (including time in the hospital and eight follow-up office visits), $430 in prescription medications, and $1,500 for physical therapy treatments. All of these charges fall within customary and reasonable payment amounts. 1. If David has an indemnity plan that pays 90% of his charges with a $500 deductible and has a $5,000 stop-loss provision, how much will he have to pay out-of-pocket? Round to the nearest dollar. 2. What would David's out-of-pocket expenses be if he belonged to an HMO with a $30 co-pay for office visits? Round to the nearest dollar.

Explanation / Answer

1) Step 1 : The total medical charges of David (Amount in $)

Step 2 Calculation of out of pocket expenses of David (Amount in $)

Stop loss provision is for maximum limit of out of pocket charges.As in this case the amount of $2,893 is less than the stop loss provision of $5,000, thus whole amount of $2,893 is to be paid by him out of pocket.

2) if he belonged to an HMO with a $30 co-pay for office visits, then he would only pay $30 for his each office visit. In this case the total office visits given in the question is eight. Thus his out of pocket expenses are as follows:-

Out of pocket expenses = $30*8 office visits = $240

Hospitalization Fees ($800*7 days) 5,600 Surgical Fees 9,100 Physician's Fees 7,800 Prescription medications 430 Physical Therapy treatments 1,500 Total Charges 24,430

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