Medicare Copayments, Coinsurance, and Annual Deductibles Explained
This article was updated on: 08/03/2017
While the Medicare program provides health-care coverage, it does not exempt you from all out-of-pocket costs. There are instances where you are responsible for paying for a share of your health coverage. Whether you’re talking about Original Medicare, Part A and Part B, or private insurance, such as Medicare Advantage and Medicare Part D, here are some of the out-of-pocket costs associated with Medicare coverage.
Medicare Advantage plans and prescription drug plans often provide benefits with a copayment structure. A copayment is an out-of-pocket payment that you make for your share of the health-care cost. You are responsible for a copayment amount when you receive most Medicare-covered services, such as a visit to your doctor or physician. This is also true of any covered prescription medications you take, or any additional covered services such as blood tests or x-rays. Copayment amounts are often pre-established, as opposed to being a fluctuating percentage for a service received. For example, a trip to the doctor might cost you $10 or $20, depending on your plan.
Original Medicare utilizes a coinsurance structure for the benefits associated with Medicare Part B. Coinsurance is an amount that you could be required to pay as your share of the cost for health-care services. This may sound exactly like a copayment, but there’s a difference. While copayments are a fixed amount determined by the plan, the coinsurance amount can vary depending on the service and is usually a percentage. So if you pay 20% of the cost for a specific procedure, then your Medicare plan pays the other 80%.
Your premium refers to a specified “membership” amount that you must pay to the Medicare program and/or a private insurance company in exchange for your health or prescription drug coverage. Most of the time, this is paid out-of-pocket, although if you qualify for Medicaid they may assist you with covering premium amounts.
Your annual deductible refers to the amount that you are required to pay out-of-pocket for your health care or prescription medications before your Medicare insurance (whether it’s Original Medicare, Medicare Advantage, or Medicare Part D) begins paying for your treatment and/or medications. This amount can vary by plan and could potentially change every year. You will be notified by your plan prior to the Annual Election Period (AEP) of any changes in coverage/cost so that you can make the necessary coverage adjustments.
Maximum out-of-pocket limit
All Medicare Advantage plans have a yearly limit on your out-of-pocket spending for Medicare-covered services. That means that once you’ve reached your plan’s maximum spending limit, the plan will cover 100% of the cost for covered services, and you’ll pay nothing else for the rest of the year. This yearly out-of-pocket limit will vary, depending on the Medicare Advantage plan.
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