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Medicare usually involves various cost-sharing mechanisms, such as coinsurance or copayments, that you generally pay every time you use your benefits to get health care. Keep in mind there is no out-of-pocket maximum with Original Medicare (Part A and Part B). Here’s how cost-sharing works with Medicare.
What is coinsurance?
Coinsurance is usually the percentage of your health-care charges you are expected to pay when you get medical care. For example, under Medicare Part B you will usually be expected to pay 20% of the allowable charges after you’ve met your deductible. Here’s how it works:
Imagine you visit your doctor because you have a cough.
Suppose the allowable charge for your doctor visit is $75. Medicare Part B may pay $60 and you may pay $15, assuming you’ve met your Part B deductible for the year. If you haven’t already paid the Part B deductible for the year ($185 in 2019), you will usually have to pay the entire $75.
Coinsurance for Part A inpatient hospital care is, in fact, a set dollar amount. For days 1-60 of hospitalization, the coinsurance is generally $0 after the deductible. For days 61-90 of hospitalization the coinsurance is $341 per day for each benefit period in 2019. For days 91 and beyond the coinsurance is $682 per day for each “lifetime reserve day.” After the lifetime reserve days (up to 60 days in your lifetime) are used up you are usually responsible for all costs.
What is the difference between coinsurance vs copayment?
A copayment, or copay, is usually a set amount you pay your provider when you receive care. According to the Centers for Medicare and Medicaid Services (CMS), Medicare enrollees generally find copayment amounts more predictable than coinsurance. Here’s how it works:
Imagine in the example above, your doctor decides to send you for an X-ray to make sure you don’t have pneumonia. You report to the hospital’s outpatient department to get the test.
If the allowable charges for the X-ray are $175, you may pay your 20% coinsurance amount (after you’ve met your Part B deductible) and you may also be responsible for an additional copayment to the hospital, $20 for example. In this instance, the amount you’re responsible for would be 20% of $175, or $35, plus the $20 copayment, for a total of $55.
Medicare copayment amounts under Original Medicare may change from year to year and they may also vary depending on the hospital you use. The copayment amounts are different for the different types of health care procedures you receive.
Does Medicare Advantage have copayment or coinsurance?
Medicare Advantage, also called Medicare Part C, is an alternative way to get your benefits under Original Medicare. By law, they must cover everything that Original Medicare covers, but they may also offer other benefits and cost-savings to their members. (Hospice care is still covered by Part A.)
Because Medicare Advantage plans are offered by private insurance companies approved by Medicare, premiums, deductibles, coinsurance, and copayments are set by the insurance company and not by Medicare.
Some Medicare Advantage plans use copayments, such as $10 or $20, for doctor visits and outpatient procedures. Some use the coinsurance model to determine your cost-sharing amount. Medicare Advantage plans may or may not have an annual deductible. It’s important to read through the plan materials carefully before you enroll to make sure you understand what your costs will be under that particular plan.
One benefit to keep in mind with Medicare Advantage plans: unlike Original Medicare, they all have a maximum out-of-pocket cap, which means that once you’ve spent a certain amount for your health care, your plan usually pays 100% of your allowable costs from that point on for that year. The cap may vary from plan to plan and from year to year.
It’s also important to note that not all plan types and benefits may be available in all locations, and that your premium may vary depending on the plan you choose and where you live. You must continue to pay your Part B premium while you are enrolled in a Medicare Advantage plan.