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Original Medicare vs. Medicare Advantage Out-of-Pocket Costs

October 6, 2016

If you’re enrolled in Original Medicare, Part A and Part B, or receive your Medicare benefits through an alternative means (Medicare Part C, Medicare Advantage) and/or Medicare Part D prescription drug coverage, offered by private insurance companies contracted with Medicare,  you may be responsible for paying a share of the medical expenses, which is your out-of-pocket costs.

The following information explains some of the more common out-of-pocket costs associated with Medicare and some Medicare plan options.  Please note the specific amounts may change each year, depending on your Medicare coverage selection.

premium refers to the fixed amount you may be required to pay each month for your Medicare coverage. This amount may vary depending on whether you have Original Medicare or Medicare Advantage.

  • Original Medicare): You usually don’t pay a monthly premium for Medicare Part A (Hospital Insurance) coverage if you or your spouse paid Medicare taxes for at least 10 years while working. This is sometimes called “premium-free Part A.” If you purchase Part A, you’ll pay up to $413 per month in 2017. Most beneficiaries pay a monthly premium for Medicare Part B (medical insurance) coverage.  In 2017 the standard Part B premium amount is $134 per month (or higher depending on your income), but many people who receive Social Security benefits will pay less than that in 2017.
  • Medicare Advantage plan premiums vary by plan. However, some Medicare Advantage plans may have premiums as low as $0. If you enroll in a Medicare Advantage plan, you must continue paying your Part B premium.
  • Stand-alone Medicare Part D Prescription Drug Plans generally charge monthly premiums.

The deductible is a yearly out-of-pocket expense that you pay in full before your Medicare plan (Original Medicare or Medicare Advantage) will begin covering approved services.

  • In 2017 for Medicare Part A, you pay $1,316; for Medicare Part B, you pay $183.
  • Deductibles for Medicare Advantage plans an Medicare Prescription Drug Plans vary by plan. Compare plans that are available where you live.

A copayment is a flat amount that you may be required to pay for a Medicare-approved service. This payment is usually due at the time of visit. Copayments are a common feature of Medicare Prescription Drug Plans, and Medicare Advantage plans with or without prescription drug coverage.

Coinsurance is the amount you may be required to pay out-of-pocket for a Medicare-covered service after you have met the plan’s annual deductible. Coinsurance is a common feature of Original Medicare. With some exceptions, Medicare may not pay the entire cost of every covered procedure, requiring you to share a percentage of the cost. Some Medicare Prescription Drug Plans might charge a coinsurance amount.

Medicare Supplement plans

Medicare Supplement (Medigap) plans help pay for some of your out-of-pocket costs under Original Medicare, including cost-sharing expenses and emergency overseas travel coverage. Plan benefits are standardized across 10 plan types (labeled letters A through N), and each plan includes different benefits and level of coverage. In 47 states, including North Carolina, Medigap plans offer the same standardized benefits for plans of the same letter type.

These plans can only be used to help with Original Medicare costs, and you’ll need to stay enrolled in Part A and Part B for your hospital and medical coverage. In addition, keep in mind that prescription drug coverage isn’t included in these plans, so if you want help with your medication costs, you should enroll in a stand-alone Medicare Prescription Drug Plan.

Specific plan types and premium amounts may vary depending on where you live in the state.

Medicare Advantage maximum out-of-pocket limit

Medicare Advantage plans differ from Original Medicare in that they have a limit on what you pay each year for covered medical services, called a maximum out-of-pocket (MOOP) limit. For example, if your current Medicare Advantage plan features a $5,000 maximum-out-of-pocket (MOOP) amount, then you would be responsible for paying the coinsurance amount until you’ve reached your $5,000 MOOP.

Once your maximum out-of-pocket amount is reached, your Medicare Advantage plan will cover the rest of your qualifying medical expenses at 100% for the remainder of the calendar year.

Just as coverage details and premium amounts may vary by plan, a Medicare Advantage plan’s MOOP amount may also vary and can change each year. If your plan’s MOOP is going to change in the coming year, then you’ll be notified when your plan sends out its Annual Notice of Change packet every fall. If upon review of your plan’s change notice, you feel like it no longer works for you, you can use the Annual Election Period that runs between October 15 and December 7 each year to make changes to your Medicare coverage.

Original Medicare, Part A and Part B, does not have a maximum out-of-pocket limit, meaning you’ll pay copayment and coinsurance amounts for the full year for any covered services that you need. The Medicare Advantage MOOP may be of benefit to those with medical conditions that require frequent use of medical services.

Stand-alone Medicare Part D Prescription Drug Plans

In addition to any premium, deductible, and copayment or coinsurance your Medicare Prescription Drug Plan might charge, you might want to read about the coverage gap (or “donut hole”) that you might encounter if your prescription drug costs are high enough. Not everyone will reach this coverage gap, but it’s good to be aware of it.

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