Medicare plans offer help with healthcare costs, but they do not pay for everything.
Aside from the monthly premiums, uncovered costs include deductibles, coinsurance, and copayments. These expenses vary among various Medicare plans.
This article discusses the details of coinsurance in each of Plan A, Plan B, Plan C, and Plan D. It also explains other costs of each part of Medicare, along with eligibility and when to enroll.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare Part A is insurance that covers inpatient care in a hospital or nursing home. It also includes hospice and home healthcare.
There is no coinsurance for Part A, but there is a copayment based on benefit periods. This time frame begins the day a person enters a hospital and ends the day they have been out of the hospital for 60 consecutive days.
In each benefit period, the copayment is as follows:
- $0 for days 1–60
- $371 per day for days 61–90
- $742 for each “lifetime reserve day” for day 91 and beyond
After a person has used all of their lifetime reserve days, they pay all expenses. “Lifetime reserve day” refers to 60 days following the first 90 days of hospitalization.
An additional Part A cost is a $1,484 deductible for each benefit period.
Most people who have Part A fully qualify for the program and do not pay a monthly premium.
Option to buy Part A
People who do not qualify for the program may opt to buy Part A.
Individuals who paid Medicare taxes for 30–39 quarters must pay a standard $259 monthly premium. However, if the person paid Medicare taxes for fewer than 30 quarters, they must pay a standard $471 monthly premium.
Medicare Part B is medical insurance that covers preventive and medically necessary services. It also covers medical equipment, ambulance services, and mental health care.
The coinsurance is usually 20% of the Medicare-approved cost. Another Part B cost includes the yearly deductible of $203.
Part B premiums depend on a person’s income. For example, the cost is $148.50 per month for someone whose annual income is $88,000 or less or whose joint income with a spouse is $176,000 or less.
Monthly premiums are more expensive for people with higher incomes.
Medicare Part C, or Medicare Advantage, is an alternative to original Medicare. It is insurance from a private company that contracts with Medicare to provide Part A and Part B coverage.
Most Advantage plans also include prescription drug coverage, and many plans offer extra benefits, such as vision and dental care.
Costs differ widely among the plans and among the insurance companies that offer them. The plans have coinsurance and copayments of varying amounts. A person can use this tool to compare costs.
Other costs may include the monthly Part B premium of $148.50. Some plans pay all or part of this expense.
Advantage plans may have no deductibles, or they may have two deductibles: one for health and the other for drug coverage. They also provide a yearly cap on healthcare costs.
Medicare Part D provides prescription drug coverage.
Since Part A and Part B do not offer help with this expense, many people with original Medicare choose to buy a Part D plan. Each plan has a formulary, which is a list of the medications that it covers.
Coinsurance and copayments differ among plans. A person can use this tool to compare costs.
The costs also vary within each plan, depending on whether they fall before, during, or after the coverage gap.
Coverage gap
This gap refers to a period of less coverage, which often starts once a person’s drug costs total $4,130 and ends when the costs exceed $6,550.
To illustrate, most plans have certain coinsurance and copayments that a person must pay before they reach the starting point of the coverage gap.
Within a coverage gap of $4,130–$6,550, an individual pays 25% of drug costs. After leaving the coverage gap, a person pays 5%, or between $3.70 (generic drugs) and $9.20 (brand-name drugs), whichever amount is greater.
Another Part D cost is the monthly premium. This expense differs between plan, but the average base premium in 2021, is $33.06.
Part D plans also have an annual deductible that varies greatly.
Those with a low income may qualify for Extra Help, which is a program that helps pay some or all of Part D’s out-of-pocket costs.
As people with original Medicare have to pay deductibles, coinsurance, and copayments, many of them buy a Medigap plan to help with these costs.
Medigap offers 10 Medicare supplement insurance plans that provide a range of benefits.
All of the plans pay 100% of Part A coinsurance. Eight of the plans pay 100% of Part B coinsurance, while one plan pays 75%, and another pays 50%.
There are some variations in eligibility and enrollment between original Medicare (Part A and Part B), Part C, and Part D.
Medicare Part A and Part B
People are eligible for Medicare when they reach the age of 65. Younger individuals with disabilities or end stage renal disease (ESRD) are also eligible.
If someone receives Social Security benefits, they are automatically enrolled in parts A and B when they become eligible.
A person who does not receive Social Security benefits may sign up during the Initial Enrollment Period, which is a 7-month time span that begins 3 months before they turn 65.
A person may also sign up during the General Enrollment Period from January 1 to March 31 of each year. It may be best to sign up during the Initial Enrollment Period, however, to avoid penalties in the form of higher monthly premiums.
Part C and Part D
An individual with Part A and Part B is eligible to buy a Part D plan for prescription coverage. They are also eligible to switch to an Advantage plan, which takes the place of parts A, B, and D.
Someone interested in a Part D plan may join during the Initial Enrollment Period. They may also join in the Open Enrollment Period from October 15 to December 7, but they may have to pay a penalty for late enrollment.
A person interested in joining an Advantage plan may do so during the Initial Enrollment or Open Enrollment periods.
Original Medicare (Part A and Part B), Medicare Advantage (Part C), and prescription drug coverage (Part D), all require a person to pay coinsurance, which is a percentage of healthcare costs.
If a person has Part A and Part B, they may choose to buy a Medigap plan to help pay this and other uncovered expenses.
Coinsurance of Part A and Part B is a standard percentage, but coinsurance of Part C and Part D varies among the plans. In contrast to coinsurance percentages, copayments are a set dollar amount per service.
A person should consider all the costs involved, including deductibles and premiums, when choosing a Medicare plan.