Healthcare can be complicated, and extra costs can hide behind words like copays, coinsurance, and deductibles. But when you know how Medicare works, you can better choose which plan is best for you. If these Medicare terms have you confused, here’s a primer, plus the Medicare costs for 2020.
A copay, or copayment, is a predetermined, flat fee you pay for healthcare services at the time you receive care. For example, when you visit the doctor, purchase prescription drugs, or visit the hospital, you may be asked to pay before you receive your healthcare.
This amount is different based on your Medicare plan and what type of service you receive. Generally, you will not have to pay a copay and coinsurance on a single service.
Unlike flat-fee copays, coinsurance is a percentage of the price of service you’ll pay. For example, after you have paid the Medicare Part B (medical insurance) deductible for the year ($198 in 2020), you will be required to pay 20 percent of each service covered by Part B, and Medicare pays the remaining 80 percent.
For Medicare Part A (hospital insurance), coinsurance is a set dollar amount that you pay for covered days spent in the hospital. Here are the Part A coinsurance amounts for 2020:
- Days 1 – 60: $0
- Days 61 – 90: $352
- Days 90 – lifetime reserve days: $704 per day until you have used up your lifetime reserve days (you get 60 lifetime reserve days over the course of your life); after that, you pay the full cost.
- Skilled nursing facility coinsurance: $176
Some Medigap plans can help you cover an additional 365 days in the hospital.
A deductible is the money you will pay before your benefits kick in. For 2020, the Medicare Part B deductible is $198. This amount will be paid only once per year.
The 2020 Part A deductible is $1,408 per benefit period. A benefit period in Part A begins on the first day you are admitted to the hospital and ends after you have spent 60 consecutive days out of the hospital.
Some Medicare Advantage and Part D prescription drug plans come with an annual deductible as well. Check with your individual plan to find out.
Maximum out-of-pocket limit
The maximum out-of-pocket limit (MOOP) is the dollar amount beyond which your plan will pay for 100 percent of your healthcare costs. Copays and coinsurance payments go toward this limit, but monthly premiums do not. The 2020 maximum out-of-pocket limits are:
- Original Medicare – No out-of-pocket limit.
- Medicare Advantage – No Medicare Advantage plan can have a maximum out-of-pocket limit higher than $6,700, but many plans charge the full $6,700 amount.
- Medigap – Some Medigap plans pay the Part A deductible and coinsurance so that your out-of-pocket costs don’t get too high. Beginning January 1, 2020, no Medigap plan will cover the Part B deductible unless you have been grandfathered into Plan C and Plan F availability.
For Part D prescription drug coverage, copay and coinsurance are separate from your Medicare plan. If your Part D plan has a deductible, you pay that first. After that, copays or coinsurance payments are what you pay for each prescription. Part D plans have different tiers as part of the Part D formulary, or lists of covered drugs in which different types of drugs incur lower or higher copays. These will differ according to your individual Part D plan.
- Copays in Part D are when you pay a flat fee (for example, $10) for all drugs in a certain tier. Generic drugs usually have a lower copay amount than brand-name drugs.
- Coinsurance in Part D means that you pay a percentage of the drug’s cost (for example, 25 percent).
- Catastrophic coverage in Part D for 2020 is $6,350. Once you pay this amount out of pocket, you will pay the copay on your prescription drugs, or 5 percent coinsurance, whichever is greater.
Read your benefits summary carefully to see how your plan handles copays, coinsurance, and deductibles so you won’t be hit with any surprises.