Understanding Medicare Costs: What is Coinsurance?

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Understanding Medicare Costs: What is Coinsurance?

 

Most insurance plans, including Original Medicare, share costs with plan members who must pay their portion out-of-pocket.Most Medicare plans, including Original Medicare, share health care costs with plan members. The reason for sharing costs is to encourage plan members to be involved in their health and to make informed decisions about the health care services they use.

Types of Cost Sharing

Medicare cost-sharing may include premiums, deductibles, copays and coinsurance. Plan members pay these costs out-of-pocket. Some people with Original Medicare choose to enroll in a Medicare Supplement Insurance plan to help pay some of these costs.

  • Premium: This is a set amount that you pay to participate in the plan. Premiums are usually charged by the month.

  • Deductible: A deductible is an amount that you have to pay before the plan will start helping you with your costs. Deductibles vary among plans and are often inversely related to premiums. For example, a high deductible plan may have a lower premium than a low-deductible plan.

  • Copay:  A copayment, or copay, is a fixed amount that you pay for a service or product at the time that you receive it. Copays are typically small amounts, like $5 or $10.

  • Coinsurance: Coinsurance is when the cost is split between you and your plan on a percentage basis. For example, you pay 20% and the plan pays 80%.

More About Coinsurance

Some plans have a coinsurance instead of a copay. In other plans, coinsurance kicks in after a deductible has been met and ends after an out-of-pocket maximum has been reached.

Let’s look at an example.

Joe has Original Medicare Parts A and B, which charges a coinsurance after a deductible is met. Joe has already met his deductible for the year, and he does not have a Medicare Supplement Insurance plan. Joe’s doctor “accepts assignment,” meaning that she agrees to take Medicare-approved amounts as full payment for her services.

On his last visit, Joe had a stress test and an X-ray. The doctor’s usual fee for interpreting the tests is $300. The Medicare-approved amount for these services is $220, which Joe’s doctor agrees to be paid. The coinsurance split for most doctor services under Medicare Part B is 80/20. So Medicare will pay 80% of the $220, or $176, and Joe will pay 20%. Joe’s share of the cost is $44.

Interpret stress test                  $175

Read diagnostic X-ray                        $125

Total doctor’s usual fee          $300

 

Medicare-approved amount    $220

Medicare pays 80%                 $176

Joe pays 20% coinsurance       $44

Original Medicare has no out-of-pocket limit. If Joe had a plan with a limit, and he had already reached his limit for the year, then he would not owe the $44 coinsurance. His plan would pay the entire $220. Most Medicare Advantage plans have an out-of-pocket limit.

You can find coinsurance amounts and other cost-sharing information for Original Medicare on Medicare.gov under Frequently Asked Questions about Medicare. Medicare Advantage plans (Medicare Part C) and prescription drug plans (Medicare Part D) are offered by private insurance companies. Coinsurances for these plans, if any, vary from company to company and plan to plan. It’s best to contact the companies directly for information about the plans they offer. To find plans near you, use the Medicare.gov plan finder.

For more information, contact the Medicare helpline 24 hours a day, seven days a week at 1-800-MEDICARE (1-800-633-4227), TTY 1-877-486-2048. You can also contact UnitedHealthcare® Medicare Made Clear at 1-877-619-5582, TTY 711, 8 a.m. - 8 p.m. local time, seven days a week.

Resources:

Compare Costs and Coverage – MedicareMadeClear.com

The Medicare Glossary – Medicare.gov

The Medicare Plan Finder – Medicare.gov

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