In order to plan your budget, you may be trying to predict what you’ll spend on upcoming Medicare health care costs. One question you may have is about cost limits. What you spend on your health care is called your “out-of-pocket” cost, because it refers to money that comes out of your pocket (or wallet, or pocketbook).
What are the limits on how much you can be charged for your out-of-pocket health care costs? What you may find is that it all depends on what kind of Medicare plan you have.
A Quick Cost-Sharing Overview
With most Medicare plans, you have to pay some portion of your health care costs. This is called cost-sharing, since you and your health plan are sharing costs. Cost-sharing can include premiums, copays, coinsurance and deductibles.
- Premium: The amount you have to pay to be a part of a plan. Most premiums are paid monthly.
- Deductible: The amount you have to pay before your plan will begin to pay its portion of your health care costs.
- Copay: The amount you pay every time you use a service.
- Coinsurance: The act of splitting costs with your plan on a percentage basis. For example, you might pay 20% of the cost of a doctor’s visit, and your plan pays the remaining 80%.
Now that we’ve got the terms down, let’s take a look at how different out-of-pocket cost limits figure in to different types of Medicare plans.
Original Medicare (Medicare Parts A and B)
Original Medicare is a benefit offered by the federal government. With Original Medicare, there are no limits on your out-of-pocket spending for cost-sharing. Most people can predict how much they’ll pay in Part B premiums (and Part A, if applicable). But if you use a large number of health care services within a given plan year, you may need to keep paying copays and coinsurance for all of those services.
What you may pay in a given plan year depends on the cost of the health care services you use. To see a complete breakdown of costs for plan year 2012 for Original Medicare, go to Medicare Plans and Cost Sharing: How to Compare Out-of-Pocket Costs.
Medicare Supplement Insurance (Medigap) Plans
Some people with Original Medicare choose to add a Medicare supplement insurance plan. These private plans help pay some of the costs that Original Medicare doesn’t pay.
Each Medicare supplement insurance plan has its own cost-sharing terms. Not all types of plans are available in all states.
Medicare Prescription Drug (Medicare Part D) Plan
Original Medicare does not include prescription drug coverage. So many people purchase it separately. Like Medicare supplement insurance plans, Part D plans are offered by private companies. The plan premiums depend on the type of coverage you choose.
Medicare Part D has different levels of cost-sharing until you have spent to a certain out-of-pocket limit for drugs that are covered by the plan. In 2012, the Part D out-of-pocket cost limit is $4,700.
Medicare Advantage (Medicare Part C)
Medicare Advantage plans are health plan options that offer an alternative to Original Medicare. They combine the coverage of Part A and Part B, and are offered by private insurance companies approved by Medicare. Most also include prescription drug coverage and may offer extra benefits like wellness programs, and vision, dental and hearing care.
With a Medicare Advantage plan, you continue to pay your Part B premium to Medicare. Your plan may or may not charge an additional premium. Your deductibles, copays and coinsurances will depend on the terms of the plan you choose.
All Medicare Advantage plans must provide an out-of-pocket cost limit. With any Medicare Advantage plan, the out-of-pocket cost limit in 2012 is $6,700.
Just One Piece of the Puzzle
Out-of-pocket cost limits are only one element of how much your total health care costs will be for a given year. In order to decide what the best Medicare coverage options are for you, make sure to look at the entire picture of which health care services each option covers, and what the cost of that coverage is.
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. If you have questions about Medicare Made Clear, call 1-877-619-5582, TTY 711, 8 a.m. – 8 p.m. local time, seven days a week.
2012 Medicare Costs – Medicare.gov
Medicare Plan Finder – Medicare.gov
How Much Does Medicare Cost? – MedicareMadeClear.com
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