Medicare deductibles, copayments and coinsurance

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As I write this month’s HIICAP article, the cases of the COVID-19 virus are continuing to increase.

I hope by the time that this article appears many of you will have received at least your first dose of a COVID vaccine. But, even with the vaccine it will still be some months before we can let our guard down.

Medicare Terminology. Last month’s column discussed the annual publication Medicare and You. Section 10 of the 2021 edition is simply titled, “Definitions.” This is a deceptively simple title, but it contains a number of terms that are extremely important for both the understanding of your insurance coverage as well as being able to communicate with your health care providers. Here are three of the terms that you will find useful. Other terms will be discussed in future columns. For a complete list see pages 113-116 of the 2021 edition.

Deductible. According to Medicare and You 2021, a deductible is “The amount you must pay for health care or prescriptions before Original Medicare, your prescription drug plan, or your other insurance begins to pay.” (p. 114).

Coinsurance. This is an amount of money you may need to pay as your share of the cost of services or medications after you pay for any deductibles or copayments.The amount is usually a percentage, 20 percent for example, of your total charge.

Copayment. A copayment (copay) is your share of the cost of a medical service or prescription drug. It is generally a fixed amount. For example, you may have a $5 copay for a prescription or a $20 copay for a doctor’s visit. The payment may be required before you receive the service, pay upon leaving or you may be billed later.

Confused? Many people are. One way to think about these terms is that a copayment is a fixed amount that you are responsible for at the time the service is delivered, while a deductible is the amount you are responsible for before your insurance coverage begins. This deductible can vary depending on the services provided.

Finally, coinsurance is a percentage of a medical charge that you must pay. So, for a complex medical service you might end up being responsible for all three types of charges. For example, you might have a $20 copayment for an initial examination and a 30 percent coinsurance charge for a resulting hospital procedure. In addition, you may also have a deductible for any medication prescribed as a result of the hospitalization.

Medicare supplemental insurance or “Medigap” plans. Medigap plans help to cover the deductible, coinsurance and copayments discussed above. These plans are sold by private insurance companies to cover those charges that are not covered by Original Medicare.

Beginning this year there is a new issue with Medigap coverage. That is, Plans C and F are no longer available to new Medicare beneficiaries. These popular plans, especially the F plans, were comprehensive and were allowed to cover the Medicare Part B deductible, set at $203 at this year, as well as other charges. If you have been enrolled in a Plan C or F you will be allowed to stay in those plans. There are still G plans available that may cover some of these charges.

Because of, in particular, coinsurance and copayments, many who are covered by Original Medicare have Medicap plans. For many retirees their Medigap plan is one provided by their former employer. If you worked for ABC company you were probably covered by their employee health insurance policy.

Upon reaching age 65, you sign up for Original Medicare as your primary coverage and your company plan, with a premium, becomes your Medigap plan. If you choose coverage through a Medicare Advantage Plan, Medigap plans cannot be used to pay for deductibles, coinsurance or copayment not covered by your Advantage Plan. Here are some things you need to know about Medigap plans.

In order to purchase a Medigap plan you must have Original Medicare (coverage by Medicare Parts A and B).

You pay a monthly premium for Medigap policy to a private insurance carrier. This premium is in addition to your Medicare Part B premium.

Medigap policies are individual policies.If you and your spouse want supplemental coverage you must each purchase separate policies.

As long as you pay your premium your carrier can not cancel your policy. This means that if you develop any new health problems your insurance company must continue to honor your policy under the original terms.

Medigap policies sold after Jan. 1, 2006 are not allowed to include prescription drug coverage. So, if you have Original Medicare and a Medigap policy you will still need to have a separate Part D drug plan. If you decide to purchase your Medigap and Part D plan from the same company, you may need to make two separate premium payments because you have two separate policies.

Dr. William Lane is the owner of William Lane Associates, a gerontological firm located in Homer, NY. He writes a monthly column on HIICAP related issues for the OFA. Dr. Lane does not sell insurance, work for any insurance company or recommend any insurance products.

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