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coinsurance

What is coinsurance?

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What is coinsurance?

Coinsurance normally refers to a percentage of medical costs that a person pays after they have met their health plan’s deductible. But with Original Medicare, there are two different types of coinsurance: One is a percentage of the Medicare-approved cost of healthcare covered by Medicare Part B (outpatient and physician coverage) after you meet your Part B deductible. The other is flat-dollar amounts that you pay for certain services under Medicare Part A (inpatient coverage). Medicare is fairly unique in terms of referring to these flat-dollar amounts as coinsurance.

How much is the coinsurance for Medicare Part A?

For Medicare Part A, you will pay a $1,600 deductible (in 2023) for each benefit period. This covers the first 60 days of your inpatient stay, and the $1,600 is a deductible, rather than coinsurance. But if you are admitted longer than 60 days, you will pay coinsurance for each day you remain in the hospital. In 2023, you’d pay $400/day for days 61-90. As noted above, coinsurance usually means a percentage of the costs, but that’s not the case for Medicare Part A.

If you need to remain hospitalized longer than 90 days, you’ll either have to start paying the full bill yourself, or dipping into your lifetime reserve days. If you use any of these 60 lifetime reserve days, you’d pay coinsurance of $800 for each day used.

How much is the coinsurance for Medicare Part B?

For Medicare Part B, you pay 20% of the Medicare-approved cost, after you’ve paid your deductible (the Part B deductible is $226 in 2023). For certain preventive screening tests – such as colonoscopies and mammograms – you are not required to pay coinsurance as long as your healthcare provider accepts assignment.

How much is the coinsurance for Medicare Part D?

For Medicare Part D (prescription coverage), coinsurance depends on your policy’s plan design. But a standard plan has a deductible (no more than $505 in 2023), and then you pay a copay (flat dollar amount) or coinsurance (percentage of the cost) set by your plan until you reach the initial coverage limit of $4,660 in 2023. This total includes the amount that you and your plan spend on your prescription drugs. At that point, you enter what is known as the donut hole and you will pay coinsurance of 25% for your prescription drugs (regardless of whether they are brand-name or generic).

After your out-of-pocket costs (what you pay for your drugs, including any manufacturer discounts, but not what your plan pays), exceed a certain amount for the year – $7,400 in 2023 – you’ll leave the donut hole and enter catastrophic coverage for the rest of the year. In 2023, you will then pay $4.15 for generic drugs, $10.35 for brand-name drugs, or 5% coinsurance – whichever costs more. Thanks to the Inflation Reduction Act, there will be no cost-sharing during catastrophic coverage starting in 2024.

How does Medigap help with coinsurance costs?

If you have a Medigap plan, it will cover some or all of the coinsurance that you’d otherwise have to pay for Medicare Part A and B, although Medigap plans will not cover any of your out-of-pocket costs for outpatient medications unless you still have Plan H, I, or J that you purchased prior to 2006. Medigap plans are standardized, and each plan differs in terms of what coinsurance costs it will pay. So the specifics of how your plan covers Medicare coinsurance will depend on the plan that you select.

How does coinsurance work if you have Medicare Advantage?

If you enroll in Medicare Advantage, your plan will wrap inpatient, outpatient, and in most cases, prescription coverage, into one plan. There will generally be a deductible and then coinsurance that you’ll have to pay until you reach the plan’s out-of-pocket limit for the year, which can’t be more than $8,300 in 2023 for in-network care, plus the cost of prescriptions. Some services may be covered by a copay instead. There is a great deal of variation in terms of plan design for Medicare Advantage plans. So the specifics of how your plan works, including the percentage that you pay in coinsurance, the services that are subject to coinsurance, and the out-of-pocket cap, will depend on the plan you choose.

How does Medicare's coinsurance differ from coinsurance under other types of health coverage?

With Original Medicare, coinsurance can be a percentage of the cost (Medicare Part B) or flat dollar amounts (Medicare Part A), whereas with other types of health insurance, coinsurance is typically just a percentage of the costs.

Original Medicare also doesn’t have any cap on how high a person’s coinsurance charges can be, as Original Medicare does not have a maximum out-of-pocket limit. This differs from virtually all other types of major medical coverage in the U.S., which are generally required to have out-of-pocket caps that don’t exceed $9,100 in 2023. As noted above, Medigap plans can help to cover some or all of the out-of-pocket costs that a person will have with Original Medicare, and Medicare Advantage plans are required to have a cap on out-of-pocket costs that can’t exceed $8,300 in 2023 (plus the cost of prescription drugs).

 

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