When exploring Medicare plans and coverage, it’s good to be crystal-clear on the terms associated with payments and how the costs are shared. This page provides you with quick definitions to key Medicare terms.
Coinsurance
The costs that you and the health insurance plan pay are split on a percentage basis. For example, you might pay 20% of the total allowed cost of a service and the remaining 80% would be paid by the plan.
Copay
The fixed amount each plan sets that you pay at the time you receive a covered service. For example, you might pay $20 when you visit the doctor or $12 when you fill a prescription. Actual copays are set by each plan.
Deductible
A set amount you pay out of pocket for covered services each year before your plan begins to pay.
Out-of-Pocket Maximum
The maximum amount you pay during a policy period (usually a year). This amount does not include your premium, or the cost of any services not covered by your plan. After you reach your out-of-pocket maximum, your plan pays 100% of the allowed number of covered services for the rest of the policy period.
Part B Excess Charge
Some Medicare Supplement Insurance (Medigap) plans cover what is known as the "Part B Excess Charge." With Original Medicare (Parts A and B), healthcare providers can charge more than the Medicare-approved amount for their services. The difference between the amount they charge, and the Medicare-approved amount is the Part B excess charge.
Premium
The potentially variable, monthly amount you pay for your health insurance. In addition to your premium, you will usually pay other costs for your health care, including a deductible, copayments, and coinsurance.
Medicare Advantage Cost Sharing
With Medicare Advantage plans, the company that offers the plan sets the monthly premium and decides on the cost-sharing amounts. Look at the details of each plan you’re considering to understand your share of the cost.
Your Out-of-Pocket Maximum
Limits on your cost-sharing are one way Medicare Advantage plans differ from Original Medicare (Part A and Part B). Many Medicare Advantage plans offer a feature that caps your out-of-pocket spending for cost-sharing expenses like copays and deductibles in any given year. There are also a few Medigap plans that offer this feature. Out-of-pocket maximums can help cap your covered fees in a medical emergency.
Prescription Drug Coverage Deductibles
Some Medicare Part D and Medicare Advantage plans have a deductible for prescription drug coverage, while others don’t. Look at your specific plan for details.
Remember
Your costs will vary from plan to plan. Shop for a plan that will fit your budget and needs.
