Medicare can be a lifesaver when it comes to healthcare costs, but understanding all the ins and outs of coverage can feel overwhelming. One term that often causes confusion is “coinsurance.” Coinsurance is a percentage of the cost of a healthcare service that you’re responsible for paying, even after you’ve met your deductible. This blog post will break down everything you need to know about Medicare coinsurance, helping you navigate your healthcare expenses with confidence.

Understanding Medicare Coinsurance

What is Coinsurance?

Coinsurance is a cost-sharing arrangement between you and your insurance provider, in this case, Medicare. It’s the percentage of the cost of a covered healthcare service that you pay after your deductible has been met. This is different from a copay, which is a fixed dollar amount you pay for a service.

Example: Let’s say you have Medicare Part B, and your coinsurance for most services is 20%. You visit a doctor for a service that costs $100. After you’ve met your Part B deductible ($226 in 2023), you’ll pay $20 (20% of $100), and Medicare pays the remaining $80.

Coinsurance vs. Copays vs. Deductibles

It’s important to differentiate coinsurance from other common healthcare costs:

• Coinsurance: A percentage of the cost of a covered healthcare service you pay.
• Copay: A fixed dollar amount you pay for a covered healthcare service. For instance, a $20 copay for a doctor’s visit.
• Deductible: The amount you pay out-of-pocket before your insurance starts to pay.

Understanding these terms can help you estimate your healthcare costs and plan accordingly.

Coinsurance in Different Parts of Medicare

Medicare Part A Coinsurance (Hospital Insurance)

Medicare Part A primarily covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care. Coinsurance applies to extended hospital stays and skilled nursing facility stays.

• Hospital Stays: For each “benefit period” (which starts the day you’re admitted as an inpatient in a hospital or skilled nursing facility and ends when you haven’t received any inpatient hospital care or skilled care for 60 days in a row), you pay a deductible. Beyond that:

Days 1-60: $0 coinsurance for each benefit period

Days 61-90: $408 coinsurance per day for each benefit period (in 2023)

Days 91 and beyond: $816 coinsurance per each “lifetime reserve day” after day 90 for each benefit period (in 2023) (you have 60 lifetime reserve days)

• Skilled Nursing Facility (SNF):

Days 1-20: $0 coinsurance for each benefit period

Days 21-100: $204 coinsurance per day for each benefit period (in 2023)

Days 101 and beyond: You pay 100% of the costs

Actionable Takeaway: Be aware of the length of your hospital or SNF stay, as coinsurance costs can quickly add up beyond the first 60 days.

Medicare Part B Coinsurance (Medical Insurance)

Medicare Part B covers doctor’s services, outpatient care, preventive services, and some durable medical equipment. Generally, the standard Part B coinsurance is 20% of the Medicare-approved amount for most services after you meet your annual deductible ($226 in 2023).

• Doctor Visits: You typically pay 20% of the Medicare-approved amount.
• Outpatient Therapy: Again, 20% coinsurance applies.
• Durable Medical Equipment (DME): You’ll pay 20% of the Medicare-approved amount for items like wheelchairs or walkers.

Important Note: Some preventive services are covered at 100% under Part B, meaning no coinsurance or copay is required.

Medicare Advantage (Part C) Coinsurance

Medicare Advantage plans, offered by private insurance companies, must provide at least the same coverage as Original Medicare (Parts A and B) but often include additional benefits like vision, dental, and hearing. Coinsurance amounts vary widely depending on the specific plan.

• Plan Variations: Medicare Advantage plans can have varying coinsurance, copay, and deductible amounts. Some plans may have low or even $0 coinsurance for certain services.
• Network Considerations: Coinsurance may be lower when you receive care from in-network providers compared to out-of-network providers.

Tip: When choosing a Medicare Advantage plan, carefully review the plan’s Summary of Benefits to understand the coinsurance amounts for different services and whether those amounts meet your budget.

Medicare Part D Coinsurance (Prescription Drug Coverage)

Medicare Part D covers prescription drugs and is also offered by private insurance companies. Part D plans have a tiered structure of cost-sharing, which can include deductibles, copays, and coinsurance.

• Initial Coverage Stage: After meeting your deductible (if your plan has one), you typically pay a copay or coinsurance for your prescriptions.
• Coverage Gap (“Donut Hole”): In 2023, once your total drug costs (what you and your plan have paid) reach $4,660, you enter the coverage gap. While in the coverage gap, you pay no more than 25% of the plan’s cost for covered brand-name and generic drugs.
• Catastrophic Coverage Stage: Once your out-of-pocket spending reaches $7,400, you enter catastrophic coverage. During this stage, you typically pay a small copay or coinsurance for covered drugs for the rest of the year.

Actionable Tip: Carefully compare Part D plans to find one that covers your medications with the most favorable cost-sharing structure, paying particular attention to which tier your prescriptions are on.

Strategies to Manage Medicare Coinsurance Costs

Supplemental Insurance (Medigap)

Medigap policies are designed to supplement Original Medicare by helping to cover some of your out-of-pocket costs, including coinsurance, copays, and deductibles. Different Medigap plans offer varying levels of coverage.

• Plan Options: Medigap plans are standardized (identified by letters A through N, though some plans are no longer available to new beneficiaries). Some plans, like Plan F and Plan C (no longer available to newly eligible Medicare beneficiaries), may cover all of your Part A and Part B coinsurance and deductibles.
• Eligibility: You must have Original Medicare (Parts A and B) to purchase a Medigap policy. You can’t have a Medigap policy if you have a Medicare Advantage plan.

Benefit: Medigap can provide peace of mind by significantly reducing or eliminating your coinsurance obligations.

Extra Help (Low-Income Subsidy)

The Extra Help program, also known as the Low-Income Subsidy (LIS), helps people with limited income and resources pay for their Medicare prescription drug costs. If you qualify for Extra Help, you’ll pay significantly lower premiums, deductibles, and coinsurance for your Part D coverage.

• Eligibility: Eligibility is based on income and resources.
• Benefits: Extra Help can substantially reduce your prescription drug costs, including lowering or eliminating coinsurance amounts.

Recommendation: If you have limited income and resources, check to see if you qualify for Extra Help to significantly lower your prescription drug expenses.

Health Savings Account (HSA) Considerations

While you can’t contribute to a Health Savings Account (HSA) once you’re enrolled in Medicare, you can use existing HSA funds to pay for qualified medical expenses, including Medicare premiums (excluding Medigap), deductibles, and coinsurance. This can be a tax-advantaged way to cover your out-of-pocket healthcare costs.

Conclusion

Understanding Medicare coinsurance is essential for managing your healthcare expenses effectively. By familiarizing yourself with how coinsurance works within each part of Medicare (A, B, C, and D), exploring supplemental insurance options like Medigap, and investigating resources such as the Extra Help program, you can navigate the complexities of Medicare with greater confidence and control your healthcare costs. Take the time to review your Medicare plan details, compare options, and seek professional advice to make informed decisions that meet your individual needs and financial situation.