During our careers, our employers deduct money from our paychecks in the form of FICA taxes. Part of these funds go to pre-pay our hospital benefits in retirement. Because we see these payroll deductions, many of us assume that when we finally turn 65 and get on Medicare, we won’t have to pay anything.
Unfortunately, those deductions are enough to cover Medicare Part A costs. They do not prepay our Part B outpatient premiums or our future drug expenses.
So every year there are thousands of people who enroll in Medicare and get a shock when they discover that Social Security will be deducting $134/month (or more, depending on our income) to pay for our Part B outpatient expenses.
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Then to add insult to injury, we find out that Medicare, just like any other types of health insurance, requires us to pay deductibles, copays, and coinsurance as we use our benefits. Let’s take a look at all of the costs related to Medicare so that you can adequately prepare for what you’ll spend.
Your Deductible for Parts A and B and D
If you have an inpatient hospital stay, you will owe a deductible for Part A. This is an amount of money that you must spend out of pocket before Medicare begins to pay. In 2019, this deductible will be $1364. This covers you for the first 60 days in the hospital before you begin paying any other copays.
On the outpatient side of things, Part B has a smaller annual deductible which will be $185 in 2019. After this Medicare Part B will pay for 80% of your costs when you access outpatient services like doctor visits, labwork, outpatient surgeries, physical therapy, and many other things.
Individuals who sign up for Part D drug coverage may also have a deductible. In 2019, Medicare has set the Part D deductible at $415. Many companies will charge this, although some insurance carriers will offer plans with a lesser deductible. Drug companies set their own copays, premiums and deductibles as long as they are no less than Medicare’s minimum limits.
Out-of-Pocket Spending for Coinsurance and Copays
In addition to deductibles, Medicare beneficiaries also pay for copays and coinsurance as they use their benefits. Under Part A, you begin paying daily copays on the 61st consecutive day in the hospital. These daily copays get larger on the 91st day and then after Day 150, you pay all your own hospital expenses.
Fortunately, hospital stays are usually not this long, but it’s important to have some supplemental coverage to help with these large copays just in case. These plans give you an additional year in the hospital after Medicare Part A benefits run out On the Part B side, we discussed earlier that Medicare will pay 20%. You must pay for the other 20% on your own. We refer to this as your coinsurance.It’s important to understand that this coinsurance has no maximum limit. This means that you will continue to pay 20% forever no matter how many bills you have.
Medigap plans can also help to cover this coinsurance for you. Also called Medigap plans, these policies pay after Medicare pays its own share of your healthcare expenses. They help to cover the deductibles, coinsurance, and copays that normally you would be responsible for paying.
Many people enjoy this type of coverage because it allows you freedom of access to any Medicare provider nationwide. You don’t have to get referrals from your primary care physician either when you wish to see a specialist.
These plans do not include retail drug coverage, so beneficiaries who enroll in Medigap plans often also enroll in standalone Part D coverage also pay copays for medications when they pick them up at the pharmacy. Generics, of course, will cost less than brand-name drugs.
Medicare Advantage Plans
About 30% of people on Medicare get their benefits from a private insurance company instead of from Original Medicare itself. These are called Medicare Advantage plans, which fall under Part C of Medicare. These plans must cover all the same services as Medicare covers, but your copays, deductible and coinsurance for these items are the discretion of the plan. When you enroll in an Advantage plan, you can review the plan’s evidence of coverage booklet to see ahead of time exactly what costs will be expected of you for various types of medical treatments and services.
Be aware that these plans often have networks, so you’ll want to verify that your doctors participate in the plan before you sign up. While Medicare isn’t free, there are options for additional coverage that can help you pay for some of the cost-sharing that you would normally be responsible for. Check into your options early so that you can take your time in making wise coverage choices.