Medicare Plans and Cost Sharing: How to Compare Out-of-Pocket Costs

Out-of-pocket costs may be a factor for many people when choosing a Medicare plan. Yet estimating these costs and comparing them between plans can be confusing.

Cost-sharing varies among plans. You may have to compare costs between a plan that charges a copay when you see a doctor and one that charges coinsurance, for example. In addition, some plans may charge premiums and deductibles, and some don’t.

So what do you do?

Step 1: Understand the Cost of Original Medicare

Most people start by looking at Original Medicare, which is administered by the federal government. Coverage and cost-sharing terms are the same for everyone, no matter where you live. Costs for plan year 2012 are summarized in the table.

  Original Medicare Part AHospital Coverage Original Medicare Part BDoctor and Outpatient Coverage
Premiums Premium free for most people; $451 per year if charged Depends on income; ranges $99.90 to $319.70 per month
Deductibles $1,156 per benefit period* $140 per year
Copays Hospital (per day)Days 1-60: $0

Days 61-90: $289

Days 91+: $578**

Skilled nursing facility (per day)

Days 1-20: $0

Days 21-100: $144.50

Days 101+: 100% of costs

Outpatient prescriptions for pain and symptom management during hospice: $5.00

Outpatient hospital services: varies and, for a single service, can’t be more than the inpatient hospital deductible ($1,156)
Coinsurances Durable medical equipment used at home: 20%  Doctor services: 20%Outpatient therapy: 20%

Durable medical equipment: 20%

Hospital doctor services: 20%

Outpatient mental health care: 40%

* A benefit period begins the day you go into a hospital or skilled nursing facility and ends when you’ve been out for 60 days in a row.

** After you use 90 hospital days in one benefit period, you can begin drawing from the 60 lifetime reserve days available over your entire life.

Step 2: Add the Cost of Prescription Drug Coverage and Medicare Supplement Insurance

Original Medicare does not include prescription drug coverage (Part D) and so many people purchase it separately. Part D premiums depend on the type of coverage you choose, for example a standalone Part D plan or a Medicare Advantage plan with prescription drug benefit. Individual plans may charge a monthly premium and most also charge a copay per prescription.

Many people also choose to add a Medicare supplement insurance plan (Medigap) to help pay some of the costs that Original Medicare doesn’t cover. There are ten standard plans and each has its own cost-sharing terms. Not all plans are available in all states.

Medicare prescription drug plans and Medicare supplement insurance plans are offered by private insurance companies. You can find and compare the plans available in your area at Medicare.gov.

Step 3: Compare the Cost of a Medicare Advantage Plan

Medicare Advantage plans are an alternative to Original Medicare. Offered by private insurance companies approved by Medicare, these plans combine the coverage of Part A and Part B. Most also include prescription drug coverage and offer extra benefits like wellness, vision, dental and hearing care—all in one plan.

Cost-sharing terms vary by plan, and the plans offered vary depending on where you live. You need to find plans in your area and compare their costs to each other and to Original Medicare. In general, with a Medicare Advantage plan:

  • You continue to pay your Part B premium to Medicare. Your plan may or may not charge an additional premium.
  • You may have deductibles, copays and coinsurances, as defined by each plan.
  • Your plan must provide an out-of-pocket cost limit. With any Medicare Advantage plan, the maximum you will pay in 2012 is $6700. There is no limit with Original Medicare.

Not Always Apples to Apples

Medicare plan coverage and cost-sharing terms vary widely. It’s a good idea to look at all your choices. It may not be an apples-to-apples comparison, but with a little effort you can determine the best choice for you.

–This information was provided by Medicare Made Clear

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