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Out-of-pocket medical expenses include any payments you are required to pay yourself for health-care-related services. If you have Medicare health insurance, these expenses may include Medicare copays, Medicare premiums, deductibles, and coinsurance amounts. While most Medicare plans offer the same types of coverage, the differences in how much you have to pay out of pocket can be quite large.
Most Americans are concerned with how much their health insurance costs and how much they may have to pay out of their own pockets every year on health care services. When considering potential out-of-pocket medical expenses, it is important to remember the following facts:
Not All Plans Are Created Equal
Medicare Advantage Plans may offer greater benefits at a lower overall cost than Original Medicare. Some plans offer inexpensive Medicare premiums, others offer supplemental vision and dental coverage, and some have very low out-of-pocket maximum spending limits. The plan that is best for you will have a good balance of costs and benefits related to the services you need. For example, not all Medicare Part D plans provide coverage for all possible prescriptions. If you have four medications that you purchase and take monthly, it is imperative that your Medicare Part D plan covers all four medications, preferably at the best price structure possible.
A Higher Monthly Medicare Premium Can Mean Less Spending Over All
If you have no diagnosed diseases, no chronic conditions, and rarely get sick, a high deductible, low monthly premium plan may be your best cost-saving bet. If, however, you have a disease or condition which causes you to need frequent medical treatments or requires extensive doctor visits, it may be in your best financial interest to choose a plan with a high monthly premium—if the plan also offers a low annual deductible and an inexpensive Medicare copay system. For example, you have diabetes, need frequent blood sugar screenings, and require numerous visits to the doctor. If your plan requires you to pay 25% of all prescription purchases and makes you meet a $3,500 yearly deductible before the plan will cover any of your medical expenses, you may find yourself spending a lot of money out of pocket every year. This would be the case regardless of how inexpensive your Medicare premium was each month.
A Medicare Copay is Not the Same Thing as Medicare Coinsurance
A Medicare copay refers to a flat amount that you are required to pay for a particular medical service (such as a visit to the doctor) or prescription drug. Some plans have tiered copay systems, which means you pay different flat amounts for different medical services or drugs. For example, many health insurance plans charge a $20 copay for a primary care doctor and a copay of either $35 or $50 for a specialist. Additionally, a tiered prescription copay system may charge $10 for generic drugs, $25 for brand name drugs, and $35 for specialty drugs.
Coinsurance varies depending on your specific plan—it is not the same as supplemental insurance. Each time you seek medical care, you are required to pay a percentage of your medical expenses out-of-pocket either at the time of services, purchase, or once the bill arrives. For example, if your bill is $100 and your coinsurance states that you must pay 10%, you owe $10. Many plans have different coinsurance amounts for in-network versus out-of-network providers.
Some Medicare plans will feature both Medicare copays and Medicare coinsurance as part of your out-of-pocket expenses. Knowing the difference can help you save money by ensuring you pick a plan that offers the benefits you use the most at the cheapest price. For example, if you have migraine headaches and require frequent visits to a neurologist, it would not make sense to choose a plan with high copay for visits to specialists, because you would likely be required to make that copayment often.
Convenient Access to In-Network Providers Is a Big Deal
Many Medicare plans provide the best coverage for doctors, hospitals and other health care providers inside of their plan network. If you obtain services from providers outside of the plan's network, you likely will face more expensive medical bills. Some plans may only require you to pay a higher level of Medicare coinsurance or a greater Medicare copay if you choose to go out of network for services. For example, you may be required to pay 20% of your medical expenses inside of the plan's network, but 30% for services obtained outside of the plan's network. Other Medicare health insurance plans may refuse to cover any of the medical expenses associated with care received by an out-of-network provider. It is essential that you check the provider list of any Medicare plan prior to enrollment to ensure you have convenient access to the type of doctors and providers you may medically need on either a frequent or emergency basis.
You Should Take Advantage of Your Plan's Yearly Annual Election Periods
Annual Election periods are the ideal time of year to review any upcoming changes to your Medicare health insurance plan and compare your plan's costs and benefits with the other plans available in your area. If you do not take advantage of this review period, you may find yourself stuck for several years in a plan that has dropped your doctor or does not provide as many of the benefits you medically need as another—perhaps cheaper—plan. To ensure you have the best and cheapest plan to fit your medical needs, you should compare the Medicare copays and coinsurance structures, Medicare premiums, annual deductibles, and annual out-of-pocket maximum spending limits of all Medicare plans for which you are eligible.
To review Medicare plans, including Medicare Advantage Plans, visit www.Medicare.gov.