Understanding a few fundamental terms before you compare the Medicare plans available to you can make the enrollment process easier. Read on to learn more about seven key Medicare terms, as defined by the U.S. Centers for Medicare & Medicaid Services, that may be relevant to you and your family as you make your Medicare plan selections.
A deductible is the yearly amount of money that you have to pay before your insurance policy begins to cover the costs associated with your medical care.
Every plan that uses deductibles will issue a specific figure, say $1,000, as a yearly amount that you must meet before your plan’s coverage kicks in. In this hypothetical case, after you’ve spent $1,000 on services that your plan covers, your policy’s coverage will begin.
All deductibles reset at the beginning of each year. Not all Medicare plans will have a deductible, and a higher deductible often means lower monthly premiums.
2. Copayment vs. Coinsurance
Copayments and coinsurance are two types of out-of-pocket expenses you can expect with most Medicare Plans.
Copayments are a predetermined amount, such as $10 or $20, that you are required to pay for each doctor’s visit or for a prescription drug. Coinsurance, however, is a percentage of a service, such as 20%, that you may be responsible for paying after you pay your deductible.
3. Out-of-Pocket Costs
Even with health insurance plans in place, out-of-pocket expenses are to be expected. Out-of-pocket expenses include costs you are responsible for paying, such as prescription drug, copayment, or coinsurance fees that are not covered by your health plan.
4. Prescription Drug Coverage
Prescription drug coverage is an optional Medicare benefit to help cover the cost of prescription drugs you may need now or in the future. Medicare offers two main ways to access prescription drug coverage:
- Those enrolled in Original Medicare (Part A and Part B) can purchase a Medicare drug plan, also known as Medicare Part D.
- Those who opt for Medicare Advantage rather than Original Medicare can purchase a Medicare Advantage Plan that includes drug coverage.
5. Medicare Savings Programs
Medicare Savings Programs offer financial help from your state to help you pay your Medicare premiums. Costs that can be covered by a Medicare Savings Program include deductibles, copayments, and coinsurance related to Part A and Part B plans. For low-income individuals who qualify, Medicare Savings Programs can help make health care and prescription drug costs much more affordable.
Medigap policies are supplemental insurance plans offered by private insurance companies in order to cover gaps in Original Medicare plan coverage. They are not available to individuals with Medicare Advantage Plans.
Medigap insurance plans can help cover remaining costs, such as:
Note that Medigap policies only apply to individual people, so each member of your household who needs Medigap coverage must have their own plan. The specific plans available to you will vary by region.
7. Medicare Advantage Plans
Medicare Advantage Plans, also known as Part C, are Medicare health plans provided by private companies. These plans are an alternative to Original Medicare and provide all of the Medicare Part A and Part B benefits, with the exception of hospice care.
Medicare Advantage Plans also vary according to region and are available in a number of forms, including:
- Health Maintenance Organizations (HMOs)
- Preferred Provider Organizations (PPOs)
- Private Fee-for-Service Plans
- Special Needs Plans
- Medicare Medical Savings Account Plans
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