Medicare Part A and Part B are provided by the federal government though there are out-of-pocket expenses involved with each. Medicare Advantage, Medicare Supplement insurance and Medicare Part D Prescription Drug plans are provided through private insurance companies. Again, both can involve out-of-pocket expenses which are listed below.
Similar to other health insurance plans, a premium is the amount that an individual pays every month for the coverage that the Medicare plan(s) provide. Generally, an individual who is 65 years of age and has worked 10 years in Medicare-taxed employment or has a spouse who has worked 10 years in Medicare-taxed employment does not pay a premium for Part A. Most individuals do need to pay a premium for Part B. Premiums are also required for Medicare Advantage, Medicare Supplement insurance and Medicare Part D Prescription Drug plans. Note that those individuals who use Medicaid may receive a subsidy for the premium(s).
A deductible is the amount of money that your plan(s) requires you to pay for your health care expenses on an annual basis. After you pay this amount, the insurance company begins to cover the expenses, either a percentage or in full for the remainder of the year. This applies to Medicare Parts A, B and D, Medicare Advantage and Medicare Supplement insurance. Be sure to compare plans as some do not have deductibles while others have deductibles that vary in amount. Also, know that deductibles sometimes change each year.
A copayment is a flat fee that an individual may be required to pay for a health-related expense, such as a doctor's appointment, after the deductible has been met. Many Medicare Advantage and Medicare Part D Prescription Drug plans do use copayments.
Coinsurance is a percentage of a health-related expense that an individual is required to pay after the deductible has been reached. Coinsurance is used for Medicare Part B.
Maximum Out-of-Pocket Limit
After all of the above out-of-pocket expenses have reached a certain limit within a year, some health plans will cover 100% of the health-related costs through the end of the year. This is referred to as maximum out-of-pocket limits. This is one important distinction between Original Medicare, which does not have out-of-pocket limits, and Medicare Advantage, which does.