Understanding the expenses associated with Medicare is crucial for choosing the right Medicare insurance plan. The Medicare deductible for 2020 is no different – you need to consider your Medicare premiums, copayments, and coinsurance expenses before enrolling.
A Medicare beneficiary under Original Medicare will have different out-of-pocket and deductible expenses than those enrolled in Medicare Advantage Plans.
Deductibles are the amount of money you need to pay out-of-pocket for health care services before your plan starts coverage. In most cases, the insured pays 100% of the costs until the deductible is reached.
Let’s look at an example of how deductibles work.
Larry goes to his doctor for his annual physical, which is considered preventive care. His plan covers 100% of preventive care, so his plan’s $250 deductible is still intact.
Later in the year, Larry is skiing and takes a wrong turn and hurts his knee. He goes to the doctor to get it examined, and the doctor visit along with incidentals costs $375. Because his deductible is still intact, he has to pay $250; the plan will pay the rest. He will also need a knee brace while the knee heals. Now that Larry has met his deductible, he will only pay 20% coinsurance for the knee brace.
Coinsurance is the percentage of a medical bill that Medicare beneficiaries are responsible for paying after reaching the set deductible. Coinsurance is a percentage of the medical care bill, but a copayment (copay) is typically a flat fee.
Let’s look at an example of how coinsurance and copayments work.
Joe has hip-replacement surgery, and the total bill for the procedure is $35,000. With his current plan, he has a copay of $125 per day for the first six days in hospital. Following surgery, Joe stays in hospital for three days and is required to pay $375 – Joe’s plan will cover the remainder of the hospital expenses.
Joe is going to need crutches through the healing process. Crutches fall under the category of durable medical equipment – a 20% coinsurance on Joe’s plan. As such, Joe is responsible for $18.75 of the $75 cost of crutches.
Mary, on the other hand, has a plan which only requires a copay. She visits her doctor and has a $20 copay regardless of what the Medicare-approved doctor charges for the visit. If she were to require additional care, surgery, tests, etc., she would only pay a predetermined copay amount that will always be fixed.
For 2020, Medicare Part A deductible is $1,408 for each benefit period.
A “benefit period” starts when you enter a hospital facility or skilled nursing facility (SNF) and ends when you have not received inpatient hospital care or SNF care for sixty days in a row.
The amount you pay in out-of-pocket expenses depends on the length of the hospital stay.
Original Medicare will cover up to 90 days of inpatient hospital care during each benefit period. Recipients also have an additional 60 days of coverage- these are called “lifetime reserve days”. These additional 60 days may only be used once.
Medicare Part A covers mental health care services that require you to be admitted as an inpatient. Medicare Part A covers the hospital room, meals, nursing, and other related services and supplies.
The mental health inpatient stay costs follow the same benefit periods seen above for hospital stays.
Medicare Part A covers skilled nursing care provided in an SNF. Skilled care is specialist nursing and therapy care that can only be performed by professionals. When you need skilled nursing or skilled therapy to treat, manage, and observe your condition, Medicare Part A covers some of the costs. As the beneficiary, you will pay
Medicare Part B covers two areas of services: Medically Necessary Services and Preventive Care Services.
In 2020, the Medicare Part B deductible is $198. Once the deductible has been met, the recipient is responsible for paying 20% coinsurance of the Medicare-approved amount for the following.
Under Medicare Part B, you can receive home health care if you are homebound and need skilled care. No prior hospital stay is required and there is no deductible or coinsurance for Part B home health care.
Medicare Part B beneficiaries pay 20% of the approved amount for most doctor services, outpatient therapy, and durable medical equipment.
Medicare Part B covers outpatient mental health services through a clinic or therapist’s office.
Coverage includes an annual depression screening, counseling services, diagnostic assessments, therapy, and more.
Medicare Part B covers medically necessary outpatient hospital care – care you receive when you have not been formally admitted to the hospital as an inpatient.
The Medicare Part D deductible is the amount you must pay for prescription drugs before the plan starts to pay.
The deductible varies from plan to plan, and in 2020 cannot be greater than $435. Some Medicare Part D plans have $0 deductibles, meaning beneficiaries are only responsible for copayment or coinsurance amounts.
After your deductible is met, your plan will help pay most of your prescription drug costs, and you will pay a copayment or coinsurance. This initial coverage limit (ICL) varies between plans but, for most in 2020, ends when you reach $4,020 in drug costs.
Proceeding the ICL is the coverage gap (also known as the Medicare Donut Hole). Once you reach $4,020 in drug costs, you will be responsible for 25% of the cost until you reach $6,350.
From here, you enter the final stage: catastrophic coverage. During this period, you pay a significantly lower copayment or coinsurance – 5% of the cost, or $3.60 for generics and $8.95 for brand-name drugs.