Medicare Advantage plans often require payments as health services are incurred such as when going to a doctor or specialist, or undergoing diagnostic testing, x-rays, lab or blood work. Think of Medicare Advantage as a pay as you go plan.
To pay for health services incurred, Medicare Advantage plans require cost share payments in the form of coinsurance and copayments. Both types of payments will be described with the advantages and disadvantages.
Coinsurance
Coinsurance is a percentage of the total medical bill. A Medicare Advantage plan may have you be responsible for paying 20%, 30%, 60%, etc. of a certain medical procedure.
The coinsurance amounts can be found in the Summary of Benefits or Evidence of Coverage. In network vs. out of network coinsurance will most likely differ.
The good news is that the Medicare Advantage plan will cover a portion of the medical bill.
The down side is that the total cost of the medical bill at the time of procedure is unknown. Paying a percentage of an unknown bill can cause confusion, anxiety and concern.
Copayments
Copayments are a fixed dollar amount that is owed for a medical procedure. The benefit is knowing exactly how much you will pay when you undergo a certain procedure.
This form of cost sharing is what helps many of our clients have confidence and sleep better at night. For example, with a copayment, an x-ray might be $20 versus coinsurance where you might be billed 20% (20% of who knows what?!).
As with coinsurance, there may be lower copayments for in network vs. out of network coverage. You may also see that for out of network charges there may be only coinsurance coverage, and not a copayment due.
Medicare Advantage plans are designed in a way that receiving services in network works out to your financial advantage. Be sure to always get care in network, whenever possible.
Conclusion
The preferred plan for your situation will depend on your financial situation and how much risk you are willing to take on. Your geography will also dictate which plans are also offered in your area as they often differ by county.
We have had clients that have had to pay thousands of dollars for an MRI due to coinsurance payments versus a fixed cost. Know which type of cost sharing that you have or are looking to have.
Often, but not always, we recommend plans that offer fixed copayments for medical services so you have more certainty around what out of pocket costs are incurred for medical procedures. This will allow you to budget and even forecast medical costs during your retirement years.
As you pay more in monthly premium for a Medicare Advantage plan, the copayments and/or coinsurance will likely decrease, which shifts more risk away from you. Plans will vary so be sure to look at more than one insurance company and plan to ensure health coverage for your anticipated and unexpected health care needs are adequate.
Medicare is extremely complex and confusing! Reach out using any of the following to see how we can of help in your specific situation:
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