Gaps & Deductibles in Medicare

Medicare is a national health insurance program used by senior citizens and people with certain health conditions. As of 2011, Medicare comes in four main parts, labeled A, B, C and D. Parts A and B are the original Medicare plans and offer benefits for hospital services, preventive services, hospice and home health. Part C, Medicare Advantage, allows users to get their Part A and B benefits from private companies, and Part D offer prescription drug coverage. But Medicare is not free an requires an array of copayments, coinsurance and deductibles.

Part A

• Most Medicare beneficiaries do not have to pay monthly premiums for Part A. Users are responsible for a number of coinsurance amounts and deductibles for Part A services, however. In 2011, hospital stays of one to 60 days require you to pay a deductible of $1,132. Stays of 61 through 90 days have a deductible of $283 per day, and stays of 91 through 150 days have a $566 daily deductible. Beyond 90 days, beneficiaries pay all costs, unless they have a Medigap plan which covers additional hospital days. Skilled nursing facility stays also have a coinsurance charge of $141.50 per day for stays of 21 through 100 days.

Part B

• Part B has an annual deductible of $162 per year as of 2011. After that is met, most medical services offered through Part B require a 20 percent copayment. If you receive services such as rehabilitation or health screenings at a hospital, you may also owe a copayment to the hospital.

Medicare Advantage

• Medicare Advantage lets Medicare beneficiaries combine their Part A and B benefits and purchase them from a private insurance company. Most Medicare Advantage plans offer extra benefits, such as vision, dental or hearing, as well. Since MA is sold through private companies, these sellers set their own copays, coinsurance and deductibles. These change depending on the company and what kind of plan you buy, as MA policies can be sold as HMO plans, PPO plans, special needs policies and plans that will work with medical savings accounts.

The Part D Doughnut Hole

• Part D Medicare offers benefits for prescription drugs only. Part D plans are also sold by private companies, which set their own premiums and their own regulations regarding what kind of drugs they will cover. However, all Part D plans feature what is often called the donut hole. Part D users pay all drug costs until they meet the annual $310 deductible. After that, they pay a 25 percent copay for all medications until the total retail amount reaches $2,800. This is the amount paid by both users and the insurance company, not the users alone. After you reach $2,800, prescription drug benefits stop. This is the doughnut hole. In 2011, new rules meant to close the hole went into place. These include receiving a 50 percent discount on name-brand drugs while you are in the hole and a one-time $250 rebate. Once your out-of-pocket spending reaches $4,550, benefits begin again. From there on, users pay only 5 percent of drug costs. In 2020, the hole will finally be closed and Part D members pay only 25 percent in copays until a yearly out-of-pocket limit is reached.