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Pay Attention to a Drug Plan’s Coinsurance

Oct 19, 2016

Depositphotos_45322329_s-2015-2.jpgMedicare beneficiaries are accustomed to cost sharing, paying their share of the cost for a drug or treatment. Deductibles and copayments are the most common method of cost sharing. However, coinsurance is becoming more common in Medicare Advantage and Part D prescription drug plans.

A coinsurance is calculated as a percentage of the amount charged for a medication, service, or treatment. For example, a 20% coinsurance would mean that, on a $100 bill, the beneficiary is responsible for $20. Compare that to a copayment. This is a fixed amount, such as a $5 copayment for a Tier 1 medication or $20 for a doctor’s visit. Read more at (

Here are some quick points about coinsurance.

  • Part D drug plans often use a coinsurance for Tier 4 and Tier 5 drugs, and, sometimes for Tier 3. 
    One plan charges 45% for Tier 4 and 33% for Tier 5. A seond plan charges 30% and 25%.
  • Medicare Advantage plans tend to use coinsurance for out-of-pocket costs in preferred provider organization (PPO) plans. Some health maintenance organization (HMO) plans also use coinsurance. 
    For an out-of-network hospital stay, the plan’s coinsurance is 45% of the cost.
  • A coinsurance allows plan to pass increasing costs for drugs and services onto the beneficiary. That means you can pay more as the year progresses. 
    Jan takes a Tier 3 preferred brand medication. The full cost of the drug when she enrolled in Medicare in June was $550. The coinsurance for Tier 4 was 41% and, in June, she paid $225.50. By December, the cost of the drug had increased to $616 and her coinsurance was up to $252.56.

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