Pay Attention to a Drug Plan’s Coinsurance
Oct 19, 2016
Medicare 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 (www.65incorporated.com/topics/out-pocket-medicare-costs/difference-between-copayment-coinsurance.)
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.
What can you do?
- Pay attention to a plan’s coinsurance when signing for a Medicare Advantage or Part D drug plan or reviewing the changes in a plan during the Open Enrollment Period. (Learn how to get expert help when picking a drug plan at www.65incorporated.com/personalized-medicare-enrollment-consultation/personalized-medicare-enrollment-consultation and check out the importance of Open Enrollment at www.65incorporated.com/topics/medicare-open-enrollment-period/why-open-enrollment.)
- Look beyond the premium and deductible to the impact of a coinsurance.
Seth takes a Tier 4 non-preferred brand drug with a full cost of $2,440. The coinsurance in one plan is 45% and the other, 30%. Over the course of a year, even if the cost of the drug does not increase, Seth will save $426 with the lower coinsurance.
- Consider setting up an emergency fund. It may be difficult to plan for the costs associated with a coinsurance.