What is coinsurance?

Coinsurance is when you and your health care plan share the cost of a service you receive based on a percentage. For most services covered by Part B, for example, you pay 20% and Medicare pays 80%.

To understand how coinsurance works, let’s look at an example.

Joe visits his doctor for chest pain. Joe has Original Medicare (Parts A & B), and he has already met his Part B deductible for the year.

Joe’s doctor “accepts assignment,” meaning that she agrees to take the Medicare-approved amount—what Medicare says is appropriate—as full payment for her services. Typically, the Medicare-approved amount is less than a doctor’s usual and customary fee.

The table shows how the costs might break down for this example.

In this example, the doctor’s fee is $300, but the Medicare-approved amount is $220. So, the doctor accepts $220 as full payment.

Medicare pays 80% of the cost, which is $176. Joe pays 20% of the cost, which is $44. If Joe has a Medicare supplement insurance plan, his share of the cost might be covered by the plan.

Medicare Advantage plans (Part C) share costs with plan members, but it’s mostly with copays rather than coinsurance. Copays are a small fee that you pay when you receive a health care service. So, if Joe had a Medicare Advantage plan rather than Original Medicare in the example above, he might pay a $30 copay when he visited the doctor.

Medicare Advantage is an alternative to Original Medicare (Parts A & B). It’s another way to get your Medicare benefits. Plans are offered by private insurance companies approved by Medicare.

Medicare Advantage plans are required to set an out-of-pocket limit for plan members. There’s no out-of-pocket limit with Original Medicare.

It’s your money, and it’s important to understand your Medicare costs and how they are calculated. Look over the medical bills you receive and the Medicare Summary Notices you get from Medicare. Talk to your provider or your plan, or call Medicare, if you have questions.