How Can I Understand Medicare Costs?
Cost is one of the biggest factors to consider when planning for your Medicare enrollment. Understanding your health care costs helps you budget for now and prepare for the future.
There are some unique words used when talking about health insurance, and it can be easy to get confused by the language.
To help you understand the costs, we will start by helping you understand some of the words commonly used when talking about Medicare costs and coverage.
Health Insurance Terms
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Annual Notice of Change (ANOC): Medicare Advantage plans can make changes to their coverage every year. In the fall of each year, you will receive an ANOC. This document explains any changes in coverage, costs and benefits that will become effective at the first of the year.
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Benefit Period: Original Medicare uses benefit periods to measure your use of hospital and skilled nursing facility (SNF) services. A benefit period begins the day you're admitted as an inpatient to a hospital or SNF. The benefit period ends when you haven't received any inpatient hospital care or SNF care for 60 days in a row.
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Coinsurance: Coinsurance is the percentage of medical charges you are responsible for paying. If your coinsurance is 10%, you will pay 10% of each medical bill and your health care cove rage will pay the remaining 90% of the costs.
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Copayment: A copayment, or co-pay, is the flat rate you will pay out of pocket for certain services. For example, doctor appointments often have a co-pay amount for each visit.
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Deductible: A deductible is the amount you pay out of pocket before your insurance begins to pay its share of the costs. Each plan sets its own deductible amount. You have to pay a deductible at the start of each year. It is called “meeting your deductible” when you have paid the total deductible amount for the year.
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Evidence of Coverage (EOC): Medicare plans provide information about what they cover and how much you will pay in the Evidence of Coverage. You will receive an Evidence of Coverage document in the fall of each year.
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Income-Related Monthly Adjustment Amount (IRMAA): IRMAA is an additional amount people with higher incomes have to pay for Part B and Part D premiums.
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Medicare Late Enrollment Penalty: A penalty you may have to pay if you don’t sign up for Medicare when you are first eligible. The additional charge will be added to your monthly premium. You will have to pay the penalty for as long as you have Medicare.
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National Coverage Determinations (NCDs): NCDs list the items and services that Medicare can pay for. CMS releases its NCDs every year.
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Out-of-Pocket Expenses: Expenses that aren’t covered by insurance that you are responsible for paying. Deductibles, co-pays and coinsurance are all out-of-pocket expenses.
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Premium: A premium is the amount you pay for your health insurance each month.