How Does the Medicare Deductible Work? 

Medicare health insurance, governed by the Centers for Medicare & Medicaid Services (CMS), is a federal program. Although it is administered by individual states, the core benefits of inpatient care, outpatient care and prescription drug coverage are consistent throughout all 50 states. Costs can vary based on the plan you choose, the services you require, and the providers you visit. Some Medicare benefits kick in only after an annual deductible has been met.

Your costs to access Medicare benefits

In terms of coverage, Medicare benefits are split into three separate and distinct parts. Medicare Part A is hospital coverage, and it supplies benefits for inpatient care in a hospital or skilled nursing facility. Medicare Part B is outpatient coverage, and it provides benefits for doctor visits, medical surgeries and durable medical equipment needs. Medicare Part D supplies coverage for prescription drugs, and it is optional coverage that varies by plan and provider. 

Medicare recipients will face various costs to utilize their benefits, and some of these costs are fixed while others will depend on how often benefits are utilized. Medicare Part A is usually available at no cost since the premium for Medicare Part A is covered by tax credits earned through paycheck deductions over the course of an individual’s working years.

Medicare Part B requires a premium in order to carry outpatient coverage. This cost remains fixed whether you use this benefit or not. Medicare Part B premium costs can vary depending on your income each year.

Medicare Part D also carries a premium that may vary based on your income level. Your plan premium may be based on the variety of medications covered by your plan.

How does the Medicare deductible work?

All three parts of Original Medicare also carry separate deductibles. A deductible is an amount of costs you must incur before your benefits will pay toward your medical costs. Keep in mind that you must simply meet your deductible in terms of costs in order for benefits to apply. This means that even if you were to go into debt over a medical cost, as long as the cost is incurred, it still applies toward meeting your deductible. The key is that you must reach the threshold for medical bills for your plan.

Once you reach your deductible for the year, your Medicare benefits will apply in full to your medical costs, though they do not apply retroactively. In some cases, various Medicare benefits are exempt from deductible amounts. This means that certain services like annual wellness visits may not be subject to your plan’s deductible and will be paid for regardless of whether or not you have met your deductible.

Medicare Supplement insurance may help with deductibles

If you need help covering your deductible for the year, a Medicare Supplement (Medigap) insurance plan may be the solution. Medigap plans supplement Original Medicare insurance. 

Some Medigap plans provide coverage for Part A deductible costs. As of 2020, new enrollees are not able to buy a Medigap policy that covers the Part B deductible. If you purchased a Medigap Plan C or Plan F prior to January 1, 2020, you may be able to keep that plan and get coverage to pay for the cost of Part B deductibles. Medigap Plans C and F are unavailable to new Medigap plan recipients.