6 MEDICARE TERMS YOU NEED TO KNOW
If you’re like most people, you probably don’t spend a lot of time memorizing healthcare terminology. Unless you’ve worked in the healthcare space for years (like us!) you probably had more scintillating things to think about than the difference between a copay and a deductible. But every once in a while, having a little extra healthcare knowledge can go a long way. Luckily, we are here to help. Check out this guide to 6 useful Medicare terms below.
Difference Between Copay and Deductible
What is the difference between copays and deductibles? One way to think of it is that deductibles are “off the top” and copays are “pay as you go.” For example, many Medicare Part D plans have an annual deductible of $360 at the beginning of the year. That means you would pay the full cost of the drugs until you have paid $360, and then you would be done paying the annual deductible for the whole year.
Copays are fixed additional payments that you owe every time. So a prescription with a $5 copay will cost you $5 every time you refill it. Another example would be Medicare Part B, which also has both copays and deductibles. For Part B, your annual deductible for visiting your doctor will be $166 (unless you have a Medigap plan that covers this cost), and then your subsequent copays will be 20% of the “Medicare-approved charge” (more on this below).
Medicare Approved Charge
What’s a “Medicare Approved Charge?” If your provider accepts Medicare, then no matter what the “rack rate” (published rate) is for the medical service in question, Medicare will only approve charges up to a certain level. So even if your physician normally charges $500 for a specific procedure, if the Medicare-approved charge is $250 with Part B, then you would pay 20% of that lower charge, and Medicare would pay the rest. In this case, 20% of $250 means a $50 copay for you, with Medicare paying the remaining $200.
Have you ever seen a business referred to as a “DME Provider?” DME stands for Durable Medical Equipment. We won’t get into a discussion of how durable something needs to be, but in general the term refers to physical objects which can be “prescribed” – yes, you can write a prescription for a wheelchair or a hospital bed. But it can also refer to things as small as diabetic and ostomy supplies.
Additionally, Medicare now limits the number of approved DME providers. The hope is that consolidating the numbers of providers will ensure better oversight and cost regulation. So when looking for a walker or crutches or power wheelchair, make sure that the business is not only approved by Medicare as a DME provider, but can also guide you in understanding the rules and regulations which govern their particular products.
Formularies and drug restrictions
A “formulary” is the list of drugs covered by your Medicare plan. Before choosing a plan type, you should make sure that any medications you currently use are included in that plan’s formulary. However, sometimes when you attempt to use your Medicare Part D drug benefit, the pharmacist will tell you that the medication is not approved, even when you know it’s on your plan’s formulary. This is because Part D plans sometimes put additional restrictions on particular drugs, especially if they are expensive and/or can be substituted for a lower-priced alternative. The most common restriction is “prior authorization.” This means that your doctor needs to get prior approval from the plan before the plan will pay for a certain drug. Another common restriction is “quantity limits.” These may apply to anti-depressants, sleep aids, or any other remedy which needs to be limited. In all of these cases, you may file an appeal with Medicare and your plan if you believe the regulations should not apply in your particular case.
Questions about any of these terms? For access to fast, trustworthy Medicare advice from a licensed benefits advisor, check out the Medicare Questionnaire (created by the nonprofit National Council on Aging). For access to federally-funded Medicare counseling, contact your local State Health Insurance Assistance Program (SHIP).
This article was written by the National Counsel on Aging– My Medicare Matters team.. It is a very informative website.