What Is Medicare Coinsurance and How Does It Work?

Medicare is a federal health insurance program for individuals aged 65 or older, younger people with certain disabilities, and people with End-Stage Renal Disease. Coinsurance is a form of cost-sharing where the beneficiary pays a percentage of the approved amount for a medical service or supply after meeting their deductible.

Defining Medicare Coinsurance

Coinsurance is a percentage of the Medicare-approved amount for services that a person is responsible for paying after their deductible has been met. This differs from a deductible, which is the initial fixed amount paid out-of-pocket before the insurance plan begins to cover costs. It also differs from a copayment, which is typically a fixed dollar amount paid for a service, such as a doctor’s visit or a prescription. For example, if a Medicare-approved service costs $100 and the coinsurance is 20%, the beneficiary would pay $20, and Medicare would cover the remaining $80. Coinsurance applies after any applicable deductible for a specific benefit period or year has been satisfied.

Coinsurance in Different Medicare Parts

Coinsurance application varies across the different parts of Medicare, each designed to cover distinct types of healthcare services. Understanding these differences helps beneficiaries anticipate and plan for healthcare costs.

Medicare Part A (Hospital Insurance)

Medicare Part A covers inpatient hospital stays, skilled nursing facility (SNF) care, hospice care, and some home health services. For inpatient hospital stays, beneficiaries pay a deductible per benefit period, which is $1,676 in 2025. After the deductible, there is no coinsurance for the first 60 days of an inpatient stay.

Coinsurance applies for longer hospitalizations. For days 61 through 90 in a hospital, the daily coinsurance amount is $419 in 2025. If a stay extends beyond 90 days, beneficiaries can use up to 60 “lifetime reserve days,” each with a daily coinsurance of $838 in 2025.

For skilled nursing facility care, there is no coinsurance for the first 20 days of a benefit period. For days 21 through 100, the daily coinsurance is $209.50 in 2025. After day 100 in an SNF, the beneficiary is responsible for all costs.

Medicare Part B (Medical Insurance)

Medicare Part B covers medically necessary services like doctor visits, outpatient care, preventive services, and durable medical equipment. After the annual Part B deductible is met, which is $257 in 2025, beneficiaries typically pay 20% coinsurance of the Medicare-approved amount for most covered services. Medicare then pays the remaining 80%.

This 20% coinsurance applies to a wide range of services. For example, if a Part B-covered service has a Medicare-approved amount of $220, the beneficiary would pay $44 in coinsurance after their deductible is met. Original Medicare Part B has no annual limit on the coinsurance amount a beneficiary might pay.

Medicare Part C (Medicare Advantage Plans)

Medicare Part C, known as Medicare Advantage, offers an alternative way to receive Medicare benefits through private insurance companies approved by Medicare. These plans must cover all services included in Original Medicare Part A and Part B, but they can structure their cost-sharing differently. Many Medicare Advantage plans utilize a combination of copayments and coinsurance, which can vary by plan and service.

A significant feature of Medicare Advantage plans is that they include an annual out-of-pocket maximum. Once this limit is reached, the plan pays 100% of covered healthcare costs for the remainder of the year. In 2025, this out-of-pocket maximum cannot exceed $9,350 for in-network care, though many plans set lower limits.

Medicare Part D (Prescription Drug Plans)

Medicare Part D provides prescription drug coverage through private plans. Coinsurance in Part D typically applies after any plan deductible has been met. In 2025, the standard Part D deductible cannot be higher than $590.

During the initial coverage phase, after the deductible, beneficiaries generally pay a percentage of the drug cost, often around 25%. This cost-sharing continues until the individual’s out-of-pocket spending on covered drugs reaches a specific threshold, which is $2,000 in 2025. Once this amount is met, beneficiaries enter the catastrophic coverage phase, where they pay nothing for covered prescription drugs for the rest of the calendar year.

Strategies for Addressing Coinsurance Costs

Managing coinsurance costs is a concern for many Medicare beneficiaries. Several options are available to help mitigate these out-of-pocket expenses.

Medigap (Medicare Supplement Insurance)

Medigap policies are sold by private insurance companies and are designed to help pay some of the out-of-pocket costs that Original Medicare (Parts A and B) does not cover. This often includes coinsurance amounts for Part A and Part B services. Different standardized Medigap plans offer varying levels of coverage for coinsurance.

Many Medigap plans cover the 20% Part B coinsurance, reducing a beneficiary’s direct cost for doctor visits and outpatient care. They can also cover Part A hospital coinsurance for extended stays and skilled nursing facility coinsurance. Medigap plans do not work with Medicare Advantage plans; they are specifically for those with Original Medicare.

Medicare Advantage Plans

Medicare Advantage plans serve as a strategy for managing overall out-of-pocket costs by including an annual out-of-pocket maximum. This maximum limits the total amount a beneficiary will pay for covered services in a year. Once this cap is reached, the plan covers 100% of additional covered medical expenses. This feature provides predictability not present with Original Medicare, which has no annual limit on coinsurance amounts.

Medicare Savings Programs (MSPs)

Medicare Savings Programs (MSPs) are state-administered programs that help low-income individuals with their Medicare costs, including premiums, deductibles, and coinsurance. These programs assist eligible beneficiaries in paying for services covered under Medicare Part A and Part B. Eligibility for MSPs is based on income and resource limits, which are adjusted annually.

The Qualified Medicare Beneficiary (QMB) program helps pay for Part A and Part B premiums, deductibles, coinsurance, and copayments. If an individual qualifies for QMB, Medicare providers are generally prohibited from billing them for services and items Medicare covers. MSPs offer a pathway to reduce out-of-pocket healthcare expenses for those with limited financial resources.