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Are Free Medicare Advantage Plans Really Free?

by David Bynon, last updated

Medicare Advantage plans with a zero-dollar premium aren’t free. You must continue to pay your Part B premium. Due to their costs, free plans can be more expensive.

How Can Medicare Advantage Plans Be Free?

This article will explain the true cost of Medicare Advantage plans and what a zero-dollar plan means.

Key Takeaways

  • If you join a Medicare Advantage plan you continue to pay your monthly Medicare Part B premium.
  • All Medicare Advantage plans provide a member’s Part A and Part B coverage.
  • Most Medicare Advantage plans include some additional benefits.
  • A Medicare Advantage plan’s monthly premium covers the additional services included in the plan.
  • A zero-premium Medicare Advantage plan is one that covers all costs, including additional services, without an additional premium.
  • Plans may cost some people less than traditional Medicare and other people more.
  • How much a plan costs all depends on how healthy you are, the plans available where you live, and any payment assistance you receive.
  • For healthy people, monthly premiums will make up the majority of their annual costs.
  • For unhealthy people, deductibles, copayments, and coinsurance will make up the majority of their annual costs.

How Can A Medicare Advantage Plan Be Free?

The monthly premium is just one cost of Medicare Advantage plans. Don’t be fooled by a zero-dollar monthly premium.

There is no free Medicare Advantage.

People who join a Medicare Advantage (MA) plan receive their Medicare Parts A and B coverage from the plan. However, they continue to pay their monthly Part B premium.

Also, most $0 premium plans are Health Maintenance Organization (HMO) plans. HMOs have smaller provider networks than Preferred Provider Organization (PPO) plans and generally have higher out-of-pocket costs.

Plus, HMO MA plans require you to use in-network providers and you are required to have a primary care doctor to manage referrals and pre-approvals. You pay the full amount if you go out of the plan’s network.

Exercise caution when considering zero-premium Medicare Advantage plans. The costs are likely hidden in what you pay out-of-pocket and a limited selection of health care providers.

Why Do Some Medicare Advantage Plans Have Premiums?

Each month, Medicare pays private insurance companies an amount that covers the Part A and Part B costs for beneficiaries in their plans. If a plan also includes prescription drug coverage as an extra benefit, Medicare provides a separate payment.

When a plan has extra benefits that cannot be covered by what Medicare pays, they add an additional monthly premium.

So, let’s say you choose a PPO plan that has a maximum out-of-pocket limit of $4,500 (in-network), and it includes prescription drug coverage, routine dental care, vision, hearing aid benefits, and healthcare transportation.

None of these services are covered by Part A and Part B. They have a value, and that value is reflected in the additional monthly premium.

The payments from Medicare to the insurance company have nothing to do with the actual medical services used by a beneficiary. These have their own costs.

Why Do Some People Get Medicare Free?

No one gets Medicare for free. This includes disabled people. However, some people qualify for government assistance.

Some low-income individuals qualify for both Medicare and Medicaid benefits. If you are dual eligible, there are several different Medicare Savings Programs that assist with monthly Medicare costs, deductibles, and copayments.

Some individuals also qualify for dual-eligible Special Needs Plans (D-SNPs). These are Medicare Advantage plans that include a Part D plan, for prescriptions, and some or all extra benefits covered by Medicaid.

Use our search tool to find Special Needs Plans in your area.

Find Plans in your area with your ZIP Code

What Are The Costs of a Medicare Advantage Plan?

One of the most important facts to know about Medicare Advantage is how much you will pay when you use health care services. Like all other types of health insurance, covered services, like doctor visits, lab tests, and diagnostics, have copayment or coinsurance out-of-pocket costs.

These healthcare expenses add up rapidly, particularly if you are hospitalized.

Before joining a plan, it is crucial that you take the time to evaluate your expected use of healthcare services. By using our Medicare Advantage plan finder tool, you can compare plans, including the shared costs.

Find Plans in your area with your ZIP Code

Maximum Out-of-Pocket Limit

One of the most important data points to compare is a plan’s maximum out-of-pocket (MOOP) limit. This is an annual cap on copay and coinsurance costs. It applies to all Medicare Part A and Part B services you use in a calendar year.

It does not include any costs you pay for medications through a prescription drug plan (Medicare Part D). And, it does not apply to additional benefits, such as routine dental and vision care. Plus, it does not count towards services received out of the plan’s service area, unless it is an emergency.

Deductibles

Some Medicare Advantage plans have an annual deductible on the health plan. This is different than the annual deductible on the prescription drug plan.

When a health plan has a deductible, you will pay the full amount of the deductible on all Medicare Part A and Part B services before the plan begins paying its share. The deductible counts towards the MOOP limit.

Copayments and Coinsurance

All Medicare Advantage plans have out-of-pocket expenses when you use healthcare services. These costs can be either copayments (a fixed amount), coinsurance (a percentage of the cost), or both.

In some instances, private health insurance companies charge their members more for a service than beneficiaries would pay with Original Medicare. For instance, if a plan charges a 40% coinsurance for inpatient hospital care, and you stay 4 or more days, your cost will be higher than in Orginal Medicare.

With Medicare Part A, you pay a deductible of $1,632 per benefit period. The deductible covers you for up to 60 days in the hospital. You will also have Part B charges for medications, supplies, tests, and doctor visits. You pay 20% of these costs.

Be very careful choosing a Medicare Advantage plan. Make sure that the copayments and coinsurance costs are affordable based on your health status.

Compare Carefully

Only by comparing costs with your health care needs will you know if an MA plan is affordable, or if you should keep your Original Medicare benefits and buy a Medicare Supplement plan.

All MedicareWire plan pages include a PDF download that lists all plan costs. Use these sheets to compare plans side-by-side.

Choosing Between Original Medicare or Medicare Advantage

Now that you know that Medicare Advantage plans are not free, you continue to pay your Part B monthly premium, they have shared costs when you see your doctors or use other healthcare services, but they have an out-of-pocket limit, how do you choose?

It’s easy.

Look at your costs with Original Medicare and Medicare Supplement plans vs. your cost in a Medicare Advantage plan.

With Original Medicare, it’s easy to compare Medicare Supplement insurance to find the right amount of coverage. Simply looking at a Medigap plan chart. With Medicare Advantage, it takes a little more effort.

Medicare Supplement Plans Comparison Chart for 2024

RELATED: Do I Need Medigap Insurance?

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Frequently Asked Questions

Do you know the answer to these popular questions about Medicare Advantage Plans?

With a Medicare Advantage plan you pay most of your costs when you use healthcare services through deductibles, copayments and/or coinsurance. As a result, private health plans can be difficult to budget. Learn More...

There is no debate when it comes to which plan offers better coverage. Original Medicare and a supplement plan offer the best coverage, but it costs more up-front. For a complete breakdown of the differences between Medicare Advantage plans and Medigap plans, read: Medicare Advantage vs Medigap: Which is Best for You?

Original Medicare is a Private Fee-for-Service (PFFS) health insurance system. Beneficiaries can use any healthcare provider that accepts Medicare. Most Medicare Advantage plans are a form of managed care health insurance, including HMOs and PPOs. As such, they have networks of doctors and hospitals that plan members use to receive care. With Original Medicare, the federal government pays about 80% of all Medicare-approved costs and the beneficiary pays the remaining 20% out-of-pocket. However, the 20% gap in coverage can be supplemented with a Medigap plan. With Medicare Advantage, members must pay all copays out-of-pocket until spending reaches the plan maximum, which can be up to $7,550. To learn more about how plans work, read How Does Medicare Advantage Work.

There are 7 common reasons that some Medicare beneficiaries, and many healthcare professionals, feel that Medicare Advantage plans are bad. They include higher costs, less freedom to choose healthcare providers, doctor referrals for most services, high maximum out-of-pocket limits, annual changes to health plan benefits, costs, and providers. Read Why Medicare Advantage Plans are Bad: 7 Top Complaints to discover all of the dirty secrets about Medicare Advantage plans.

RELATED: Is CMS Biased in Favor of Medicare Advantage?

Need Help Choosing a Medicare Advantage Plan?

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Citations & References:

medicare.gov

cms.gov

kff.org

 

Citations & References:

medicare.gov

cms.gov

kff.org

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