While Medicare is designed to make health care more affordable, you must still pay out-of-pocket costs including monthly premiums, deductibles and co-pays. These costs can add up quickly, leading some people to opt for Medicare Advantage Part C plans without monthly premiums. On the surface, these private insurance plans seem to be free. Keep in mind, however, that while you aren’t asked to pay plan premiums up front, you still incur costs when you receive health care services later. Let’s take a closer look at standard costs involved with various Medicare Advantage plans so you can find a plan that fits your particular needs.
Original Medicare vs Medicare Advantage Plans
When you turn 65, you’re eligible for health plan coverage through the federal government’s Original Medicare program. Original Medicare consists of two parts:
- Medicare Part A is hospital insurance, and covered services include inpatient hospital stays, hospice care and home health care.
- Medicare Part B is medical insurance, and covered services include ambulance transportation, doctors’ visits and preventive screenings.
Medicare Advantage is available through private insurance companies. Also known as Medicare Part C, these health plans cover the same services as Medicare Parts A and B and include extra benefits such as vision, dental, hearing and prescription drug coverage (Part D). There are different plans available, including HMO, PPO, PFFS and SNP. You can find more information about these types of plans in our Medicare Advantage planning guide.
Plan Premiums
Once you’re enrolled in a Part C plan, you must pay premiums to your health care insurer to keep your coverage active. Plan premiums are paid monthly whether or not you use the benefits in a particular month. Some enrollees choose Medicare Advantage plans with no monthly premium. These health plans give you coverage without requiring a monthly fee but may have higher deductibles and co-pays when you use a service. Low and no-premium plans are often offered by Health Maintenance Organizations (HMOs). HMOs make arrangements with a network of providers to reduce their plan costs. The network providers often agree to reduced rates that the insurer can pass on to enrollees. In return, the plan directs patients to the providers. When you’re considering a zero-premium plan, be sure to consider how you’d use your medical insurance. If you expect to use a service frequently, higher deductibles and co-payments may add up over the long run.
Zero-Premium Part C Plans
Plans without monthly premiums are widely available. In 2021, more than half (54%) of all Medicare Advantage plans with prescription drug coverage (Medicare Part D) had no plan premium, with 96% of Medicare beneficiaries having access to one or more in their service area. In 2020, six out of 10 beneficiaries chose a Medicare Part C plan with no premium in 2020. Of those who paid a premium, the average monthly payment was $63. Keep in mind that in most cases, enrollment in a Medicare Advantage plan still requires payment of your Medicare Part B premium. In 2021, the Part B premium is $148.50 per month.
Plan Deductibles
A deductible is the amount you pay for your health care before your insurance begins to pay its portion. Private insurers have the flexibility to set their own deductibles, which typically include an annual deductible that applies to all health care costs and additional deductibles for certain items, such as prescription drugs.
Types of Cost-Sharing
Once you’ve met your plan’s deductible, you must pay some of the costs of services as you use them, such as visits to health care providers or an emergency room. Cost-sharing can be in the form of a:
- Co-payment, which is a flat fee per service. For example, you may pay $10 each time you visit your doctor.
- Coinsurance, which is a percentage of the total cost of a service. For example, you may pay 20% of the cost of a flu shot.
If your Medicare Advantage plan has a network of providers, it may cost you more to use a provider outside the network. In some cases, you may have to pay the full cost of the service.
Capping Out-of-Pocket Costs
The federal government requires that all Medicare Advantage plans limit the amount you pay out-of-pocket for deductibles and cost-sharing. Once you’ve reached this cap, the insurance company pays for all of your covered services for the rest of the year. In 2020, the average Medicare Advantage enrollee had an out-of-pocket limit of $4,925 for in-network services. Those with a Preferred Provider Organization (PPO) plan had an out-of-pocket cap averaging $8,828. Enrollees in a PPO plan may see providers in network for a lower cost but have the flexibility to go outside of the network.
Can Medicare Be Free?
If you’re having difficulty affording Medicare, you may qualify for your state’s Medicaid program, which assists those with low incomes. States must cover certain mandatory benefits, including hospital and physician services, and can provide optional additional benefits such as prescription drugs and physical therapy. If you’re dual eligible and qualify for both Medicare and Medicaid, you may have most of your health care costs covered. You can enroll in either Original Medicare or a Medicare Advantage plan for hospital and medical insurance (Part A and B).
For further reading on Medicare pricing and how it can change over time, take a look at this article on attained age, issued age, and community rated medicare explanations.
Finding the Best Medicare Advantage Plan for Your Needs
If you’re ready to shop around for a health insurance plan that fits your needs and budget, use Medicare Planning of America’s easy online plan finder. With a few clicks, you can see the types of health plans available in your service area and compare features such as benefits, premiums and deductibles. You can also speak directly to one of our licensed insurance agents by calling 888-225-1609. Our friendly and qualified team members are happy to answer your questions to help you find a plan that’s suited for you.
