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Medicare Advantage Insurance Costs at a Glance

by David Bynon, last updated

You might find the cost structure confusing if you are new to Medicare. This is particularly true when it comes to Medicare Advantage plans.

If you landed here looking to answer the question, “What is the average cost of a Medicare Advantage plan?”, you won’t find it here. This article is a lesson in what Medicare Advantage plans really cost. You’ll get the good, bad, and ugly of it all.

Key Takeaways

  • Medicare Advantage plans are not free (even those with a zero-dollar premium).
  • If you enroll in a Medicare Advantage plan you must continue to pay your Medicare Part B premium.
  • If your annual income is above a certain amount you may pay an Income Related Adjusted Amount (IRMAA) based on your IRS-adjusted gross income from 2 years ago.
  • Medicare premiums adjust annually.
  • In addition to the monthly premiums, you will pay the deductibles, copayments, and coinsurance outlined in your plan’s summary of benefits.

Medicare Advantage Plan Costs

At a minimum Medicare Advantage (MA) plans cost the same amount as your monthly Medicare Part B premium: $174.70.  If your annual income is over $103,000, you will pay a bit more.

You may notice that some Medicare Advantage plans in your area have a zero-dollar ($0.00) premium. This simply means that the full premium for the plan is covered by what you pay for your Medicare Part B. Medicare Advantage plans are not free.

Do we ever really get anything for free in life?

Medicare Advantage Monthly Premiums Are Just One Cost

The monthly premiums you pay to be in a Medicare Advantage plan are just the beginning. There are also copayments, coinsurance, and deductibles. For this reason, it is impossible to accurately compare the cost of MA plans with Original Medicare and a Medicare supplement.

That’s because with an MA plan the majority of your costs are paid when you use healthcare services. Conversely, with Original Medicare plus a Medigap policy, you pay most of your costs in advance.

The only way to compare Medicare Advantage plans with Original Medicare and Medigap is to look at your use of healthcare services over the past couple of years and factor your usage into a plan. Here’s an example.

Medicare Advantage Cost Example

Let’s say you have bipolar disorder and need to see your psychiatrist every three months and your therapist monthly. Additionally, you have been a life-long smoker and you now suffer from COPD complications that send you to the hospital two or three times per year for medical care for respiratory complications. To further complicate things, you have PTSD from a traumatic event and occasionally require inpatient mental health treatment.

Imagine now that you joined a popular 4-star Medicare Advantage plan believing that the medical services you need would cost you less than Original Medicare alone. But, then the bills started coming in for your outpatient and inpatient treatment:

  • $40 copays for psychiatrist visits ($40 x 3 = $120)
  • $25 copays for therapist visits ($25 x 12 = $300)
  • $75 for emergency room visits ($75 x 3 = $225)
  • $295 for ambulance transportation ($295 x 2 = $590)
  • $395 per day for the first 5 days in the hospital ($395 x 5 x 3 admissions = $5,925)

This is how people with chronic health conditions get into trouble with Medicare Advantage. They don’t understand the shared costs or they don’t use their recent history to do the math.

This is actually a real-life situation from a good friend. The costs are real. And the one-year total, not including medications, premiums, and the Part D deductible, exceeded $7,160. Fortunately, the plan’s out-of-pocket maximum (MOOP) limit kicked in at $6,500.

The Alternative is Medigap

With the level of out-of-pocket costs demonstrated above, you’d have to spend over $540 per month on a Medigap Plan G policy to have the same level of spending. Believe it or not, my friend would have spent less on a high-deductible Plan G, even those she would have pulled $2,800 out of her pocket before the plan kicked in.

This is why it is so important to do your research.

If you have chronic health conditions, like my friend, Medicare Advantage can be very expensive. And, here’s the thing. If you blow your chance to get supplemental Medicare coverage when you first turn 65, insurers can and will turn you down. That’s one of the advantages of Medicare Advantage. In most cases, plans can’t turn you down. Medicare supplements can turn you down.

You only have a guaranteed-issue right to buy a Medigap policy once. Private insurance companies that sell Medicare supplements are not required to sell you a policy because technically it isn’t medical insurance. Medigap plans are a form of indemnity insurance.

Hi there. MedicareWire offers a 100% FREE Medigap Rate Comparison Service. It will arm you with all of the information you need to make an informed decision.

Get Your Free Medicare Supplement Rate Comparison

We are retired seniors, not insurance agents. Our goal is to help folks, just like you, by making sure you have access to rates from all carriers without a sales pitch. No Calls. No Email Spam. No Kidding!

Some Medicare Advantage Plans Have Additional Costs

The additional monthly cost Medicare Advantage plans charge will depend on the additional services (extra benefits) offered and the area of the country where the plan is offered. Competition, cost of living, and the availability of health networks in your area are all factors.

When comparing plans, look at more than just the cost. Here are some questions you should carefully consider when shopping and comparing Medicare Advantage plans:

  • What type of health services do you need? How often?
  • How much do you currently spend on copayments, coinsurance, and additional insurance coverage each year?
  • Does the plan have a yearly deductible? If so, how much?
  • Does it charge a deductible for any of the most common services?
  • How much will you pay for each doctor’s visit or service (copayments) in-network and out-of-network?
  • Does the plan charge a monthly premium in addition to your Medicare Part B premium?
  • Does the plan pay any of the Part B premiums?
  • How much is the plan’s maximum out-of-pocket limit?
  • Does the plan include a Medicare Part D prescription drug plan (most do)?
  • What additional benefits does the plan offer, such as hearing, vision, and dental coverage? Do you need them? What do these benefits cost?

As you can see, there is a lot to consider.  Do your homework and call the plans you are considering before joining (our plan pages include contact information). Have them fully explain their rules and calculate your costs so you can make sure the plan you choose will meet your needs.

The bottom line is this. Health Maintenance Organizations (HMOs), which make up the majority of all plans, are designed to keep healthy people healthy. They are not designed to efficiently care for people with chronic conditions. If you are healthy, and actively work to maintain your health, Medicare Advantage can offer you many cost benefits.

If you are not healthy, Original Medicare is the better option in terms of cost. Hospital insurance, covered by Medicare Part A, is very expensive. This is why we pay for it during the years we work through Medicare taxes. And, even though the Medicare Part A deductible can be pretty hefty, it generally costs less than an inpatient stay with a Medicare Advantage plan. The cherry on top is a Medigap plan that covers your major Part A and Part B out-of-pocket costs.

Call 1-855-728-0510 (TTY 711) for plan assistance.

If you qualify for Medicare and don't know where to start, MedicareEnrollment.com, an independent HealthCompare insurance broker, has licensed insurance agents who can help you with your Medicare enrollment options, Mon-Fri, 8am-9pm , SAT 8am-8pm EST.

Is Medicare Advantage Worth the Cost?

After reading what we had to say above, you might be wondering if MA plans are worth the cost? For certain people, the answer is a resounding, yes!

If you fall into one of these categories, Medicare Advantage is a great deal:

  • Medicaid and/or Special Needs Plan (SNP) — If you are dual-eligible for both Medicare and Medicaid, or you qualify for an SNP due to your health condition, and a Medicare Advantage SNP is available where you live, get it. You will get excellent health care and pay next to nothing for your copayments and Part D plan deductible.
  • Employer or Retiree Benefits — Millions of people enrolled in Medicare Advantage plans enjoy employer or retiree benefits that help pay premiums, deductibles, and copays. For these people, Medicare Advantage is an excellent option.
  • Chronic Illness — If you have chronic health conditions and you can’t get additional coverage through a Medicare supplement (i.e., turned down or not covered due to age), then Medicare Advantage may be a better choice than Original Medicare alone. It all depends on the frequency of emergency and inpatient visits and your prescription drug coverage requirements.

Frequently Asked Questions

Do you know the answers to the following popular questions about Medicare Advantage plans?

We see websites tossing out figures like "$20 per month" for the average Medicare Advantage plan, and others say things like "... and, some plans have no premium at all." These are misleading statements. All Medicare Advantage plans have a cost, but the cost largely depends on the services you use. Costs include a monthly premium, deductibles, and copayments or coinsurance. In addition to the plan's premium, you're also required to pay the monthly Medicare Part B premium. Read How Much Do Medicare Advantage Plans Cost? to get the full story on what Medicare Advantage plans really cost.

Some Medicare Advantage plans offer a zero-dollar monthly premium because what Medicare pays the plan, plus your Medicare Part B premium, cover the full cost. For healthy people who want to keep their monthly costs low, these plans are an attractive option. But, just be aware that the premium is not the only cost. Plans also have copays or coinsurance you must pay when you use services. To learn more about free Medicare Advantage plans, read Why are Some Medicare Advantage Plans Free?

One of the most important things to understand about Medicare Advantage plans is how much it costs to use health care services. Like all private health insurance, covered services (i.e., doctor visits) have copayment or coinsurance out-of-pocket costs. These healthcare costs add up rapidly, particularly when you are hospitalized. These are the costs Medicare beneficiaries need to be concerned about, not the low premiums. The notion of a $0 premium is smoke and mirrors. Beneficiaries continue to pay their Medicare Part B premium, which covers the cost in full. Read Why are Some Medicare Advantage Plans Free? to learn more about "free plans".

The primary benefit of Medicare Advantage is extra benefits. And, if you are a healthy senior, the additional benefits and cost savings really add up. But, there are some serious disadvantages as well, including network provider limitations, costly inpatient copays, and no coverage traveling away from home. To discover all of the pros and cons, read: What are the Advantages and Disadvantages of Medicare Advantage Plans?

Summary

There’s no avoiding it. Healthcare costs are going up and you need insurance to help pay the bulk of Medicare-covered services. Fortunately, Medicare beneficiaries have many options.

In this article, we showed that Medicare Part C, like Original Medicare, has both benefits and some serious disadvantages. The plan premium is a minor consideration of most Medicare Advantage plans. The big costs come from the annual deductible and other cost-sharing, including copays and coinsurance.

Do the math and compare plans. Use your own good judgment. If you need assistance, give us a call. There’s no obligation.

Call 1-855-728-0510 (TTY 711) for plan assistance.

If you qualify for Medicare and don't know where to start, MedicareEnrollment.com, an independent HealthCompare insurance broker, has licensed insurance agents who can help you with your Medicare enrollment options, Mon-Fri, 8am-9pm , SAT 8am-8pm EST.

Citations & References

medicare.gov

cms.gov

kff.org

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