When people are struggling to afford catastrophic coverage with Obamacare, how can it be that health insurance companies are giving away Medicare plans for nothing?
They aren’t. Not by a long shot.
A Medicare Advantage plan with a zero-dollar monthly premium isn’t free. It may be the most expensive plan of all.
In this article, we’ll explain the true cost of Medicare Advantage plansMedicare Advantage (MA), also known as Medicare Part C, are health plans from private insurance companies that are available to people eligible for Original Medicare (Medicare Part A and Medicare Part B)..
Key Takeaways
- If you join a Medicare Advantage plan you continue to pay your monthly Medicare Part B premiumThe Medicare Part B premium is the monthly charge paid by beneficiaries for their outpatient medical care, services, and supplies. A beneficiary's premium may be uplifted by an IRMAA surcharge if their income is above....
- All Medicare Advantage plans provide a member’s Part A and Part BMedicare Part B is medical coverage for people with Original Medicare benefits. It covers doctor visits, preventative care, tests, durable medical equipment, and supplies. Medicare Part B pays 80 percent of most medically necessary healthcare services. 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 MedicareOriginal Medicare is private fee-for-service health insurance for people on Medicare. It has two parts. Part A is hospital coverage. Part B is medical coverage. 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 premiumsA premium is an amount that an insurance policyholder must pay for coverage. Premiums are typically paid on a monthly basis. In the federal Medicare program, there are four different types of premiums. will make up the majority of their annual costs.
- For unhealthy people, deductiblesA deductible is an amount a beneficiary must pay for their health care expenses before the health insurance policy begins to pay its share., copaymentsA copayment, also known as a copay, is a set dollar amount you are required to pay for a medical service., and coinsuranceCoinsurance is a percentage of the total you are required to pay for a medical service. will make up the majority of their annual costs.
Why Are Some Medicare Advantage Plans 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 costsOut-of-Pocket Costs for Medicare are the remaining costs that are not covered by the beneficiary's health insurance plan. These costs can come from the beneficiary's monthly premiums, deductibles, coinsurance, and copayments..
Plus, HMO MA plans require you to use in-networkDoctors, hospitals, pharmacies, and other healthcare providers that agree to health plan members' services and supplies at a set price are in-network providers. With some health plans, your care is only covered if you get... 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 beneficiaryA person who has health care insurance through the Medicare or Medicaid programs.. 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-eligibleDual-eligible beneficiaries are those who receive both Medicare and Medicaid benefits. It includes beneficiaries enrolled in Medicare Part A and/or Part B while receiving full Medicaid and/or financial assistance through a Medicare Savings Program.... 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 MedicaidMedicaid is a public health insurance program that provides health care coverage to low-income families and individuals in the United States..
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 costsAn amount patients pay for their share of the cost of medical service or supply, like a doctor’s visit, hospital inpatient visit, or prescription drug..
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 AMedicare Part A is hospital coverage for Medicare beneficiaries. It covers inpatient care in hospitals and skilled nursing facilities. It also covers limited home healthcare services and hospice care. 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 DMedicare Part D plans are an option Medicare beneficiaries can use to get prescription drug coverage. Part D plans provide cost-sharing on covered medications in four different phases: deductible, initial coverage, coverage gap, and catastrophic. Each...). 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 $1,600 per benefit periodA benefit period is a method used in Original Medicare to measure a beneficiaries use of hospital and skilled nursing facility (SNF) services. With each new benefit period, the beneficiary is charged a new benefit.... 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 MedicareWireMedicareWire is a Medicare insurance consulting agency. We founded MedicareWire after seeing and hearing how confusing and frustrating it is to find, understand, and choose a plan. Our services are free to the consumer. 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 insuranceMedicare Supplements are additional insurance policies that Medicare beneficiaries can purchase to cover the gaps in their Original Medicare (Medicare Part A and Medicare Part B) health insurance coverage. to find the right amount of coverage. Simply looking at a Medigap plan chart. With Medicare Advantage, it takes a little more effort.
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Frequently Asked Questions
Do you know the answer to these popular questions about Medicare Advantage Plans?
The primary advantage is the monthly premium, which is generally lower than Medigap plans. The top disadvantages are that you must use provider networks and the copays can nickel and dime you to death. To discover all of the pros and cons of Medicare Advantage, read: What are the Advantages and Disadvantages of Medicare Advantage Plans?
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?
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Citations & References:
- Costs for Medicare Advantage Plans | Medicare
https://www.medicare.gov/your-medicare-costs/costs-for-medicare-advantage-plans - How do Medicare Advantage Plans work? | Medicare
https://www.medicare.gov/sign-up-change-plans/types-of-medicare-health-plans/… - Find a Medicare plan
https://www.medicare.gov/plan-compare/
- Trump Administration Drives Down Medicare Advantage and Part D Premiums for S…
https://www.cms.gov/newsroom/press-releases/trump-administration-drives-down-… - Institutional Special Needs Plans (I-SNPs) | CMS
https://www.cms.gov/Medicare/Health-Plans/SpecialNeedsPlans/I-SNPs - Home – Centers for Medicare & Medicaid Services | CMS
https://www.cms.gov/
- Medicare Advantage | KFF
https://www.kff.org/medicare/fact-sheet/medicare-advantage/ - A Dozen Facts About Medicare Advantage in 2020 | KFF
https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advanta… - Medicare Advantage 2020 Spotlight: First Look – Data Note – 9365 | KFF
https://www.kff.org/report-section/medicare-advantage-2020-spotlight-first-lo…
Citations & References:
medicare.gov
- Costs for Medicare Advantage Plans | Medicare
https://www.medicare.gov/your-medicare-costs/costs-for-medicare-advantage-plans - How do Medicare Advantage Plans work? | Medicare
https://www.medicare.gov/sign-up-change-plans/types-of-medicare-health-plans/… - Find a Medicare plan
https://www.medicare.gov/plan-compare/
cms.gov
- Trump Administration Drives Down Medicare Advantage and Part D Premiums for S…
https://www.cms.gov/newsroom/press-releases/trump-administration-drives-down-… - Institutional Special Needs Plans (I-SNPs) | CMS
https://www.cms.gov/Medicare/Health-Plans/SpecialNeedsPlans/I-SNPs - Home – Centers for Medicare & Medicaid Services | CMS
https://www.cms.gov/
kff.org
- Medicare Advantage | KFF
https://www.kff.org/medicare/fact-sheet/medicare-advantage/ - A Dozen Facts About Medicare Advantage in 2020 | KFF
https://www.kff.org/medicare/issue-brief/a-dozen-facts-about-medicare-advanta… - Medicare Advantage 2020 Spotlight: First Look – Data Note – 9365 | KFF
https://www.kff.org/report-section/medicare-advantage-2020-spotlight-first-lo…