Are there free 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)....? Asked another way, how can Medicare Advantage plans have a $0 premium?
It seems impossible, doesn’t it? In the day and age when people struggle to afford catastrophic health insurance coverage, how can it be that health insurance companies are giving away plans for nothing?
They aren’t. Not by a long shot.
Key Takeaways
- A Medicare Advantage plan’s monthly premium covers the extra benefits included in the plan.
- If you join a Medicare Advantage plan you continue to pay your monthly Medicare Part BMedicare Part B is medical coverage for people with Original Medicare. It covers doctor visits, specialists, lab tests and diagnostics, and durable medical equipment. Part A is for hospital inpatient care.... premium.
- Plans may cost some people less than Original 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. It all depends on how healthy you are, plans available when you live, and payment assistance benefits 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 Medicare Advantage Plans So Cheap?
People who join a Medicare Advantage (MA) plan give up their Medicare Part A and Medicare Part B benefits, but they continue to pay their monthly Part B premium. Behind the scene, the Centers for Medicare & Medicaid Services (CMS) pays the private insurance companies for each beneficiaryA person who has health care insurance through the Medicare or Medicaid programs.... enrolled in one of their insurance plans.
By no means are MA plans cheap. They are funded by the federal government through the Medicare program. Medicare payments to Advantage plans to fund Part AMedicare Part A is hospital inpatient coverage for people with Original Medicare, whereas Part B is medical coverage for doctor visits, tests, etc.... and Part B benefits exceed $250 billion per year (approximately 33% of the total budget).
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.
How Are Medicare Advantage Plans Funded?
What a zero-dollar premium on a Medicare Part C plan means is that the beneficiary’s Part B premium covers the full cost of the plan. If a plan has extra benefits, like dental, vision, and hearing care, the insurer will add an additional premium. This additional premium is what you see next to each Medicare Advantage plan.
Each month, CMS pays private insurance companies an amount that covers the Part A and Part B costs of beneficiaries in their plans. If an insurer’s plan also includes prescription drug coverage as an extra benefit, CMS provides a separate payment. These payments have nothing to do with the actual medical services used by the beneficiaries.
The amount of the monthly payments is based on two primary factors:
- The health care practices in the county where each beneficiary lives. This influences the annual CMS bidding process.
- The combined health of the beneficiaries in a county. This governs how CMS raises or lowers the rates (i.e., risk adjustment).
What Are The Costs Of Zero-Premium Medicare Advantage Plans?
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 (HMO, PPO, PFFS, MSA, etc.), covered services, like doctor visits, lab tests, and diagnostics, have copayment or coinsurance 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..... These healthcare costs add up rapidly, particularly when you are hospitalized.
It is crucial that beneficiaries take the time to evaluate their use of healthcare services before joining a plan. By using the 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 finder tool, beneficiaries can compare Medicare Advantage 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.....
One of the most important costs to compare is a plan’s MOOP (maximum out-of-pocket). This is an annual cap on copay and coinsurance costs. It does not include any costs you pay for medications through a prescription drug plan (Medicare Part DMedicare Part D is Medicare's prescription drug plan program. Plans are offered by private insurance companies and cover outpatient prescriptions....).
Only by comparing costs with your health care needs can you know if a MA plan is affordable, or if you should buy supplemental coverage through a Medicare supplement insurance policy. Medicare supplement insurance plans work with Original Medicare coverage and cannot be used in conjunction with other private insurance. These plans offer flexibility in choosing healthcare providers, but they do not offer additional benefits. Also, unlike Advantage plans, there are no enrollment period restrictions.
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 use services, but they have an out-of-pocket limit, how do you choose?
It’s easy.
Look at your cost under Original Medicare with a Medicare supplement plan vs. your cost in a Medicare Advantage plan. With the private-fee-for-service system, Original Medicare uses, coming to a cost estimate is as easy as looking at a chart. With Medicare Advantage, it takes a little more effort.
We’ve detailed everything you need to know in What is the Difference Between Medicare Advantage and Medicare Supplement? and Medicare Advantage vs. Medigap: Which is Better for You?
Why Are Medicare Advantage Plans So Heavily Advertised?
The number of ads shown during Medicare open enrollment is mind-boggling, isn’t it?
When the Medicare Part C program was signed into law in 2003, the health insurance industry jumped for joy. Finally, they were going to get a piece of the 80-million person pie.
As of 2021, there are just over 60-million people on Medicare and over 24-million of them are enrolled in a Medicare Advantage plan. By 2032 there will be approximately 80-million people on Medicare.
The stakes are high for both the Medicare program, insurers, and network providers. Medicare is bleeding money and the medical insurance industry is raking it in.
RELATED: Is CMS Biased in Favor of Medicare Advantage?
Need Help Choosing a Medicare Advantage Plan?
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…