Why Are Some Medicare Advantage Plans Free?

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  • Why are some Medicare Advantage plans free? And are they actually free? Our Medicare plan review gives you the full scoop on $0 premium Medicare Advantage plans and whether one might be a good deal for you.

You’ve likely seen advertisements for $0 Medicare Advantage plans (also called Medicare Part C plans) and have wondered how they can possibly be free – and whether they actually are “free.” 

It’s true that many Medicare Advantage plans offer $0 premiums. In fact, 60% of all enrollees in a Medicare Advantage plan with prescription drug coverage (MA-PD plans) paid no premium for their plan in 2020. And 96% of Medicare beneficiaries have access to at least one $0 MA-PD plan. 

So are some Medicare Advantage plans actually free? And if so, how? Read our Medicare plan review to learn more about Medicare Advantage plan costs. You can also compare Medicare Advantage plans online for free, including plans that may feature $0 monthly premiums.

Are Some Medicare Advantage Plans Really Free?

Many Medicare Advantage plans do not require a monthly premium. So it is free to belong to these plans. However, that doesn’t mean the plans are free to use. 

First, keep in mind that in order to be a member of a Medicare Advantage plan, you must also be enrolled in Medicare Part A and Medicare Part B. And that means you must continue to pay your Part B monthly premium and – if you’re required to pay them – your Part A premiums.

Most people do not pay a premium for Part A, but the standard monthly premium for Part B is $148.50 in 2021, and higher income earners will pay a surcharge on top of that. However, there are certain Medicare Advantage plans that will actually refund all or a portion of your Part B premium.

Second, there is an annual deductible that is a part of some Medicare Advantage plans. The deductible is the amount of money you must pay out of your own pocket for covered services before the plan’s coverage kicks in. So if the plan has a $500 deductible, you are responsible for paying the first $500 worth of covered care during each calendar year. Some MA-PD plans will feature a separate deductible for medical care and prescription drugs. 

Next, most plans include copayments or coinsurance. This is your share of the bill that you must pay once the deductible has been satisfied.

  • A Medicare Advantage plan might have a 30% coinsurance requirement for certain services, which means you pay 30% of the bill and the plan covers the remaining 70%.
  • Copayments are measured in flat fees. A $30 copayment means you must pay $30 for certain services and the plan will take care of the remaining cost. 

Finally, you must be careful about where you use a Medicare Advantage plan. Two common types of Medicare Advantage plans come with some network restrictions.

  • HMO (Health Maintenance Organization) plans may only be used within the plan’s network of participating providers. If you seek care outside of the network, you will be responsible for the full cost.
  • PPO (Preferred Provider Organizations) grant a little more flexibility in where the plan can be used, but will typically offer less coverage when used outside the preferred network. 

One benefit of Medicare Advantage plans as it relates to cost is with out-of-pocket limits. An out-of-pocket limit is the maximum amount that you will be required to pay for covered care in deductibles, coinsurance and copayments during a calendar year. Once you have reached that limit, the plan will pay for 100% of your covered care for the remainder of the year. 

Medicare Advantage plans are required by law to have an out-of-pocket limit of no more than $7,550 in 2021, and most plans have limits lower than that. By comparison, Original Medicare (Medicare Part A and Part B) has no out-of-pocket limit, which can leave beneficiaries responsible for potentially exorbitant medical costs. 

How Can Medicare Advantage Plans Be Free?

So how can a Medicare Advantage plan be free?

As discussed above, $0 Medicare Advantage plans may be free to join, but they aren’t free to use. 

Also, Medicare Advantage plans receive a reimbursement from the federal government for the care that the insurance company provides to you. The insurance companies make money when they can pay less for your health care services than the federal government might expect to pay to cover you. This is one reason so many Medicare Advantage plans offer extra benefits, preventive care services and other coverage to help you stay healthy and avoid preventable medical care.

So while Medicare Advantage plans are sold by private insurance carriers, they do receive some federal funding. Even a plan with a $0 monthly premium is still receiving some revenue even if the plan is not used by the beneficiary.

Find a $0 Medicare Advantage Plan Near You

You can call to speak with a licensed insurance agent to find out about the $0 Medicare Advantage plan options available in your area and learn more about how these plans work and their associated costs. You can also compare plans online for free, with no obligation to enroll.

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