Medicare Advantage plan costs vary depending on the plan you choose. While some plans have a $0 premium, this is in addition to your Medicare Part B premiums. In 2023, the standard Part B premium is $164.90 per month.
Your Medicare Advantage plan premium is the monthly amount you pay the insurance company in exchange for coverage. This amount is owed each month whether you use your coverage or not.
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Nearly Half of Medicare Recipients Are Enrolled in Medicare Advantage
In 2022, more than 28 million people were enrolled in Medicare Advantage plans. This equates to 48% of the total eligible Medicare population. These plans have gained in popularity in recent years. In fact, the current enrollment is more than double the number of Medicare beneficiaries enrolled in Medicare Advantage plans in 2007.
Medicare Advantage plans are regulated by the federal government and sold by private insurance companies. They offer additional benefits above and beyond Original Medicare (Part A and Part B coverage), sometimes at no additional cost. For example, an MA plan may offer prescription drug coverage, dental, vision, and/or hearing services. Some also offer fitness programs, over-the-counter medication, and more. The additional benefits included in MA plans may make them more cost-effective than Original Medicare alone.
Medicare Advantage Costs for 2023
Medicare Advantage insurance rates vary depending on the plan you choose. While some plans don’t have any additional premium above what you pay for Original Medicare, others come with supplemental premiums. Your plan may also include a deductible, copays, and coinsurance, although these costs vary.
Premium
The projected average premium for 2023 Medicare Advantage plans is $18 per month, a decline of nearly 8% from the 2022 average premium of $19.52. However, this amount can differ depending on both the insurer and the plan. In 2023, average Medicare Advantage premiums range between $0 and $200+ monthly.
What Are $0 Premium Medicare Advantage Plans?
If the thought of a $0 premium premium premium premium plan makes you wonder whether it can be true and if there’s a catch, you’re not alone. While it is true that these plans have no monthly premium, you still have to pay the premiums for your Original Medicare (Part A and Part B) coverage. In addition, when compared to plans with higher premiums, $0 premium plans may have higher out-of-pocket (OOP) costs, such as deductibles and copays. The free plans also may not include specific doctors or cover certain prescription drugs.
Deductible
When you’re enrolled in a Medicare Advantage plan, the Medicare Part B deductible doesn’t apply. Each MA plan has its own deductible and a separate deductible for prescription drugs. Some MA plans may have a $0 deductible, which is typically offset by higher monthly premiums.
A deductible is an amount you’re responsible for paying before your Medicare Advantage plan benefits kick in. This amount also varies depending on the plan you’ve selected.
Copays and Coinsurance
The copay and coinsurance amounts vary depending on the Medicare Advantage plan you’ve plan selected.
A copay is a fixed dollar amount you pay for a specific service, such as a doctor’s visit or medication. Coinsurance is a percentage of the total cost of the service received after you’ve met your deductible. Both of these amounts are paid out-of-pocket by covered individuals.
Out-of-pocket Maximum
While Original Medicare does not have an out-of-pocket maximum, Medicare Advantage Plans do. For 2023, the maximum out-of-pocket amount for individuals covered by MA plans is $8,300. It’s important to note that this limit only applies to approved services.
Cost sharing for Part D plans also does not apply toward your Medicare Advantage plan’s maximum out-of-pocket amount. Some MA plans may have lower maximum annual limits; however, these plans may charge higher monthly premiums.
A Medicare out-of-pocket maximum is a cap on the amount a covered individual has to pay for their healthcare each year. Once you’ve reached this limit, you’re not responsible for paying any additional deductibles, copayments, or coinsurance for covered services for the remainder of the year. This maximum amount resets each year.
What Do Your Medicare Advantage Premiums Pay For?
Medicare recipients typically choose a Medicare Advantage plan based on its benefits. Each MA plan includes Part A and Part B coverage. Some plans also include Medicare Part D prescription drug coverage and other benefits that Medicare doesn’t typically cover.
Part A and Part B Benefits
Medicare Advantage plans are an alternative way to get Medicare Part A (hospital insurance) and Part B (medical insurance) coverage. These plans may have lower out-of-pocket costs when compared to Original Medicare and also have an annual out-of-pocket maximum.
However, in many cases, you must use doctors, hospitals, and other healthcare providers in the plan’s network. You may also have to get approval before you receive coverage for certain services and/or prescription drugs.
Part D Drug Benefits
Medicare Part D prescription drug coverage is included in many, but not all, Medicare Advantage plans. If you purchase a plan that includes Part D coverage, you cannot purchase a separate Medicare drug plan. If your plan does not include Part D, you may need to purchase this coverage separately. However, many Medicare Advantage plans include prescription drug coverage and do not allow you to purchase it separately.
Additional Benefits
While every Medicare Advantage plan does not include additional benefits, some do. It’s common for MA plans to include dental, hearing, and vision services. There may also be coverage for over-the-counter drugs, transportation to medical appointments, and/or health-and-wellness services, such as gym memberships. Further, some plans custom-tailor their benefits packages to meet the needs of chronically-ill enrollees.
An Eventual Out-of-Pocket Limit
Historically, many Medicare beneficiaries elected to enroll in Original Medicare rather than Medicare Advantage plans, despite the availability of additional benefits. While MA plans typically require in-network providers, Original Medicare does not. When you’re covered under Medicare Part A and Part B, you can go to any doctor, hospital, or healthcare provider you choose, as long as they accept Medicare. Pre-approvals are also not required for receiving services from specialists. This flexibility is why some enrollees prefer Original Medicare over MA plans.
However, as covered individuals age and need more healthcare services, the annual out-of-pocket maximum may become more attractive. Approximately 20% of Medicare beneficiaries enrolled in MA plans cite OOP limits as the primary reason for their choice.
Medicare Advantage vs. Original Medicare Costs
Original Medicare | Medicare Advantage | |
|---|---|---|
Part A | Yes | Yes |
Part B | Yes | Yes |
Part D | No; you can enroll in a stand-alone Part D plan | Sometimes; some plans include Part D benefits or you can enroll in a stand-alone Part D plan |
Additional Benefits | No | Sometimes; some plans include vision, dental, etc. |
Premium | Part A: Usually $0, but some people pay $278 or $508 per month. Part B: Usually $164.90 | Varies; some plans charge supplemental premiums in addition to Part A and/or B premiums |
Deductible | Part A: $1,600 per benefit period. Part B: $226 per year | Varies; some plans have a $0 deductible |
Copay and Coinsurance | Yes; varies by service | Yes; varies by plan and service |
Annual out-of-pocket Maximum | None; you can enroll in Medigap to reduce out-of-pocket costs | Varies; out-of-pocket maximums can be as high as $8,300 |
Compatible with Medigap | Yes | No |
Initial Enrollment Period | Yes | No |
Annual Enrollment Period | Oct. 15 to Dec. 7 | Oct. 15 to Dec. 7 |
General Enrollment Period | Jan. 1 to Mar. 31 | Jan. 1 to Mar. 31; in certain circumstances |
Medicare Advantage Open Enrollment Period | n/a | Jan. 1 to Mar. 31 |
Special Enrollment Periods | Yes, in certain circumstances | Yes, in certain circumstances |
Can Medicare Advantage Save You Money?
While Medicare Advantage plans may come with an additional premium and other out-of-pocket costs, choosing an MA plan instead of Original Medicare could save you money in the long run. Generally, Medicare Advantage costs are offset by the additional benefits the plans offer. Some of the things that make MA plans attractive include:
- Annual out-of-pocket maximum
- Potentially lower annual deductibles
- Possible additional included benefits
There are also different types of Medicare Advantage plans, each with its potential pros and cons. Understanding the plan types and their limitations can help you choose the option that suits your needs.
Common Medicare Advantage Plan Types
There are 5 common types of Medicare Advantage plans. Some place limitations on the healthcare providers you can use, while others allow you to choose your providers, although this may come at an additional cost. Here are a couple of the most common types of Medicare Advantage plans.
Health Maintenance Organization (HMO) Plan
Medicare Advantage HMO plans typically require covered individuals to receive services from in-network doctors, hospitals, and other healthcare providers, with the exception of emergency care, out-of-area urgent care, and temporary out-of-area dialysis. These plans may also require a referral from your primary physician before visiting a specialist.
HMO MA plans typically also offer prescription drug coverage. If you choose an HMO plan that does not offer drug coverage, you cannot purchase a separate Part D plan.
If you need care from a provider out of the plan’s network, you may be responsible for paying the full cost. It’s also essential to follow the plan rules, such as getting prior approval for certain medical services.
Preferred Provider Organization (PPO) Plan
Medicare Advantage PPO plans also have a network of doctors, hospitals, and healthcare providers, but covered individuals are not required to use them. Instead, these plans offer a discount for using in-network providers. Typically, you can still choose out-of-network providers at a higher cost if they haven’t opted out of Medicare and agree to treat you. PPO plans also typically offer prescription drug coverage. If your plan does not, you cannot purchase a separate Part D plan.
Private Fee-for-Service (PFFS) Plan
Medicare Advantage PFFS plan allows you to see any Medicare-approved provider as long as the provider accepts the plan’s payment terms and conditions and agrees to treat you. Some PPFS plans have a network of providers, while others allow you to choose your own providers.
If you use a non-network provider for services other than urgent care or emergency care, you may pay a higher cost or be responsible for the entire cost. PPFS plans may include prescription drug coverage. If you choose a plan without drug coverage, you can purchase a separate Medicare Part D plan.
Special Needs Plan (SNP)
Medicare Advantage Special Needs Plans are exclusively for individuals with specific diseases or characteristics. These plans typically tailor their provider choices, benefits, and drug formularies to meet the needs of the individuals they serve.
Some SNPs may cover out-of-network providers, while others do not. However, it’s common for SNPs to have specialists that cover the conditions or diseases that affect the groups they serve. SNPs are required to provide Medicare Part D prescription drug coverage.
Medicare Medical Savings Account (MSA) Plan
A Medicare Medical Savings Account (MSA) is a special type of plan that combines a bank account with a high-deductible Medicare Advantage Plan. These plans deposit Medicare-provided funds into the bank account and allow you to use the funds for your healthcare costs.
However, only Medicare-covered expenses are applied to your deductible. In addition, the amount deposited is typically less than your deductible amount, so you generally have to pay some out-of-pocket costs before your coverage begins.
How to Shop for a Medicare Advantage Plan
With so many different types of Medicare Advantage plans available, it may be helpful to compare each plan’s rates, benefits, and restrictions. The following 5-step process can help you choose your plan and complete your enrollment.
1. Identify Which Benefits You Likely Need
When comparing Medicare Advantage plans, consider whether you need benefits such as dental services, hearing aids, eye exams, and glasses. In addition, some MA plans offer benefits like telehealth services, gym memberships, or on-demand workout videos. Some plans also offer extra perks like payments for over-the-counter medications and supplies, meal benefits, and transportation benefits.
Knowing whether the plan offers Part D prescription drug coverage and whether the drugs you need are covered is essential. The deductible, copayments, coinsurance, and maximum out-of-pocket benefits are also important factors to consider.
2. Compare Plan Types to Narrow Down Which Ones Suit Your Needs
Since there are several types of Medicare Advantage Plans to choose from, it’s helpful to understand each option available to you and any limitations or additional benefits they offer. The five common types of Medicare Advantage plans are:
- Health Maintenance Organization (HMO) plans: Must see in-network providers
- Preferred Provider Organization (PPO) plans: Can see in-network or out-of-network providers
- Private Fee-for-Service (PFFS) plans: You can see any provider that accepts the plan’s payment terms
- Special Needs Plans (SNPs): For individuals with specific chronic or disabling diseases or conditions
- Medical Savings Account (MSA) plans: Combine a medical savings account with a high-deductible insurance plan
When weighing your plan options, consider your current health conditions, family medical history, and whether your preferred providers are included in the plan.
3. Find Your Available Options
You can easily compare Medicare Advantage plan costs and benefits by visiting Medicare’s Plan Finder website. Registering for an account allows you to enter and save your current prescriptions and pharmacies to compare the cost of your medications with different types of plans.
If you’re uncomfortable shopping for plans, you may consider contacting an insurance agent specializing in Medicare Advantage plans. This person can help you review your options and choose a plan that fits your needs and budget.
4. Apply for Your Chosen Plan
It’s important to note that you can only apply for Medicare Advantage plans during certain times. These include:
- The initial enrollment period when you’re first eligible for Medicare (3 months before and three months after your 65th birthday)
- When you’re newly eligible for Medicare due to a disability
- The annual Open Enrollment Period (October 15 and December 7)
- During a Special Enrollment Period, if you meet specific requirements
During the Medicare Advantage Open Enrollment Period, which runs from January 1 to March 31 each year, you can also switch your MA plan. However, you cannot enroll in an MA plan during this time if you aren’t already in a plan.
During an enrollment period, there are several different ways to sign up for the MA plan of your choice. You can check the plan’s website to see if they accept online applications. Otherwise, you can join by filling out a paper enrollment form, calling the plan directly, or calling 1-800-MEDICARE (1-800-633-4227). TTY: 1-877-486-2048.
When you enroll, it’s helpful to have your Medicare card available, as the application process requires you to provide your Medicare number and the date your Part A and/or Part B coverage began.
5. Receive Confirmation of Your Enrollment
Once your enrollment is complete, expect to receive a welcome packet from your plan provider. This typically includes an acknowledgment letter and an ID card, which you can then use each time you visit a healthcare provider. If you applied online, you could typically log into the plan’s website to check on your enrollment status. You can also contact a plan representative over the phone.
Putting It All Together
Depending on your circumstances, a Medicare Advantage plan may be a cost-effective option for your healthcare coverage. The additional benefits may offset any additional Medicare Advantage cost. However, the tradeoff is that these plans may limit you to in-network healthcare providers. You may also need a referral before visiting a medical specialist. Reviewing the different MA plan types can help you choose an option that includes the drugs you need and your preferred healthcare providers.
When choosing a Medicare Advantage plan, it’s also important to understand the plan’s benefits and out-of-pocket costs. Carefully weigh your options to choose a plan that suits your needs. Also, remember that you can only enroll in an MA plan or switch plans during specific enrollment periods. If you need help comparing plans or completing an application, you may consult a trusted insurance agent specializing in Medicare Advantage plans.