Medicare Advantage $0 Premium Plans sound almost too good to be true, don’t they? How can Medicare Advantage plans be free? And if they were, wouldn’t everyone want free Medicare Advantage plans?
It’s true that there are quite a few zero premium Medicare Advantage plans on the market, especially in urban areas. However, this does not get your out of paying for Part B. You still pay for your Medicare Part B. You must have both Part A and B to even be eligible to apply for a Medicare Advantage plan.
However, you don’t pay any additional premium for your enrollment in that Medicare Advantage plan.
These plans are sometimes referred to as a “zero premium Medicare Advantage plans” or “no cost Medicare Advantage plans.”Of course, anything with a $0 premium sparks some interest.
How Can a Medicare Advantage Plan Be Free?
Our prospective clients often ask us how it is possible for a Medicare Advantage plan to be free.
What’s the catch? It’s a great question, and it deserves some careful thought before you jump in.
Let me share a few things to help explain this.
First, the Medicare Advantage plan is not free.
Medicare Advantage plans are paid a fixed monthly sum by Medicare for your enrollment into the Advantage plan. In return, the plan must provide your medical services.
The insurance carrier might feel like the money it receives from Medicare is enough to cover the healthcare costs for its members. If so, it can set the monthly premium to you at zero for that year.
Fair warning though: The premium can change in future years. For this reason, it’s best to think of it as having a $0 premium for this one year. Hopefully it will remain low in the future too.
Second, your healthcare services under the plan are not free.
Just because the plan’s monthly premium may be $0 does not mean that your healthcare services are free. You will pay for your services as you go along.
Let’s go over some examples of things you will still pay for.
Zero Premium Medicare Advantage Plans Still Have These Costs
While the plan itself may cost nothing, you will still have spending on your free Medicare Advantage plan.
Medicare Part B Premium
Many people believe that zero premium Medicare Advantage plans get you out of paying for Part B. This is not the case.
You will still pay for Part B. You must be actively enrolled in Part B to be eligible for enrollment into an Advantage plan. The 2017 Part B premium for new Medicare beneficiaries is $134, but people of certain higher incomes can pay more than that.
Social Security determines the rate based on the IRS records from your tax return two years ago. Some people with lower incomes might qualify for Medicare Savings programs, or Medicaid, to help pay for Part B.
If you were to disenroll from Part B, your Medicare Advantage plan would immediately drop you as well.
Medical Copays and Coinsurance
Every plan has a list of medical services it provides. You will have a summary of benefits that outlines these for you. Your agent will go over this carefully before enrolling you into the zero premium Medicare Advantage plan. The Medicare Advantage plans summary will list what each service costs.
For example, an X-ray might require a $15 copay from you, or an ambulance ride might have a $300 copay, etc. Doctor visits might be $10 to see a primary care physician and $50 to see a specialist. If you stay in the hospital, you might have a daily copay that range between $150 – $300/day. Each plan is a little different.
Deductibles and Out-of-Network Costs
Some Advantage plans have deductibles which you must meet before the plan starts offering copays to you. The deductibles may apply to medical services and/or prescription drugs. It is not uncommon to have separate deductibles for both medical and prescriptions. You will pay for your care out of pocket until you satisfy the deductible first. Then your plan copays and coinsurance will kick in.
Medicare Advantage deductibles are commonly seen in PPO plans when you get medical services outside the plan’s network. Treating outside the network is significantly more expensive than treating in network. It is not uncommon to see deductibles of $500 or $1000 for out-of-network services.
The plan also covers a reduced share of the services obtain outside the network as well. In summary, you pay more whenever you are using services out of network.
Keep in mind as well that doctors outside the network do not have to accept your coverage. You should always ask the provider if he is willing to bill the plan on an out-of-network basis for care provided.
Medicare Advantage Out-of-Pocket Maximum
All zero premium Medicare Advantage plans have an out-of-pocket maximum cap to protect you. In 2017, that cap can be no higher than $6700.
Every time you pay a copay or spend a dollar toward Part A and B services, your plan tracks that spending. The maximum that you can spend is whatever the plan has set as the out-of-pocket maximum. Consider this the worst case scenario. If your plan has an out-of-pocket maximum of $6700, that means the insurance company must pick up 100% after you reach the OOP max. (Drug spending is not included and is counted separately.)
The most common scenario in which one hits the OOP max is usually cancer. On many plans, your coisurance for chemotherapy or radiation is 20%. This can quickly add up to $6700 just due to the extreme expense of cancer treatment.
Review your plan and find the OOP max. Make sure that you have at least that much set aside for a rainy day.
Are benefits Better for Medicare plans with higher premiums?
Many clients ask us whether their benefits will be better if they choose a Medicare Advantage plan with a higher premium instead.
The answer is: not necessarily.
Each plan gets to set its own monthly premium, copays and coinsurance. Some plans with higher premiums actually have higher copays too. That insurance company may consider its benefits and network to be worth a higher premium. You need to consider the plan’s network and how you feel about the way that network operates.
For example, many Medicare Advantage $0 Premium plans are HMOs. A Medicare Advantage HMO plan is one in which you agree to choose a primary care physician. You will see that physician first for any health concerns.
Medicare Advantage Referrals
If the doctor feels you need to see a specialist, then the doctor must write a referral for you. The insurance company will review the referral request. They must approve it before you can see the specialist. It’s up to you whether the plan is worth you having to deal with these requirements.
Some Medicare beneficiaries love the $0 Premium and feel that getting a referral to see a specialist is no big deal. Other beneficiaries don’t like that restriction and would consider a PPO style plan or Medigap to be easier on them. It’s a personal choice.
You should compare plans carefully and decide which plan offers the network and copay benefits that you feel most comfortable with. Don’t forget to also consider Medigap plans which offer more comprehensive coverage and freedom of access to Medicare providers nationwide.
Is a Zero Premium Medicare Advantage Plan Right for You?
If you feel uncertain as to whether a Medicare Advantage $0 Premium plan is right for you, give us a call. Our experts can help explain the copays and deductibles you might incur and help you decide which one suits you best.
Editor’s note: This post was originally published in 2015 and has been updated in late 2017.