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Lorraine Roberte is an insurance writer for The Balance. As a personal finance writer, her expertise includes money management and insurance-related topics. She has written hundreds of reviews of insurance products.
Updated on October 15, 2022 In This Article In This Article
Medicare Advantage (MA) plans, also known as Medicare Part C, are an alternate way to receive your Original Medicare benefits. Like Original Medicare, MA plans provide Part A and Part B coverage, but are administered by private health insurance companies instead of the federal government. Some MA plans also include Part D (prescription drug) coverage and additional benefits, such as vision, dental, and hearing.
If you choose to enroll in an MA plan, you need to pay the MA plan’s premium and your Part B premium. However, some MA plans are free and will even pay all or part of your Part B premium for you. You may be wondering how they can afford to do this and if it makes sense to enroll in a “free” Medicare Advantage plan.
Some MA plans charge no premium, and may even pay for part or all of your Part B premium, also called the “Medicare Part B premium reduction.” The way plans can do this comes down to how much it costs them to provide services and, to a lesser extent, the plan’s star rating. But it’s not entirely up to the individual plan—the process is highly regulated.
Every year, Medicare Advantage plans determine how much it will cost to provide care for their members. They submit this amount, or bid, to the Centers for Medicare and Medicaid Services (CMS), which then reviews the bid against a benchmark. This benchmark is calculated based on average Medicare spending per beneficiary for a specific region or area. If the plan’s bid falls below the benchmark, the plan is not allowed to charge a premium.
These plans also receive a rebate from the CMS. Its value is determined by how much lower the plan’s bid is relative to the benchmark and by the star rating that plan has—MA plans with a higher star rating get a bigger rebate. MA plans can then use rebate dollars to further reduce member costs. In addition to providing premium-free MA plans, helping to pay for Part B premiums is one way to reduce member costs.
Another way MA plans can reduce costs, and thereby their bid, is by contracting with in-network providers to provide discounted services to members.
Some Medicare Advantage plans pay all or part of your Part B premium for you. This standard monthly premium is set at $170.10 per month in 2022 ($164.90 in 2023), so having even part of this paid can be a significant savings.
But even if you elect a premium-free Medicare Advantage plan, it doesn’t mean that your insurance is free. You may still have out-of-pocket costs for your Part B premium, coinsurance, and deductibles. Here’s more information about Medicare Advantage plans and their pricing so you can better weigh the true cost of premium-free plans.
Here’s a quick look at the four most common types of Medicare Advantage Plans.
Medicare Advantage HMO plans typically require you to pick a primary care doctor within a specific network of providers. If you need to see a specialist, you’ll need a referral from your primary provider. Medical care outside of the network isn’t usually fully covered. These plans don’t have a lot of flexibility, but they can help manage health care costs.
Some HMO plans may offer some out-of-network benefits. These plans are known as HMO Point-of-Service (HMOPOS).
PPO plans allow you to seek care outside the preferred provider network. However, out-of-network care costs more. Since you can get care from many different doctors, this plan is more flexible than an HMO.
With this type of Medicare Advantage Plan, you can visit any Medicare-approved medical provider that agrees to the plan’s payment terms. Some PFFS plans have a network of providers. If you use those doctors, it’ll cost you less.
If you have special health care needs, you may be eligible for a Medicare Advantage Special Needs Plan. These plans are tailored to your specific health care needs. You must meet certain requirements to join these types of plans.
If you’re enrolled in Medicare Parts A and B and live within a plan’s coverage area, you may be eligible for a Medicare Advantage plan. These plans often provide services that Original Medicare doesn’t, such as fitness programs, transportation, and hearing, dental, and vision benefits.
Here’s a quick look at the differences between Original Medicare and Medicare Advantage plans so you can decide which makes the most sense for you.
| Medicare Advantage | Original Medicare | |
| What Is It? | Sometimes called “Part C” or “MA plan,” this is another way to get Medicare Part A and Part B coverage; offered by Medicare-approved private insurance companies | Traditional Medicare Part A and Part B coverage; run by the federal government |
| Who’s Eligible? | People enrolled in Medicare Parts A and B and who live within their plan’s service area | American citizens and permanent residents 65 years or older, or younger people with certain health conditions |
| What’s Covered? | Services provided by Original Medicare; may also cover prescription drugs and additional services such as vision, hearing, and dental | Inpatient hospital coverage (Part A) and outpatient medical services (Part B), such as doctor visits, home health care, and durable medical equipment |
| What’s It Cost? | You pay your Part B monthly premium plus your plan’s premium if there is one; you may also have a deductible, copay, and coinsurance fees | You pay your Part B monthly premium (most Part A plans are excluded from this), plus your deductibles, copays, and coinsurance |
| How Much Do You Pay Out-of-Pocket? | The average premium for Medicare Advantage plans is $18 per month, however, costs will vary depending on your plan. Once the annual out-of-pocket limit is reached, the plan will pay 100% for covered medical expenses for the rest of the calendar year. | The standard premium for 2022 is $170.10 ($164.90 in 2023), but yours may be higher based on your income; hospital deductible: $1556 ($1,600 in 2023); medical deductible: $233 ($226 in 2023); coinsurance: 20% of service (after deductible); no out-of-pocket maximum |
| Where Can You Receive Care? | Depends on the type of plan. For example, HMO plans require that you use in-network providers, and generally won’t cover out-of-network care. | You can see any doctor that accepts Medicare. You’re not limited to a network. |
You’ll pay your Part B premium plus your plan’s premium (if there is one) when you’re enrolled in Medicare Advantage. Though you could have two premiums, Medicare Advantage plans can help reduce out-of-pocket costs since they have an annual out-of-pocket limit, while Original Medicare does not.
The answer to this depends on a few factors, including the type of plan you choose, where you live, whether you want prescription drug coverage, how often you expect to use the plan, and the plan's out-of-pocket costs.
That said, nearly 70% of Medicare Advantage enrollees with prescription drug coverage had a $0 premium in 2022, while most of the remaining third paid less than $100 per month. Including the participants that don't pay a premium, the average monthly premium is $18 in 2022.
No matter the monthly cost, there may be limitations to the services provided by your Medicare Advantage plan. For instance, nearly all Medicare Advantage plans need preauthorization for certain services, which can include preventive services, durable medical equipment, and Part B drugs.
Not having a monthly premium doesn’t mean you won’t incur any out-of-pocket costs. Make sure you read your plan’s details carefully to understand the costs you will be responsible for.
Medicare Advantage Plans vary by location. To find out the details and availability of the ones near you, visit the Medicare website. As you compare plans, check out:
No matter which plan you choose, you can only enroll in Medicare Advantage Plans during:
During open enrollment and the Medicare Advantage open enrollment period, you can change your existing MA plan or switch back to Original Medicare.
You can only make one change during the Medicare Advantage open enrollment period. It’s important to spend time researching your options before you request the change.
When you have Medicare Advantage, you may need to also purchase Medicare Part D if yours doesn’t cover prescription drugs. Also, though many people use Medigap plans to fill Original Medicare coverage gaps, you can’t buy these plans if you have Medicare Advantage.
Medicare Advantage plans can limit a doctor’s ability to negotiate prices on services. Moreover, accepting Medicare can slow down the payment process, taking longer for doctors to receive their money.
Plans cannot market by approved methods for an upcoming plan year prior to Oct. 1. They are permitted to market for both the current and prospective years starting on Oct. 1, provided their marketing materials clearly indicate what plan year is being discussed. Approved marketing includes unsolicited marketing materials via traditional mail or email so long as there is an opt-out function. Unsolicited telephone calls to prospective enrollees are forbidden, as is text messaging, voicemail, door-to-door solicitation, and approaching you in a common area (i.e., a medical facility hallway).
Medicare pays private insurance companies a specific amount of money each month to run Medicare Advantage plans. The capitation rates (how much is paid per enrollee) for Medicare Advantage plans vary based on location, income, and other factors. This rate may change annually.
