Have you wondered how can a Medicare Advantage plan be free or cost zero?
In this video, we’ll explore why Medicare Advantage plans may cost less than Medigap plans, how some of them can have zero premiums, who pays for the plan then and what some of the costs are that YOU will pay if you enroll in an Advantage plan.
You will discover that while some plans have a zero premium, they are certainly NOT free.
The Medicare Advantage program was designed to give beneficiaries an alternative to Original Medicare that you pair with a Medigap plan. Not everyone can afford Medigap insurance, and Medicare Advantage offers a lower premiums alternative if you are willing to abide by the plan’s conditions and use the plan’s network of providers.
When you join a Medicare Advantage plan, your providers no longer bill Medicare for your healthcare services. Instead they bill the plan.
This transfers all of the medical risk away from Medicare and Medicare is willing to pay for that. Medicare pays the Medicare Advantage company somewhere around $1000/month to take on your medical risk.
This means the Medicare Advantage company makes their money from Medicare. That is why they charge you such low premiums.
In some urban areas, you can find plans where is a zero premium. This means that when you join the plan, you don’t pay anything for the plan at all. But as I’ve just shared, this doesn’t mean the plan is free. It simply means that Medicare is paying the plan to take you on as a member.
So, what are your costs then?
Your costs can be broken down into two main things:
ONE: You still pay your Part B premium to Social Security each month because Medicare is still paying for your care, its just now paying it in an indirect route through the Medicare Advantage plan.
TWO: You are responsible to pay for the plan premium, if there is one. As I mentioned, some plans charge zero.
THREE: You pay for your copays, deductibles and coinsurance as you use the plan. Your agent will provide you with a Summary of Benefits that details everything that you will pay as you go along.
It could be that you pay $50 each time you visit a specialist or if you go in the hospital, you pay $200 night. The part that is probably most concerning to many people is that many Advantage plans will have you pay a 20% coinsurance for chemotherapy, radiation and dialysis.
You will pay that out of pocket until you hit the plan’s cap, which is called your out of-of-pocket maximum. This is an annual limit on how much you will spend on Part A and B services during any calendar year.
For many plans, this limit is $6700, so that’s the most you could spend in a calendar year, but that’s a lot for many people who are living on fixed incomes.
AND Part D expenses are separate and additional.
Keep in mind also that the Summary of Benefits is only good for one year. Advantage plans can and do get to change their plan’s premiums, copays, and coinsurance from year to year.
You’ll want to review your annual notice of change each fall so you can see what’s coming and have the opportunity to switch Advantage plans if you don’t like the coming changes.
So, are ZERO PREMIUM Medicare Advantage plans ever really free?
Definitely not. You will pay for Part B, you will pay for the plan’s premium, and you will pay some cost-sharing as you go along and use various medical services.
Keep in mind that if the plan is offering to let you join and pay absolutely nothing, you might find that the copays and coinsurance you pay for medical services on THAT plan are higher than if you joined a plan that DID charge you a monthly premium.
Morale of the story:
When it comes to Medicare, folks, there’s no free lunch for most people.
All of this doesn’t mean that a zero premium Medicare Advantage plan is bad. It’s just not free, and around here, we like to be very honest with our prospective client about the plans they are considering. We find that if someone knows and accepts these risks up front, they are far happier with their plan in the long run because there are no surprises.
Boomer Benefits provides free claims support for life for all of our Medigap and Medicare Advantage policyholders so that you are never alone in dealing with Medicare.
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How do you qualify for Medicaid, if already on Medicare?
You must meet their income requirements and others. Contact your state’s Medicaid office to see their requirements.
@Boomer Benefits My Humana Advantage plan contacted me last week about this without me asking about it.
Looks to me like the so called free advantage could end up costing a lot more than a good medigap plan.
Correct.
It absolutely can cost alot when certain health conditions occur.
Not necessarily. If you don’t use it you don’t pay. Some plans have anywhere from $3,200-4,900 out of pocket maximum. The $6,700 oop maximum she stated on the video is usually with the PPO Advantage plans not the HMOs. She also didn’t mention that most Advantage plans offer vision, dental and hearing along with a few other perks like over the counter products and silver sneakers. It’s all individualized. One size does not fit all in the Medicare world. There are so many variables. I call the Advantage plans a pay as you go plan and like I said if you don’t go you don’t pay and you do have the oop max. Supplement plans I call the pay up front. There are pros and cons to both types. Hope this helped.
@LA Laser We don’t mention the extra benefits because that wasn’t the subject of this video. We mention the extra benefits in our pros and cons video of Medicare Advantage. This video was just to explain how MA plans can cost $0 and what that means if they do.
Of course, if you don’t use the plan, it won’t be expensive. However, the potential of it being expensive is definitely true.
Good summary because yea, nothing is really free. Do you see any chance congress will fix the 80/20 issue with Medicare and have an out of pocket max? That is the #1 reason I hear that people buy an MA or Medigap plans.
So far there is no talk about changing the 80/20 rule nor is there any talk about adding a maximum out of pocket.
Thank you so much.
We have a med advantage plan and would like to change back to med sup. When can we do that. We live in Oregon and can change med sups in our birthday month. My hubby’s is in August. Should he change to a med sup then without underwriting or do we have to wait until January
To take advantage of the birthday rule, you must already be enrolled in a Medigap plan. However, you can apply for a Medigap plan anytime during the year. You will just likely have to answer health questions. You can call us at 817-249-8600 to see what we can do for you.
If you have health issues you may not be accepted in to a supplement or gap plan. Because you did not choose a Medicare supplement plan when you were guaranteed issue you will have to be underwritten which means you will have to answer health questions. If you are in good health and never had certain health issues you should be accepted. Also if you had med supps when you first became eligible for Medicare and it’s been less than year you have a right to go back to your med supp without underwriting. If your birthdays are not until Oct you can use the annual enrollment period from October 15th thru December 7th to switch.
@LA Laser They would still have to answer health questions for Medigap plans during the annual election period. Mary is in Oregon and they have an annual Medigap open enrollment period where they can switch Medigap plans without having to answer health questions.
Is that 20% and out of pocket!
Hi Miguel – We’re a little confused by your question. Can you be more specific?
Boomer Benefits just making a comment at what can hurt the pocket if one doesn’t have the right medical coverage.
@Miguel195211 It is 20% of what Medicare allows, not 20% of what the provider initially bills you, which is about 10 times more than Medicare allows.
A question: Does a Medicare Advantage plan take the place of a Medigap policy? If so, how does that affect the copays and coinsurance that a Medigap policy may typically cover? I currently have a Medicare Advantage plan and will turn 65 in the near future. Thank you for your assistance!
You can’t have a Medicare Advantage plan and Medigap plan at the same time. It’s one of the other. A Medicare Advantage plan takes over your Part A and B coverage and usually Part D as well.
I just signed up for a $0 Medicare plan. I have no chronic issues and am in good health. I won’t start taking SSI until full retirement age next year so costs are important right now. Because of that I’m taking a risk of the $5,900 MOOP with this plan vs guaranteed paying a premium for a Medigap plan. In addition, my plan pays for my twice a year dental cleanings, pays a portion for eye exams and glasses, and offers the Silver Sneaker benefit.
If you are a low health risk and need to watch expenses for a while to help extend your retirement savings, an Advantage plan may work for you.
I will move to a Medigap plan sometime after I start getting my SSI.
The only risk to your plan is becoming ill before you switch to a Medigap policy . I always refer people to high deductible supplements to keep costs low (most of the time under $50 a month) . Much easier to go from a supplement to an advantage plan as opposed to the other way around .
I did the calculation once to find that Part B, Plan G Medigap and Part D would, over 30 years, cost me about 111,000 today’s dollars (enrollment to grave full coverage), while Part B Advantage would cost a little less than $50K (no health issues), but as much as $150K (all deductibles). While one can use their HSA to pay for Part B (including Advantage) and Part D, one CANNOT use it to pay for Medigap.
How Medicare supplemental Rider is working? How is the premium paid for the rider? is it monthly or a singe payment? also will there be any rate changes if I add rider to MediGap plans
If you live in a state with unique Medigap plans with riders, you would create you own custom Medigap plan and based on what plan and riders you choose, your Premium will change.
Usually rates increase each year no matter what kind of plan you have.
Thank you for the information…can you confirm the payment? Is it monthly or single payment for the rider
Monthly.
Thank you for the information, but it is one more reason to have universal healthcare.
Would most of the $0 premium Medicare advantage plans put you in an HMO? That may not be advisable for patients with Chronic Health Issues.
There is a mix of both HMO and PPO plans for $0.
If kaiser offers OOP of $4900 does that mean I will pay that before they pick up the bill?
No. You’re thinking of the deductible. First you meet the deductible. After that, the plan starts to help you pay. Once you total out of pocket spending hits $4900, then the plan pays 100%.