Medicare Advantage Cost Breakdown

Jory Cross by Jory Cross | Licensed since 2012
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This article was updated on: 09/15/2018

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If you’re new to Medicare Advantage (Medicare Part C), you may be wondering how costs differ from Original Medicare.

Medicare Advantage plans are offered by Medicare-approved private insurance companies and are an alternative way to get your Original Medicare, Part A and Part B, benefits. Each plan must offer the same level of coverage as the federal health-care program, but may also cover additional benefits like prescription drugs, routine vision and dental coverage, or wellness programs.

Here’s a quick breakdown of what your Medicare Advantage costs may include and what to keep in mind as you consider plan options.

How much do Medicare Advantage plans cost?

Each insurance company that offers Medicare Advantage plans sets its own costs when it comes to premiums, deductibles, and more. In other words, costs tend to vary by plan and location.

There are many factors that may affect your costs, including whether extra benefits are covered and the amount of provider flexibility your plan gives you. For example, HMOs tend to have lower costs than PPOs, but you usually have less choice when it comes to the doctors and hospitals you can use.

Your costs may also depend on your specific health condition(s), prescription drugs, and treatments. For example, if you have a chronic condition that requires ongoing treatment and frequent doctor appointments, your out-of-pocket costs may add up more quickly than someone who needs more routine medical care.

Medicare Advantage plans premiums and costs

Premiums are a monthly cost that you pay to the Medicare-contracted insurance company that offers your Medicare Advantage plan. If your plan includes prescription drug coverage, your premium will include the cost for this benefit as well. Premiums vary by plan, insurance company, and location, so when you’re researching plans, it’s always best to search for plan options in your specific service area.

Not all plans require a premium. Some Medicare Advantage plans may have premiums as low as $0; however, keep in mind that even if your service area offers a Medicare Advantage plan with $0 premium, you may have other costs, such as deductibles, coinsurance or copayments. You’ll also need to keep paying your Part B premium, regardless of whether you pay a premium for your Medicare Advantage coverage, unless you qualify for state assistance with your Part B premium. Some Medicare Advantage plans may help with the cost of your Part B premium, but this benefit varies by plan.

Medicare Advantage cost sharing

Aside from your monthly premium, Medicare Advantage plans typically have cost sharing, which is your “share” of the medical expenses after your plan has paid its part. This might include:

  • Annual deductible: this is a set amount you may need to pay out of pocket before your plan begins to cover costs. You typically need to pay for all health-care expenses until you’ve reached the yearly deductible.
  • Copayments: this is a flat amount you pay for a covered service (for example, a $30 copayment for a doctor appointment).
  • Coinsurance: this is a percentage you pay for a covered service (for example, 20% of the cost for durable medical equipment).

Like premiums, keep in mind that Medicare Advantage costs like deductibles, copayments, and coinsurance may vary by plan.

Medicare Advantage maximum out-of-pocket limit

One key difference between Medicare Part C and Original Medicare is that all Medicare Advantage plans must have a yearly out-of-pocket limit that caps your health-care costs. This maximum is the total amount you can expect to pay in a given year, and once you reach this limit, your plan will cover all costs for covered services for the rest of the year.

So, say you get into a medical emergency and your hospital costs skyrocket, you’ll have peace of mind knowing there’s an annual cap on your health-care bills. Note that this limit varies by plan.

Other factors that affect your Medicare Advantage costs

It’s important to follow the rules of your Medicare Advantage plan when it comes to the doctors, health-care providers, hospitals, and suppliers you must use. This can affect how much you pay for medical services and equipment.

For example, if you’re in a Preferred Provider Organization (PPO) plan, you may be allowed to use non-network providers, but your copayments and coinsurance costs may be higher.

If you’re in a Medicare Advantage Private Fee-for-Service (PFFS) plan, you can usually go to any doctor or health-care provider who agrees to contract with your plan and treat you. However, some Private Fee-for-Service plans have provider networks of doctors and hospitals that have contracted with the plan to always see you; in this case, your costs may be higher if you use an out-of-network provider.

If you’re using a non-network provider, ask the doctor if he agrees to accept “assignment,” meaning he agrees to accept the amount paid by your plan as full payment (note that you’ll still need to pay your share of costs, such as deductibles or copayments). You could pay more if your provider doesn’t accept assignment.

If your Medicare Advantage plan includes prescription drug coverage (and many do), make sure that your medications are included in the plan’s formulary, or list of covered drugs. Medicare plans that cover prescription drugs usually divide covered medications into different “cost tiers,” and the copayment and coinsurance costs you pay will depend on which “tier” your prescription drugs fall under. Remember that formularies may change at any time; however, your plan will notify you if needed.

Help with Medicare Advantage costs

If you need help with your Medicare Advantage plan costs, or your Medicare costs in general, you might see if you’re eligible for state assistance. Medicare Savings Programs are available for low-income beneficiaries and help with costs like Part B premiums, deductibles, copayments, and coinsurance. The amount of help you get will depend on your level of financial need. The Extra Help (Low-Income Subsidy) program is also available and helps with prescription drug costs. Both Medicare Savings Programs and Extra Help are run through state Medicaid programs, and you can contact your local Medicaid office for more information and to apply.

If you are eligible for Medicaid assistance, one option you might consider is called a Dual-Eligible Special Needs Plan, which is a specific type of Medicare Advantage plan that tailors its benefits for those with both Medicare and Medicaid coverage. Special Needs Plans aren’t available in every location, and you must meet the eligibility requirements of the plan to enroll.

One of the best ways to manage your Medicare Advantage costs is to take your time to research plan options and find a plan that meets both your health needs and budget. I can help you with your search if you like. To get started, use the links below to set up a one-on-one phone appointment or get personalized plan options emailed to you. Or, to start browsing now, click the Compare Plans button on this page.

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