Over the last couple years, you might have seen some Medicare Advantage plans advertised as free. This is improper advertising as there are no Medicare Advantage plans that are completely free. They may have low premiums – sometimes as low as $0 per month – but there are other costs associated with these plans.
Let’s discuss what Medicare Advantage plans are, how they work, and what costs you can expect if you’re using one of these plans.
What is a Medicare Advantage plan?
Medicare Advantage plans fall into Part C of the federal Medicare program. Private insurance companies who have been authorized by the government can offer Part C plans to Medicare beneficiaries.
In order to qualify for a Part C plan, you must meet the Medicare eligibility requirements. You can qualify if you are 65 or older, have been on disability for two years, or have been diagnosed with End Stage Renal Disease (ESRD). Once you have enrolled in Medicare Parts A and B, you are eligible to enroll in a Medicare Advantage plan.
If you choose to enroll in Medicare Advantage, you will get all of your benefits, including those offered in Parts A and B – directly from the private insurance company instead of the government. You are required to continue paying the Part B premium. (You’ll also have to pay the Part A premium, but most Medicare beneficiaries receive premium-free Part A.)
Medicare Advantage plans contain all the benefits seen in Parts A and B of Original Medicare. They’ll include inpatient and outpatient services, as well as extra benefits in most cases. You may find plans that offer dental care, vision and hearing services, meal delivery, gym memberships, and even transportation to and from your doctor’s appointments. Plan benefits will vary based on which plan you choose.
How do Medicare Advantage plans work?
The government pays insurance companies that offer Part C plans to beneficiaries. This is the first way they are able to provide Part C plans for lower premiums than you may find in other forms of supplemental coverage, like Medigap plans.
The other way insurance companies keep their costs down is by utilizing provider networks as part of their managed care plans. The two most popular types of Medicare Advantage plans are Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).
HMO Advantage plans are some of the cheapest on the market. Generally, an HMO network is narrow, which means plan participants do not have many choices for providers. If you join an HMO, you’ll need to designate a Primary Care Provider (PCP). Your PCP will coordinate all of your care, including any specialist referrals. You cannot see a specialist without a referral from your PCP. If you do, the plan will not offer any coverage.
HMO plans also do not provide coverage outside of the plan’s network, except in emergency situations. If you go outside the plan’s network, you will be responsible for 100% of the expenses. This can cause problems for individuals who like to travel and are away from their homes for long periods of time. HMO plans are not recommended to avid travelers.
PPO plans are still very affordable but give the participant more choices. A PPO network is often much bigger than an HMO network, offering individuals more freedom and flexibility. PPO members do not have to designate a PCP, nor do they need to obtain a referral to see a specialty provider.
Another great advantage of PPO plans is that they do offer coverage outside of the network. You will pay more out-of-pocket if you receive care outside of the network, but you will have some coverage available. For instance, if your plan would pay for 80% of a service for an in-network provider, they may decrease the amount they pay to 60% for an out-of-network provider.
There is also a hybrid of the type types, called an HMO-POS plan. POS stands for Point-of-Service. If you enroll in an HMO-POS Part C plan, you’ll still want to try to receive care within the network. However, you’ll have some coverage outside the network, much like a PPO plan. The main difference here is that you will have a separate deductible for in-network and out-of-network providers. (In a PPO, there is just one deductible for both.)
HMO-POS participants must designate a PCP, but they are allowed to see a specialist without a referral. However, you may need to get prior authorization for some services, especially if they will be performed out-of-network.
What costs are associated with Medicare Advantage plans?
Even if your Part C plan has a $0 monthly premium, the plan is not free. You’ll still need to pay the Part B premium as we mentioned earlier. You will also have coinsurance and copays costs associated with the treatment you receive. The amount you pay will depend on the terms of the plan and if you receive care in or out of your plan’s network.