What Are the Costs for Medicare Advantage Plans?

checkmark Fact checked Contributing expert: Roseann Birch; Reviewed by: Leron Moore - Published: September 14, 2020

What You Should Know

  • 1 The cost of a Medicare Advantage plan depends on the insurance company, the type of plan, and the benefits offered. It’s important to shop around and consider how you might use the plan and estimate your overall costs.
  • 2 More than 90% of beneficiaries have access to at least one plan in their service area with no monthly premium.
  • 3 Overall, the average monthly premium for a plan with prescription drug coverage is $36 in 2020.
  • 4 In 2020, the average out-of-pocket limit was $4,925 for in-network services through an HMO or PPO and $8,828 for out-of-network services through PPOs.

When it comes to selecting a Medicare Advantage plan, you have a lot to consider. You need to find the right mix of benefits to match your particular healthcare needs, but you also want to minimize your out-of-pocket expenses and ensure your overall Medicare Advantage plan cost is as low as possible.

Some Medicare Advantage plans have no monthly premium, but charge more when it comes to cost-sharing. Others have higher monthly premiums but may absorb more of the cost of treatment when you receive it. There are also differences in deductibles and annual caps on out-of-pocket spending.

This article provides an overview of the Medicare Advantage plan costs you’re likely to encounter to help you research your healthcare options. 

How Much Does a Medicare Advantage Plan Cost?

Medicare Advantage plans, also known as Medicare Part C, are a type of health plan provided by private insurance companies. They offer consumers a choice in the way they receive health benefits, so people can select the optimal coverage for their needs.

All Medicare Advantage plans must provide the same coverage as Original Medicare Part A (hospital insurance) and Part B (medical insurance). They may also offer supplemental health benefits, such as prescription drugs, vision, dental, and hearing. Consumers must choose from plans available in their service area.

What’s Included in Your Medicare Advantage Plan Cost

The cost of a Medicare Advantage plan depends on the insurance company, the type of plan, and the benefits offered. It’s important to shop around and consider how you might use the plan and estimate your overall costs.

Generally, beneficiaries are asked to pay:

  • Plan B premiums to Medicare: The standard Plan B premium is $144.60 in 2020. 
  • Plan C premiums: This is a monthly payment to a private insurance company for your Medicare Advantage plan, although some policies have no premium.
  • Deductibles
  • Cost-sharing including copayments and coinsurance

Medicare Advantage Plan Premiums

The monthly premiums charged by Medicare Advantage plans vary. More than 90% of beneficiaries have access to at least one plan in their service area with no monthly premium.   

About 60% of Medicare Advantage plan subscribers choose a plan without a monthly premium, according to the Kaiser Family Foundation. For those who pay premiums, the average cost is $63 per month in 2020. 

Here’s a breakdown of premium amounts paid by Medicare Advantage subscribers in 2020:

  • No premium (60%)
  • Less than $20 per month (5%)
  • $20 to $49 per month (17%)
  • $50 to $99 per month (12%)
  • More than $100 per month (6%)

Overall, the average monthly premium for a plan with prescription drug coverage is $36 in 2020.

Some plans with no monthly premiums may have higher cost-sharing. Other plans with higher monthly premiums may cover more of the costs at the time you receive services. If you anticipate needing regular treatment, a higher monthly premium may make sense if more of your per-service costs are covered. 

Other Costs

In addition to monthly premiums, you should consider how much you’re asked to pay for healthcare services. 

Here are some of the costs you should be aware of:

  • Deductibles are the amount a beneficiary must pay before the insurance plan begins its coverage. There may be an annual deductible and deductibles that apply to specific services.
  • Coinsurance is the percentage of a claim that a beneficiary must pay when receiving a service. For example, you may be required to pay 20% of each prescription drug.
  • Copayments are a dollar amount a beneficiary must pay when receiving a service. For example, you may need to pay $10 per doctor visit.

How Do I Compare Medicare Advantage Plan Costs?

Here are some factors to consider when you compare Medicare Advantage plans.

Which Benefits Do I Need?

Think about the benefits you would use under each plan and your potential savings.

  • Do you anticipate needing regular treatment or services? If so, how much are you paying for each visit?
  • Would you use an out-of-network doctor, and if so, what is the added cost?
  • Is there prescription drug coverage, or do you need to purchase a separate Medicare Plan D?
  • If you’re taking regular medications, what are your prescriptions costs under each plan?
  • Do you see a dentist regularly? What does it cost for routine cleanings under each plan?
  • If you’re unlikely to use a benefit, such as a fitness membership or non-emergency transportation, is there a plan without the benefit that may be cheaper?

Estimate Your Expenditures

Once you’ve assessed which benefits you’re likely to use, compare the cost of each Medicare Advantage plan by estimating your expenditures based on your anticipated healthcare needs. Take into consideration:

  • Monthly premiums for Part B and C. Some Medicare Advantage plans may provide a Part B premium reduction.
  • The annual deductible that you must pay before the plan begins payment.
  • Estimated copayment or coinsurance for doctor’s visits, prescription drugs, and other benefits. Don’t forget there may be a deductible for specific services.

The plan’s cap on out-of-pocket costs is also important. All Medicare Advantage plans must set a limit on out-of-pocket expenditures for Part A and B services. Once you’ve reached this maximum, the plan can’t charge you anything additional for these services. 

In 2020, the average out-of-pocket limit was $4,925 for in-network services through an HMO or PPO and $8,828 for out-of-network services through PPOs.

While a plan without a premium may seem like the most cost-effective option at first glance, these plans may end up costing more in the long run, depending on your needs. If you anticipate seeing a physician regularly or needing frequent treatment, a plan with a lower out-of-pocket limit could save you money over the long-term.

Medicare offers an online tool to help compare Medicare Advantage plans in your service area.

Can I Get Payment Assistance for Medicare Advantage?

If you have limited resources and are below certain income limits, you may qualify for assistance from your state’s Medicaid program.

Medicare Savings Account (MSA) Plans

Medicare Savings Programs provide eligible beneficiaries with a health plan that has a high deductible and a bank account. Funds are deposited into the bank account that can be used to pay for healthcare services, which may include some of your Part A and B premiums, deductibles, coinsurance, and co-payments. 

Dual-Eligible Special Needs Plans

Special Needs Plans are a type of Medicare Advantage plan that limits enrollment to individuals with chronic health conditions or other high needs. Dual-Eligible Special Needs Plans are designed for those who qualify for Medicare and medical assistance from a state plan under Medicaid. These plans may cover some Medicare costs, but eligibility varies by state.

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Contributing Expert:

Roseann Birch, Medicare Consultant

With experience in the insurance field since 1986, Roseann Birch is a seasoned Medicare consultant who is passionate in educating and guiding seniors through their Medicare and Medicare Advantage journey.

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Reviewed by:

Leron Moore, Medicare Consultant

With over 10 years of experience in the Medicare industry, Leron Moore has dedicated his career to effecting change, educating, informing, and resolving issues for Medicare patients and their families.