Why are some Medicare Advantage plans $0?

Costs and coverage—for most of us, when it comes time to choose a Medicare plan, those 2 factors are the bottom line.

You may be surprised to learn that some Medicare Advantage plans have a monthly plan premium of $0. That's right—zero dollars per month. And that usually includes coverage for services that aren’t covered under Original Medicare.

With Medicare Advantage plans, rather than pay your medical bills directly, the federal government contracts with private insurance companies to administer your plan. You still have all the rights and benefits that come with Original Medicare, but private insurers—like Humana—compete for your business with low premiums and added benefits.

Private insurance companies are able to offer zero-premium Medicare Advantage plans, in part, because:

  • To help manage costs, Medicare Advantage plans usually enter into contracts with a network of doctors and hospitals.
    • That means you may have to pay more money out of pocket if you see a doctor outside the plan’s network
  • Many Medicare Advantage plans offer preventive care and disease management programs to help people better manage their health, and healthy patients generally have lower healthcare costs.
  • If a particular Medicare Advantage plan ends up spending less than the flat fee it gets from the government, it can pass the savings on to members.
    • That may mean offering plans with a monthly plan premium of $0 or providing additional benefits, such as dental, vision and/or prescription coverage

So what’s the catch?

Of course, no Medicare plan is really free. You may still pay deductibles and copays for covered services and you’ll still have to pay the Part B premium. But depending on your own personal healthcare needs, a Medicare Advantage plan may be worth it for the added benefits.

Medicare Advantage plans also offer one level of predictability not available with Original Medicare: There’s a yearly limit on how much you’ll ever have to pay out of pocket.

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