As long as we are talking about premiums we can say that some Medicare Advantage plans are free. However, if we are talking about out-of-pocket costs, there are costs to consider. There is no such thing as a totally free Medicare Advantage plan. You’ll always be paying at least out-of-pocket cost-sharing. Although since that will be obvious to most people, we can safely say there are indeed premium-free Medicare Advantage plans.
Is Medicare Advantage Free?
Thus it if we are talking about the monthly premium costs, then yes, some Advantage plans are free (this can even be true for Advantage plans with drug plans and other benefits like vision and dental). However, if we are talking about all costs, then no Advantage plans are free (as all plans have cost-sharing).
TIP: It is important to understand that some people will get a better value out of a higher premium Advantage plan, as they tend to offer more benefits and better cost-sharing. This is especially true for those who utilize more healthcare services on a regular basis.
FACT: Medicare Advantage is also called Medicare Part C.
How Can Medicare Advantage Plans Be Free? How Do $0 Medicare Plans Make Money?
Advantage plans are sold by private insurers. The main stipulation of offering a plan is that it must cover at least what Original Medicare Part A and Part B cover. In return, the insurer is paid a flat fee by Medicare for each person they offer coverage to. When a plan is profitable under this model, it allows insurers to pass some of the savings along to beneficiaries in terms of lower premiums, which in turn allows them to offer $0 plans and still profit.
FACT: Did you know standalone Part D plans can be premium-free as well if your income is low enough to qualify for Extra Help due to the way cost assistance works with Medicare? Medicare Part A can be premium-free as well based on income.
Why Get a $0 Premium Plan
$0 premium plans are a great alternative to Original Medicare if you are healthy and don’t use a lot of healthcare services (as your out-of-pocket spending will be low, so your out-of-pocket cost-sharing isn’t a big concern). This is especially true due to the fact that there are limited options for when to enroll in Medicare Advantage plans but many options for when to change plans down the road. This is also especially true for plans that include drug plans since forgoing part D drug coverage can otherwise result in late enrollment penalties down the road.
The bottom line is, $0 premium plans are an inexpensive way to maintain coverage while offering more flexibility and avoiding late enrollment penalties. They make a lot of sense if you won’t use a lot of services, but if you know you will have a decent amount of health and/or drug spending, you may want to look at the higher-premium alternatives.