Medicare Advantage plans are popular among seniors because they offer additional benefits such as prescription coverage, vision care, dental care, and hearing aids. These plans also tend to be much lower in price than other types of Medicare coverage, like Medigap (Medicare supplement) plans.
Now, Medicare Advantage plan premiums are at an all-time low. Back in 2017, premiums were predicted to drop 34.2% by 2021 while the plan choices, benefits, and enrollment numbers of Medicare Advantage plans continued to increase. That prediction is exactly what happened. The average monthly premium for a Medicare Advantage plan is the lowest it has been in 14 years – since 2007. There are an estimated 26 million Medicare beneficiaries enrolled in a Medicare Advantage plan.
These numbers represent a significant decrease in the cost of Medicare Advantage plans.
But why? How can insurance companies offer these low deductibles to their members? First, let’s talk about how these plans are funded and then discuss what premiums currently look like in one of these plans.
How are Medicare Advantage plans funded?
There are some Medicare Advantage plans that have a $0 premium. This is made possible because of how the plans are structured.
If a Medicare beneficiary chooses to enroll in a Medicare Advantage (also called Medicare Part C) plan, their coverage will no longer come directly through Original Medicare and the federal government. Instead, private insurance companies offer Medicare Advantage plans.
The Medicare program then pays Medicare Advantage plan insurance carriers a set amount for each of their members. The amount is determined by an annual process during which the company submits “bids” for how much they estimate it will cost to provide the same benefits as Original Medicare for the average beneficiary.
Why are Medicare Advantage premiums decreasing?
According to studies, the Medicare program spent $321 more per Medicare Advantage beneficiary than it would have if those same individuals had been enrolled in Original Medicare in 2019. The total spent per person in Original Medicare would have been $11,523. However, Part C members averaged $11,844 per person. These payments to Medicare Advantage plans are coming from the federal program, not the beneficiaries themselves.
This growth is expected to continue as more and more Medicare beneficiaries enroll in a Part C plan. From 2021 to 2029, the Medicare program is expected to increase from $348 billion to $664 billion – a jump of $316 billion. This does account for inflation, but $208 billion is the growth of payments per enrollee and growth of enrollments.
Increased payments by the federal government to private insurance companies allow these companies to pass that on to their members, who will enjoy even lower premiums and even more benefits.
How much do Medicare Advantage plans cost?
If you enroll in a Medicare Advantage plan, you’ll need to consider both your monthly premium and any deductibles, copays, or coinsurance costs. These vary depending on the specific plan you enroll in.
Here are a few things to consider when comparing plans.
The monthly premium.
Some plans are premium-free, but that does not apply to every plan. Whether you pay a premium for your Part C plan or not, you will still need to pay the monthly premium for Medicare Part B. (You’ll also need to pay the premium for Medicare Part A if you have not met the qualifications that make Part A premium-free.)
That being said, some Advantage plans do pay for some of your Part B premium. They do this in the form of a “Part B reduction” benefit.
The annual deductibles.
You’ll need to know if the plan has an annual deductible and if there are any additional deductibles. For instance, if your plan offers dental coverage, there may be a separate deductible for those services.
The copayment or coinsurance.
The copayment or coinsurance is the amount you will pay for each visit to your provider. For instance, the plan may have a $10 or $25 copay for each appointment. These copays may be different than the ones dictated by Original Medicare.
The type of healthcare services offered.
Your cost in a Medicare Advantage plan will also be based on the type of healthcare you need. Someone who rarely visits the doctor and is generally healthy is going to pay less than someone who has frequent visits and is being treated for a condition.
The type of plan.
There are five types of Medicare Advantage Plans.
- Health Maintenance Organizations (HMOs)
- Preferred Provider Organizations (PPOs)
- Private Fee-for-Service Plans (PFFSs)
- Medicare Savings Account Plans (MSAs)
- Special Needs Plans (SNPs)
Your cost will first depend on which type of plan you choose and then whether or not you receive care from a provider or hospital in the network of that plan. Going outside a plan’s network will cost individuals more.
The plan’s out-of-pocket limit.
Unlike Original Medicare Medicare Advantage plans have an out-of-pocket limit for covered medical services. The total amount of your out-of-pocket expenses will depend on what that limit is.
It’s important to remember that Medicare Advantage plans change each year. Every fall, you’ll need to review the upcoming changes to your plan and decide if you need to find a new plan.
What’s the catch?
No Medicare Advantage plan is 100% free. There are still deductibles and copays for services, and individuals will still have to pay the monthly premium for Medicare Part B.
There are other considerations as well, and you’ll need to understand how Medicare Advantage plans work before enrolling in one. Regardless, Medicare Advantage plans offer a great value for a meager price.
Experienced Insurance Advisor and financial planner. Graduated from Webber International University with a Bachelor of Science in marketing and a Masters in Business Administration. Skilled in Public Speaking, Team Building, Management, Marketing, Direct Sales, and Strategic planning.