Free Medicare Advantage Plans? They May Not Be What They Seem

Can Medicare Advantage plans really be free? You may not have to pay a premium, but you'll definitely be paying for something, no matter what supplement you choose.

By Andrea Bonner

Updated September 1, 2020

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Key Takeaways:

Many Medicare Advantage plans have $0 premiums, but that doesn't mean they're free.
Medicare Advantage plans make up for their $0 premiums in a variety of ways — and some of them can be expensive for plan members.
The best time to sign up for a Medicare Advantage plan is during your Initial Enrollment Period.
If you want to change your Medicare Advantage plan to a different one — premium-free or otherwise, you can do so during the Medicare or Medicare Advantage Open Enrollment Periods.

If you're researching Medicare plan options, premium-free Medicare Advantage plans have likely caught your eye. You may have even wondered, "Why are some Medicare Advantage plans free?" After all, who could argue with paying zero dollars per month for extra Medicare benefits?

But as the old saying goes, there's no such thing as a free lunch, and "free" Medicare Advantage plans are no exception.

What's the catch? Keep reading to find out what "free" really means, and how much Medicare Advantage could actually cost you.

Do Free Medicare Advantage Plans Really Exist?

The concept of "free" Medicare Advantage is a misnomer. Yes, there are Medicare Advantage plans with $0 premiums. This means you pay nothing extra each month to join the plan.

But it doesn't mean that the plans won't cost you anything, ever. There is still an element of cost-sharing, just like there is with Original Medicare.

Reminder: A Medicare Advantage plan replaces your Original Medicare coverage and often includes benefits that Original Medicare doesn't cover.

Original Medicare Costs

Original Medicare beneficiaries are responsible for a variety of out-of-pocket costs that can really add up. These include:

Premiums — While many beneficiaries qualify for a free Part A premium, if you don't, the cost could be as high as $458 per month.

The standard Part B premium could be anywhere from $144.60 to $491.60, depending on your income.

Deductibles — The Part A deductible will run you a minimum of $1,408 per benefit period. A benefit period begins the day you're admitted for inpatient care and ends when you haven't received inpatient care for 60 days in a row. You could have multiple benefit periods in a year, with a new deductible for each one.

The standard Part B deductible is more manageable, at $198 per year.

Coinsurance — After you've paid your deductible, your Part A costs could skyrocket depending on the length of your hospital stay. For stays over 90 days, you could end up paying 100 percent of your healthcare costs.

For Part B, you're responsible for 20 percent of your healthcare costs after you've met the deductible. Medicare will pay the other 80 percent.

When you consider that there is no cap (annual limit) on what you could owe under Original Medicare, a Medicare Advantage plan starts sounding like a pretty good deal. That seems especially true when you search for plans in your area, and see plans — possibly many plans — with $0 premiums.

How Can Medicare Advantage Plans Have Free Premiums?

Medicare Advantage plans contract with Medicare to provide coverage at a flat rate. If the plan can provide coverage for less than that rate, the plans can pass the savings on to members. Therefore, $0 premiums may be offset by other costs. For example:

Your deductible may be higher, and you may have separate medical and drug deductibles.
Your copays and/or coinsurance may be higher.
Your provider choice may be limited, and it could cost you much more money if you want to see a provider who is out-of-network.

Types of Premium-Free Medicare Advantage Plans

There are literally thousands of Medicare Advantage plans, but they fall into a few main categories:

Health Maintenance Organizations (HMOs) — These plans cover care from in-network doctors and providers only (excepting emergency care).
Preferred Provider Organizations (PPOs) — These plans charge different rates for in-network and out-of-network care. The out-of-network rate can be significant.

Private Fee-for-Service (PFFS) — These plans may either offer provider networks or offer more flexible provider choices. Providers can determine whether or not to accept the plan's patients.
Special Needs plans (SNPs) — These plans are tailored to patients with particular disease, disability, or set of medical conditions.
Medicare Medical Savings Accounts (MSAs) — These plans combine a high deductible health plan with a medical savings account. Enrollees usually have high out-of-pocket costs before they reach their deductible.

The types of plans available to you will differ depending on your location, but the type of plan won't affect whether or not it will have a free premium. You're likely to find plans in all of these categories offering $0 premiums.

When Can You Change Your Medicare Supplement Plan?

If you are enrolled (or soon to be enrolled) in Medicare, you are eligible for any of the Medicare Advantage plans that are available in your area. The cost of the plan's premium has no effect on your eligibility.

If you are new to Medicare, you can sign up for a premium-free Medicare Advantage plan during your Initial Enrollment Period. Your IEP is seven months long: It begins three months before the month you turn 65, includes your birthday month, and ends three months after your birthday month.

If you want to purchase a Medicare Advantage policy, this is the best time to do so. Why?

You'll typically enjoy lower prices and more choices among policies.
You won't be subject to underwriting — insurers can't reject you or charge you more if you have health problems.

Change Your Medicare Advantage Plan during Open Enrollment

If you are already enrolled in a Medicare Advantage plan, but want to change to a premium-free plan, you can make that change during the Medicare Open Enrollment Period — from October 15 to December 7 each year. You can update your Medicare Advantage plan in the following ways:

Switch from Original Medicare to Medicare Advantage
Switch from Medicare Advantage back to Original Medicare
Change to a different Medicare Advantage plan

Open Enrollment for Medicare Advantage

This period runs from January 1 to March 31 of each year, and applies to Medicare Advantage only. During this period you can:

Switch from one Medicare Advantage plan to another Medicare Advantage plan.
You can drop your Medicare Advantage plan and return to Original Medicare.

You can't:

Medicare Advantage Special Enrollment Periods:

You can also make changes to your Medicare Advantage coverage during Special Enrollment Periods (SEPs) — as long as you meet the eligibility requirements. Here are three of the most common reasons for Special Enrollment Periods:

You move to a location where your current plan isn't available.
You lose coverage involuntarily (from Medicaid, an employer, etc.).
Your plan is no longer available (Medicare has terminated its contract with your plan).

Many Medicare Advantage plans advertise $0 premiums, but none of them are truly free. You will still be responsible for out-of-pocket costs that can add up, depending on your health situation.

That doesn't mean signing up for a premium-free Medicare Advantage plan is a bad idea. In fact, depending on your specific healthcare needs, it might be a great choice. Just don't let the "free" part distract you from the real costs of the plan.

Andrea Bonner is a healthcare writer with more than 10 years of experience covering senior health. She is from the Raleigh-Durham area in North Carolina.