Medicare Advantage Costs

Medicare Advantage, also known as Medicare Part C, are plans offered by private insurance companies contracted with Medicare and provide at least the same level of coverage that Original Medicare provides for both inpatient (Part A) and outpatient (Part B) services. Medicare Advantage is provided, most typically, as a type of “managed care” plan, such as an HMO (health maintenance organization) or PPO (preferred provider organization), similar to the plans you or your spouse or partner may have had through an employer. The cost sharing of Medicare Advantage plans varies based on a number of factors including the plan you choose, location, and risk factors. Before we dive into the cost of Medicare Advantage plans, let’s first begin with the basic definitions of cost components. 

Premiums

A premium is what you pay to purchase your health insurance. Premiums are a routine cost, typically paid on a monthly basis (versus charges like copays or coinsurance that are paid only when you receive care). You can think of a premium as being like a membership fee, giving you access to all of the benefits that the health plan provides.

Deductible

A deductible is the amount that you are obligated to pay for covered services before your insurance starts paying. Generally, plans with higher deductibles have lower premiums and plans with higher premiums have lower deductibles. Accordingly, it may be worth considering how your healthcare use patterns (e.g., number of hospital visits, inpatient stays, etc.) may affect your maximum out-of-pocket (MOOP) costs (see below).

Copays, Coinsurance, and Out-of-Pocket Costs

In addition to premiums, your individual costs will vary depending on how you access care. Depending on the Medicare Advantage plan you choose, you may have additional cost-sharing responsibilities and the amount you have to pay will vary depending on the plan you choose. To learn a bit more about how the costs could vary, check out our Choices Table. The Medicare Advantage plan network may vary depending on where you live and if it is a Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO). Remember, receiving services that are in-network will keep your out-of-pocket costs—like your copay and coinsurance—lower than if you went out-of-network.

Copay

A copay (or copayment) is a fixed amount that you pay when you receive services. Copay charges typically occur after you’ve met your deductible. In some plans, copays can be different for different services, such as $20 when you see your primary care doctor and $50 when you see a specialist.

Coinsurance

Coinsurance is the percentage of costs that you pay for covered services after you’ve met your deductible. For example, in a plan that has 20% coinsurance, you would be responsible for 20% of your covered costs (with your plan paying the other 80%).

Maximum Out-of-Pocket 

The maximum out-of-pocket (MOOP) is the most you’ll pay in any given year for your medical services. Medicare Advantage (Part C) plans typically offer lower premiums and have a fixed cap on out-of-pocket expenses. However, there are limitations, particularly in the network of doctors you can access. It’s important to note that MOOP is related to your medical costs and is different from the true out-of-pocket (TrOOP) costs, which is associated with your prescription drug coverage. In 2024, the Medicare Advantage MOOP is $8,850.

Frequently Asked Questions

What Is the Average Medicare Advantage Premium? 

The average Medicare Advantage premium changes year over year. The 2024 average Medicare Advantage premium is approximately $18.50 per month. The Medicare Advantage premium varies based on where you live and the type of Medicare Advantage plan you choose. Some Medicare Advantage plans have $0 premiums while others have $100 premiums. Typically, plans with a higher premium will provide extra benefits such as routine vision, dental, hearing, and more. 

Do I have to pay a Medicare Part B Premium and Medicare Advantage Premium? 

Yes, you are required to pay the Medicare Part B premium in addition to your Medicare Advantage premium. As we stated previously, some Medicare Advantage plans have a $0 premium while others may cost more. In this case, you would only pay the Medicare Part B premium. 

What Is Organization Determination? 

If you need a service that the plan says isn’t medically necessary, you may have to pay for all of the costs associated with the service. But, you also have the right to appeal the decision.

If you have a Medicare Advantage Plan, you have the right to an “organization determination” to see if a service, drug, or supply is or should be covered, based on your circumstances. Contact your plan to get one and follow the instructions to file a timely appeal. You also may get plan directed care. This is when a plan provider refers you for a service or to a provider outside the network without getting an organization determination in advance.

You don’t have to pay more than the plan’s usual cost-sharing for a service or supply if a network provider didn’t get an organization determination and either of these is true:

• The provider gave you or referred you for services or supplies that you reasonably thought would be covered.
• The provider referred you to an out-of-network provider for plan-covered services.

How Does Medicare reimbursement Work?

Typically, if you receive care from a provider who accepts Medicare or if you are part of a Medicare Advantage plan, all payments to the provider (referred to as Medicare reimbursements) are handled by the insurer or by the Centers for Medicare & Medicaid Services (CMS). At the point of service, you should only have to pay the provider your share, which may be a co-payment or a co-insurance amount, depending on the service and the terms of your plan. To learn more about how Medicare reimbursement, including how rates are set, read our article.

It is important to remember that your cost sharing will vary depending on how you access Medicare (i.e., with or without a Medicare Supplement plan or through a Medicare Advantage plan). You can see more about how these choices compare in our Medicare Choices page.

Low-Income Subsidy (Medicare “Extra Help”)

People with Medicare who have limited income and assets may qualify for the Low-Income Subsidy (LIS), also known as “Extra Help”, which can help with the costs of their prescription drugs. The Social Security Administration (SSA) and the Centers for Medicare & Medicaid Services (CMS) work together to provide the benefit.

Some people get Extra Help automatically. These include people who are enrolled in both Medicaid and Medicare (often called dual eligibles), those receiving Supplemental Security Income (SSI), and those who qualify for a Medicare Savings Program (MSP).

Anyone else who is not already enrolled in the benefits noted above must apply to the Social Security Administration to receive Extra Help.

How Does Extra Help Work?

The amount of Extra Help a beneficiary receives depends on their income and resources. Beneficiaries will receive either a full-subsidy or a partial-subsidy. Most people who qualify for Extra Help will pay:

• No premiums,
• No deductibles (unless receiving the partial subsidy), and
• No more than $11.20 in 2024 for each brand-name drug their plan covers and no more than $4.50 for each generic.

In addition to lower out-of-pocket costs, beneficiaries with Extra Help have the following protections:

• A quarterly Special Enrollment Period (one time every three months between January – September and once during Annual Open Enrollment) to join or switch Medicare Part D drug plans during the year. These opportunities allow people who get Extra Help to not wait for the Annual Open Enrollment Period (Oct. 15 – Dec. 7) to change plans. Any plan changes made outside the Annual Open Enrollment Period will become valid for the following month.
• No Part D late enrollment penalty, even if the beneficiary enrolls late (that is, after they were first eligible to join a Part D plan and if they did not have other drug coverage).

How Do I Apply for Medicare Extra Help?

To apply for the Medicare Low-Income Subsidy (LIS), you’ll need to fill out an “Application for Extra Help with Medicare Prescription Drug Plan Costs” (SSA-1020) form with the Social Security Administration (SSA). You can apply and submit this form by:

• Applying online.
• Calling Social Security at 1-800-772-1213 (TTY 1-800-325-0778) and requesting an application be mailed to you or applying over the phone. Social Security representatives are available by phone Monday through Friday, from 7AM to 7PM.
• Applying in person at your local Social Security office.

After you submit your application, the Social Security Administration will review it and send you a notification in the mail if you are eligible. If you qualify for Extra Help and are not yet enrolled in a Medicare Part D Prescription Drug Plan, you can enroll in a plan at that time.