Summary: When evaluating Medicare Advantage plan costs, don’t stop at Medicare Advantage plan premiums. Understand the out-of-pocket costs for each plan you’re interested in as well as plan benefits. Then estimate total Medicare Advantage costs for the plans of interest based on your health care needs.

Medicare Advantage cost is probably a top consideration when you are choosing a Medicare Advantage plan. Medicare Advantage plan’s cost differs from one plan to another.

Medicare Advantage plans must provide coverage that is at least equivalent to Medicare Part A and Part B. They can set their own premiums and design benefits with different cost-sharing features. They can also include extra benefits not available under traditional Medicare. These factors affect Medicare Advantage plan costs.

Where do you start to compare Medicare Advantage plan costs?  

A good place to start comparing Medicare Advantage plan costs is with the premium. Comparing premiums is pretty straightforward. Some Medicare Advantage plans have no premium. Others charge a monthly premium. The premium varies from one plan to another. According to the Centers for Medicare & Medicaid Services (CMS), the average Medicare Advantage plan premium in 2019 was $28 per month.

Resist the temptation to select a Medicare Advantage plan because it has the cheapest premium. Premium-related Medicare Advantage costs are just one piece of the Medicare Advantage cost assessment.

What is cost-sharing and how does it affect Medicare Advantage plan costs?

Deductibles, copayments, and coinsurance are ways that Medicare Advantage plans share cost with members of their plans. The amount you pay for Medicare Advantage deductibles, copayments, and/or coinsurance varies by plan.

  • A deductible is the amount you must pay for care before the plan starts to pay. Some Medicare Advantage plans have no deductible. When applicable, the deductible is usually an annual amount. It doesn’t apply to preventive care the Medicare Advantage plan pays in full (100%).
  • A copayment is a fixed fee you pay for a medical service, such as a $20 copayment for a doctor visit.
  • A coinsurance is a percentage of the fee you pay for a medical service or a prescription drug if you select a Medicare Advantage Prescription Drug plan.

You can compare the deductibles, copayments, and coinsurance from one plan to another for the health services and medications you use. This will give you a better understanding of a Medicare Advantage plan’s cost based on your estimated out-of-pocket expenses. It could also help you evaluate a $0 premium Medicare Advantage plan’s costs if it has relatively high deductibles and copayments compared to a Medicare Advantage plan with a premium.

All Medicare Advantage plans put a cap on your out-of-pocket cost for deductibles, copayments, and coinsurance during a year. This maximum out-of-pocket limit can’t be higher than $6,700 in 2020 for in-network medical care. Plans can set lower limits and reduce your potential Medicare Advantage cost. If you reach the spending limit, the plan pays covered services in full for the rest of the year.

Understanding cost share and its limits takes you another step further in comparing Medicare Advantage plan costs.

How do benefits influence Medicare Advantage plan costs?

Consider plan benefits and whether they match your health care needs when calculating Medicare Advantage plan cost.

Do you need prescription drug coverage? A Medicare Advantage prescription drug plan’s costs are usually lower than staying with traditional Medicare and purchasing a stand-alone Medicare Part D Prescription Drug Plan. Check the Medicare Advantage prescription drug plan’s list of covered prescription drugs (formulary) to make sure your medications are covered and know what your cost-share will be.

Many Medicare Advantage plans’ costs cover benefits for routine dental, vision, and hearing care. Consider what these services would cost you if you had to pay or purchase separate insurance.

Some Medicare Advantage plans’ costs include additional benefits such as transportation to and from doctor visits or over-the-counter health supplies. Some plans offer gym membership discounts and access to nurse advice centers. You may find the savings you could get from extra benefits offset other Medicare Advantage plan costs.