Are Medicare Advantage Plans Really Free?

Medicare Advantage plans are offered by private insurance companies that contract with Medicare to provide Part A (Hospital Insurance) and Part B (Medical Insurance) benefits. These plans, sometimes called Medicare Part C, often advertise $0 monthly premiums. However, this can be misleading, as beneficiaries typically incur other expenses beyond a monthly premium. Understanding the full financial structure of these plans is important for anyone considering their healthcare coverage options.

Understanding Premiums

While some Medicare Advantage plans do not charge an additional monthly premium, beneficiaries are almost always still responsible for their Medicare Part B premium. For 2025, the standard monthly premium for Medicare Part B is $185.00. This amount is typically deducted directly from Social Security benefits.

Some Medicare Advantage plans may offer a Part B premium reduction, where the plan pays a portion of the Part B premium on behalf of the beneficiary. Even with such a reduction, the Part B premium remains a baseline cost that must be accounted for. Other Medicare Advantage plans may have their own additional monthly premium, which can range from $0 to over $200, with an estimated average of $17 per month in 2025. Roughly 60% of individuals enrolled in a Medicare Advantage plan are in a plan with a $0 premium in 2025.

Other Out-of-Pocket Expenses

Beyond premiums, Medicare Advantage plans involve various other out-of-pocket expenses that beneficiaries may incur when receiving care. One such expense is a deductible, which is the amount you must pay for covered services before your plan begins to pay. While some Medicare Advantage plans have no deductible, others may require you to meet one before coverage starts.

Copayments represent a fixed dollar amount paid for a covered service, such as a doctor’s visit or a prescription. For instance, a plan might require a $10 copayment for a primary care physician visit or a $50 copayment for a specialist. Coinsurance is a percentage of the cost of a covered service that you pay after meeting your deductible. An example might be paying 20% of the cost for a hospital stay or durable medical equipment. These deductibles, copayments, and coinsurance amounts vary significantly among different plans and depend on the specific services received.

The Maximum Out-of-Pocket Limit

Medicare Advantage plans include a maximum out-of-pocket (MOOP) limit, which serves as a financial safeguard against unexpectedly high medical bills. This limit represents the most a beneficiary will have to pay for covered Medicare Part A and Part B services in a calendar year. Once this spending cap is reached, the plan is responsible for 100% of the costs for covered services for the remainder of the year.

For 2025, the maximum out-of-pocket limit for in-network services in Medicare Advantage plans can be up to $9,350, though individual plans may set lower limits. This limit primarily applies to costs for covered Part A and Part B services. It generally does not include prescription drug costs (covered under Medicare Part D) or costs for out-of-network services unless the plan is a PPO with a combined in-network and out-of-network MOOP. The average out-of-pocket limit for in-network services in 2025 is approximately $5,320.

Evaluating Total Costs

Considering all financial components, no Medicare Advantage plan is truly without cost. A comprehensive evaluation of a plan’s total cost involves accounting for the Medicare Part B premium, any additional plan premiums, deductibles, copayments, and coinsurance. Prescription drug costs, if applicable, also contribute to the overall financial picture.

Plans with a $0 monthly premium often feature higher copayments or deductibles for services, meaning you pay more when you actually use healthcare services. Conversely, plans with a higher monthly premium might offer lower out-of-pocket costs when care is utilized. While many Medicare Advantage plans include “extra benefits” such as vision, dental, hearing, or fitness memberships, these are enhancements and do not eliminate core medical costs. The most suitable plan is not necessarily the one with the lowest or $0 premium, but rather the one whose combined cost structure, including premiums, potential out-of-pocket expenses, the maximum out-of-pocket limit, and included benefits, aligns best with individual health needs and financial considerations.