Medicare Annual Enrollment Period: October 15 - December 7

Are $0 Premium Medicare Advantage Plans Free?

Medicare Advantage plans are increasingly gaining popularity. In 2020, 60% of enrollees who were in a Medicare Advantage plan were enrolled in a ‘$0 premium’ plan. But are $0 (‘zero-dollar’) premium Medicare Advantage plans really free?
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Medicare Advantage plans (also known as Part C plans) are bundled ‘all-in-one’ alternatives to Original Medicare that provide the same coverage as Medicare Part A and Part B, and often include additional coverage such as Part D prescription drug coverage and extra benefits.  Some plans are advertised as ‘$0 premium’ plans but are these Medicare Advantage plans really free?

Are $0 premium Medicare Advantage plans free?

When insurance companies reference a ‘$0 premium’ plan, they are referring to the fact that the plan requires no additional premium to be paid above the standard Medicare Part B premium ($170.10 in 2022).  However:

$0 premium plans are not completely free.  You are still responsible for out-of-pocket costs and the standard Part B premium.  

Beneficiaries generally must pay the standard Part B premium regardless of if they receive Medicare through Original Medicare or Medicare Advantage.

Nearly two-thirds (65%) of Medicare Advantage plan beneficiaries in 2021 were enrolled in $0 premium plans.

What do $0 premium Medicare Advantage plans cost?


Premiums are a monthly amount you pay an insurance company to have insurance in place whether you use any covered services or not. As mentioned above, $0 premium plans refer to the fact that there is zero additional premium to be paid on top of the standard Medicare Part B premium ($170.10 in 2022).

Deductibles, Copays and Coinsurance

Even if you are in a $0 premium plan, you are still responsible for out-of-pocket costs such as deductibles, copays, and coinsurance, as specified under each plan’s benefit details.

Deductible:  A deductible is an amount you pay for medical services before the Medicare Advantage plan begins to help pay for services. For example, if you have a $500 deductible, you must first pay $500 for medical services out of pocket before your Medicare Advantage plan will help cover your expenses.  Medicare Advantage plans may have $0 medical deductibles and/or $0 prescription drug deductibles but this varies depending on the plan.

Copayments / Coinsurance: this is a dollar amount (copayment) or percentage share (coinsurance) you pay to receive service after you have reached your deductible amount.

For example, a PPO plan may have a $10 copayment for an in-network doctor visit and 33% coinsurance amounts for out-of-network doctors. This means that you will pay $10 every time you see an in-network doctor regardless of who you see, as long as they are in-network. However, if you decide to see a doctor out-of-network the ultimate cost to you may vary depending on what the doctor charges. For example, if an out-of-network doctor charges $100, you will be responsible for $33 ($100 x 33%) but if another doctor charges $110 then you will pay $36.30 ($110 x 33%).

If there is a $0 premium then what is the catch?

While $0 premium plans can be an attractive option, depending on your health condition and usage of health services, you could potentially end up spending more with a $0 premium Medicare Advantage plan than for a Medicare Advantage plan with a higher monthly premium because of your out-of-pocket costs or out-of-pocket maximum.

Out-of-Pocket Costs

Similar to other insurance you may purchase such as auto or home insurance, in return for receiving a higher monthly premium, insurers will typically lower your out-of-pocket costs (deductibles, copays, and coinsurance) if you do happen to make a claim.

A similar dynamic exists with Medicare Advantage plans. In return for a monthly premium, you may have lower out-of-pocket costs (deductibles, copays, and coinsurance) when you use services such as medical, hospital, prescription drugs (if your plan includes Part D), and extra benefits.  Depending on how often you use services, your out-of-pocket costs may accumulate to a level that outweighs the benefit of a $0 premium plan.

Out-of-Pocket Maximum

Another factor is your Medicare Advantage plans’ ‘out-of-pocket maximum’ limit. By law, every Medicare Advantage plan, including $0 premium plans, must have an out-of-pocket maximum.  In 2022, the absolute maximum out-of-pocket for in-network services is $7,550 and $11,300 for out-of-network services.

These limits are the maximum total cost you have to pay out of pocket for Medicare-covered services in any year.  Once you have reached these limits within a calendar year, you will no longer be obligated to pay for additional covered medical services that year and the plan will be responsible for all costs.

You may find that if you pay a higher monthly premium that your maximum out-of-pocket cost is lower than the a $0 premium plan. For example, a $0 premium plan may have a maximum out-of-pocket is $7,550 for in-network services (the maximum allowable by law), however, if you select a plan that requires a $40 premium your maximum out-of-pocket might be a lower amount, such as $4,900.

Final Words

In 2021, 65% of Medicare Advantage beneficiaries were enrolled in a $0 premium plan.  $0 premium plans refer to the fact that you have no additional premium obligation outside of the standard Medicare Part B premium.

While $0 premium plans can often be a great choice for someone who does not use extensively use health services.  However, if you require more frequent health services and/or significant prescription drug costs, it is worthwhile investigating a Medicare Advantage plan with a higher monthly premium as you may end up in a better position overall with lower out-of-pocket costs.

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