Why is some Medicare Advantage plans free?
Why is some Medicare Advantage plans free? Medicare Advantage (MA) plans, also known as Medicare Part C, are an alternative way to receive Original Medicare benefits. Like Original Medicare, MA plans provide Part A and Part B coverage but are administered by private health insurance companies rather than the federal government. Some MA plans also include Part D (prescription drugs) and additional benefits, such as vision, teeth, and hearing.
If you choose to sign up for an MA plan, you must pay the MA plan premium and the Part B premium. However, some MA plans are free and will also pay all or part of the Part B premium for you. You may be wondering how they can afford to do this and if it makes sense to sign up for a “free” Medicare Advantage plan.
Why are some Medicare Advantage plans free?
Some MA plans do not charge any premiums and may even pay part or all of the Part B premium, also called the “Medicare Part B Premium Reduction.” How the plans can do this depends on how much it costs them to provide services and, to a lesser extent, the star of the rating plan. But it doesn’t depend entirely on the individual plan – the process is highly regulated.
Each year, Medicare Advantage plans determine how much it will cost to provide care to their members. They submit this amount, or an offer, to the Centers for Medicare and Medicaid Services (CMS), which then reviews the offer against a benchmark. This benchmark is calculated based on the average Medicare spending per beneficiary for a specific region or area. If the plan’s offering falls below the benchmark, the plan cannot charge a premium.