How Do Medicare Advantage Plans Make Money?

If you’re getting ready to sign up for Medicare, you have two paths to consider. One is signing up for Original Medicare and adding a Medicare Supplement along with a Part D drug plan. The other option is to choose a Medicare Advantage plan.

We have resources on our website to help you choose between these. You can also call our office to connect with a local agent – they will help you decide. But what we want to talk about today is how these Medicare Advantage plans work.

If you’ve shopped around for one before, you might’ve noticed there are some options with a $0 monthly premium. A lot of people wonder how these plans can do that –how are MA making any money if they don’t have a premium?

Disclaimer: We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.

How Medicare Advantage Plans Make Money (Video)

CMS Pays Medicare Advantage Plans

Medicare Advantage companies have a contract with the federal government.

Medicare pays these private companies to take on the risk of its policyholders. So, instead of Medicare paying for your claims, they pay the insurance company to manage them.

Medicare Advantage plans are managed care, which means you might need prior authorization for a medication, you may need a referral to see a specialist, and you may have to try a cheaper treatment plan before your plan will approve a more expensive one. That’s how Medicare Advantage plans manage their costs.

Most Medicare Advantage plans are paid enough by the government to offer very low – sometimes even $0 premium plans – in addition to extra benefits that go above and beyond what Medicare regularly covers. For example, you might get some dental, vision, and fitness benefits.

How Much Does Medicare Pay MA Plans?

The exact amount Medicare pays these private carriers gets a bit complex, but it’s based on a bidding process and a risk adjustment. The funding is different for each county.

Medicare is mainly funded by payroll taxes, so ultimately, all of us are funding the Medicare Advantage plans that offer a $0 monthly premium.

Conclusion

I hope that shines some light on how Medicare Advantage plans work – and how some plans even have $0 monthly premiums. If you have any questions about the options in Macon County, Illinois or surrounding areas, give us a call at 217-423-8000!