Medicare offers different health plans administered by private insurers. Medicare cost plans fall under this category, but they are not available in every state.
Under current Medicare rules, areas of the United States that already offer two or more Medicare Advantage plans cannot offer Medicare cost plans.
This article discusses the Medicare cost plans, who is eligible, and how a person can get one.
Medicare resources
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Medicare has different health plans, including:
- Medicare Advantage
- Medicare medical savings account (MSA)
- Medicare cost plans
Private insurance companies administer these health plans. Understanding Medicare Advantage might help one better understand how Medicare cost plans work.
Glossary of Medicare terms
- Out-of-pocket cost: This is the amount a person must pay for care when Medicare does not pay the total amount or offer coverage. Costs can include deductibles, coinsurance, copayments, and premiums.
- Premium: This is the amount of money someone pays each month for Medicare coverage.
- Deductible: This is an annual amount a person must spend out of pocket within a certain period before Medicare starts to fund their treatments.
- Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, coinsurance is 20%.
- Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
Medicare Advantage
Medicare Advantage plans include Medicare Part A and Part B and may also include additional benefits, such as dental options.
Most Medicare Advantage plans include prescription drug coverage. If the plan does not, a person may purchase a Prescription Drug Plan (PDP), also known as Medicare Part D.
However, they can only do this if their Medicare Advantage plan is a private fee-for-service (PFFS) plan or a Medicare Savings Account plan (MSA).
If someone has any other type of Medicare Advantage plan that does not cover prescription drugs, they cannot buy a PDP.
Private insurance companies administer Medicare Advantage plans. If the plan is an HMO or PPO, then it will provide a list of healthcare professionals that a person must visit to avoid additional out-of-pocket expenses. Sometimes, this list is limited.
Out-of-pocket costs, such as copayments, coinsurance, and deductibles, vary by the plan provider.
Medicare cost plans
Medicare cost plans are similar to Medicare Advantage, in that they offer all original Medicare benefits and usually some additional ones.
A Medicare cost plan allows a person to visit an out-of-network healthcare professional. Original Medicare will cover the costs, rather than the private insurer.
Prescription drug coverage may be available with a Medicare cost plan, but a person would need to check with their plan provider to see if this is an option.
If the cost plan does not cover medication, individuals may purchase a PDP. If the Medicare cost plan offers a PDP, but a person would prefer not to take this option, they can decline this part and purchase a separate drug policy.
Out-of-pocket costs will vary per plan provider, but if a person chooses to visit an out-of-network healthcare professional, triggering Part A or Part B benefits, the associated deductibles, copayments, and coinsurance will apply.
Medicare cost plans must be offered by companies legally authorized to provide policies in the state and counties they serve.
The Find a Medicare Plan web tool allows users to research plan options in their zip code. This site lists plan benefits, estimated costs, and contact information for the plan provider.
Not every state in the U.S. offers cost plans. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 changed the Medicare cost plans and Medicare Advantage rules.
The Act has a “cannot compete” rule that stops private companies from offering Medicare cost plans in their service areas if there are two or more competing Medicare Advantage plans available.
Although the Act added this rule in 2003, implementation did not take place until 2019.
In instances where newly available Medicare Advantage plans are in a particular service area, the private insurer may not renew their Medicare cost plan contract with Medicare.
A person can find out if cost plans are available in their area using this online tool.
Although private insurers may have different rules around cost plans, a person does not necessarily need to have Part A to enroll.
Individuals can join a cost plan when a plan provider accepts new members, and they can return to Original Medicare anytime they choose.
Medicare cost plans are health plans sold by private companies. They can have a provider network, but patients can choose to use out-of-network services.
When visiting a non-network provider, Medicare Part A or B will cover the costs, and associated out-of-pocket expenses will apply.
Insurers cannot offer a cost plan in an area with two or more Medicare Advantage plans available.
