Medicare Part C, or Medicare Advantage, is a bundled alternative to traditional Medicare that includes coverage for parts A and B.
People with Medicare Part C still have to pay their monthly premium for Part B, but they may get Part A without a monthly charge. A standalone Part C premium may also apply.
More and more people are opting for these types of plan, and there are now hundreds of Medicare Part C plans available. A person’s options will vary based on where they live and which services are available in that area.
This article explains the potential costs and premiums of Medicare Part C, including the possible monthly fees, the out-of-pocket costs, and how to incorporate drug costs into coverage.
We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:
- Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
- Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
- Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
A person with Medicare Part C will still pay a monthly Medicare Part B premium. They will also need to fund coinsurance payments and deductibles, depending on the healthcare services they use.
As Part C is a bundled plan, it is important to consider the costs of each service available. The sections below will discuss these in more detail.
Medicare Part A
Most people with Medicare receive Part A for free. Part A covers inpatient hospital services. A person must still pay a $1,484 deductible each benefit period when they need inpatient care.
They are also subject to paying coinsurance if they require an extended hospital or inpatient stay.
Learn more about Medicare Part A coverage here.
Medicare Part B
A person with Medicare Part C will still need to pay the monthly Part B premium. For 2021, this premium amounts to $148.50. The Social Security Administration will typically deduct this premium amount from a person’s check.
If a person has Medicare Advantage, their plan will outline how much they pay for medical services under Part B.
For example, Medicare has contracts with specific local providers to offer medical services. Some plans charge a copayment if a person visits an out-of-network provider.
Each Medicare Advantage plan has an out-of-pocket maximum spending limit. Once a person reaches this, they will not be responsible for any coinsurance or copayments for the rest of that enrollment year.
In 2021, this limit cannot be more than $7,550, depending on the type of policy a person has.
Learn more about Medicare Part B coverage here.
Medicare Part C premiums
As well as paying the Part B deductible, a person with Medicare Part C will pay a monthly premium. Some premiums are $0. The monthly premium varies based on the type of plan and the coverage offered.
For 2020, the average monthly premium cost for all Medicare Advantage plan types was $25, according to the Kaiser Family Foundation (KFF).
Different Medicare Advantage plan types are available. They vary by deductible, coinsurance, and out-of-pocket limits.
A person should look over their last year of healthcare costs to work out the cost effectiveness of a Medicare Part C plan. They should also consider how much they could afford to pay if they were to suddenly need significant medical care.
For targeted cost estimates based on a person’s local services, they can visit the Medicare Part C search engine on Medicare.gov.
For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.
Around 88% of Medicare Advantage enrollees choose to add a Medicare Part D benefit through their plan, according to the KFF. Medicare Part D is the portion of Medicare that funds prescription drugs.
The Centers for Medicare and Medicaid Services require that all people aged 65 years and over have “creditable drug coverage” for their prescriptions.
By having Medicare Part D, a person can meet this requirement. If they do not have Part D, they may have to pay penalty fees if they try to sign up for it at a later date.
If a person does not choose to cover prescription drugs through their Medicare Part C plan, they will need to purchase a separate Part D policy. If a person already has prescription drug coverage through Medicare Part C, they do not need an additional Part D policy.
In 2021, Part D costs take the following shape:
- A person will need to meet the Part D deductible that their Medicare Advantage plan sets. The deductible could be up to $445 before a person begins to pay their copayments or coinsurance.
- Once a person meets their deductible, they will pay coinsurance for medications. This should come to no more than 25% of the total drug cost, up to a limit of $4,130.
- Once a person reaches the $4,130 spending limit, they become responsible for their drug costs. This coverage gap is known as the “donut hole.” However, Medicare has an arrangement with drug manufacturers to provide these medications at no more than 25% of the original cost.
- Once a person spends $6,550 in the donut hole, they pay 5% of prescription drug costs.
Each Medicare Part C plan has a different list of drugs, called a formulary. This list separates medications into categories, including generic, brand name, and premium drugs.
If a doctor prescribes generic drugs under a person’s Medicare Part C plan, the person will save on medication costs.
Medicare Part C, or Medicare Advantage, is a bundled Medicare plan. Private insurance companies sell and administer Part C plans, but they work with Medicare to make sure that they provide the full benefits available.
The private insurance companies work with Medicare to offer parts A and B, as well as some additional services, such as Part D. Some Part C plans also fund services that traditional Medicare may not cover, such as vision care.
An estimated 36% of all people enrolled in Medicare are covered under Medicare Advantage plans, according to the KFF.
The number of people with Medicare Advantage plans has grown by approximately 9% between 2019 and 2020.
Medicare Part C is an alternative to traditional Medicare. Some people may choose a Medicare Part C plan for the following reasons:
- They have a medical condition that requires specific services and medications. Medicare Part C offers Special Needs Plans for people with specific conditions, such as congestive heart failure or diabetes. These targeted plans may provide cost savings to a person.
- They need additional services that Medicare does not offer, such as hearing or vision care.
- They receive benefits under a group plan. Some employers and unions offer their retired employees a group plan under Medicare Advantage. These firms may provide additional services at a lower cost to their former employees. An estimated 19% of all Part C enrollees are part of an employer- or union-sponsored group plan, according to the KFF.
People tend to choose Part C over traditional Medicare if they are seeking greater cost savings, expanded coverage, or both.
Some people prefer Medicare Part C for its potential cost savings or expanded coverages. For others, Medicare Part C is not as cost effective as traditional Medicare.
A person’s overall health, geographical location, and specific medical needs usually factor into whether or not a plan is cost effective for them.
Because so many Medicare Part C plans are now available, a person should thoroughly compare and consider each before making their selection.
Learn more about traditional Medicare and Medicare Advantage here.