Are $0 Medicare plans a scam?

Today, Medicare Advantage plans are the most common way people in Missouri and Illinois receive their Medicare benefits. Are they legit?

You probably see them advertised on television all the time: "all-in-one" Medicare plans that are full of extra benefits but claim to cost $0 each month.

It sounds too good to be true. Is it a scam?

Medicare Advantage, technically called Medicare Part C, is a different way to get your Medicare benefits. Benefits are provided by private insurance companies with a Medicare contract. More than half of St. Louis Medicare recipients are enrolled in an Advantage plan.

Many Medicare Advantage plans bundle hospital, medical, prescription drug coverage and more into one insurance policy having a $0 monthly plan premium. There are many of them. In Saint Charles, for example, there are 36 premium-free Advantage plans, each a little different from the others.

The low premium is real but there are a few strings attached.

The fine print that comes with a $0 premium plan

First, Medicare Advantage members must continue to pay their Part B premium; in 2026, that's about $203 each month. High income beneficiaries pay more. 

Second, most Medicare Advantage members are subject to a doctor network and other managed care techniques like referrals. Sometimes the plan must pre-approve certain kinds of care.

Those old fashioned managed care techniques aren't the only reasons these plans can charge such low (or no) premiums.  

Government funding helps Advantage plans pay for your care

The way our government funds the Medicare Advantage program is complicated.

Generally speaking, insurance companies make an offer to provide Original Medicare benefits in exchange for a set amount of money per member, per month. This is called their "bid".

The bid amount is compared against what the Medicare program would expect to pay for the same level of coverage and, to a certain extent, the bids of other insurance companies wishing to operate Medicare Advantage plans.

If the insurance company's bid is lower than what the government expects to spend, the company must spend the difference (the Medicare amount minus their own bid) on extra benefits, lower premiums or both. They cannot put it in their own pocket.

The Medicare program pays a typical Medicare Advantage plan around $1,000 per member per month. That is their allowance, so to speak, for paying all the claims incurred by their members. 

Sometimes the actual cost of care is less than what the government paid them, in which case the company keeps the difference (up to a maximum permitted amount) as profit. But if the care ends up costing more than the monthly allowance from Medicare, the insurance company is on the hook for those bills.

Too good to be true?

We've been trained throughout our lives to be skeptical of free things. Sure, those $0 premium Medicare plans sound too good to be true, but they are not a scam. 

Remember that with any insurance option, you should make sure you understand how the plan works and what you will pay in monthly premiums and other out of pocket costs like co-pays or co-insurance. 

The fine print matters. Never enroll in a plan you do not understand.

About the Author

Andrew Shea specializes in health insurance for Medicare recipients in the St. Louis area. His help is offered for free and without obligation. He can be reached at (636) 495-1180.