Understanding Part C Costs

Medicare Advantage (Part C) plans have premium and out-of-pocket costs to consider. While some Advantage plans have $0 premiums or even pay your Part B premium, all have out-of-pocket costs.[1]

Generally speaking, you’ll pay a premium, owe copays and coinsurance, and want to think about your deductible and maximum with a health plan. Then, if your plan has a drug plan you’ll want to think about coverage phases and formulary tiers.

The costs and cost-impacting factors below be considered before enrolling in a Medicare Advantage plan.

Medicare Advantage Premium Costs

Below are premium costs you may see when browsing Part C plans:

Part C premium: If the plan charges a premium for Part C. Some Advantage plans charge a premium, others offer a $0 premium. The Part C premium is paid in addition to your Part B premium.

Part B premium: Some plans will cover part or all of your Part B premium. This may be labeled as a “Part B reduction.”

Part D premium: Advantage plans with drug plans may charge a part D premium. You may see this broken down as Part D basic, Part D supplemental, and Part D total premium. The supplemental premium is an extra amount that may be charged for plans with enhanced benefits.

Part C + D Premium: The total amount of premium you’ll pay ignoring Part B reductions.

Total premium (B+ C + D): Your total premium is simply the sum of your Part B premium you’ll owe under the plan after any Part B reduction is applied, your Part C premium, and your total Part D premium.

Medicare Advantage Health Plan Out-of-Pocket Costs and Other Costs

A plan may have out-of-pocket costs for the health plan portion and if it has drug coverage for the drug plan portion. Let’s cover the health plan costs first:

Health plan Deductible: the amount you pay before your plan’s cost-sharing kicks in.

Maximum Out-of-pocket limit (MOOP): The Maximum you can spend out-of-pocket on covered services in an annual period. This is the most you can pay for Part A and Part B services, and some plans apply this to other benefits like vision, hearing, and dental as well.

Copayments and Coinsurance: Most benefits, from doctor’s visits, to hearing aids, to hospital stays, have associated copays or coinsurance amounts. These may differ between a specialist and non-specialist and may differ between in-network and out-of-network.

Plan Type: Your plan type can impact your costs. MSA plans, PFFS plans, PPO plans, and HMO plans deal with costs in different ways, and some people may find one style fits their needs best.

Optional benefits: Some plans charge a premium and copayments/coinsurance for optional benefits packages (for example for dental, vision, hearing coverage).

Medicaid and Cost Adjustments: If you have Medicaid and/or meet certain criteria for wealth and income what you pay may be adjusted. In general, if you are low-income you can get additional costs covered (for example with Low Income Subsidies LIS) and if you are high income you may pay more for things like the Part B premium (although this isn’t paid to your plan provider).

Medicare Advantage Plan Drug Plan Out-of-Pocket Costs

The drug plan portion of your Advantage plan has its own unique cost-sharing to consider. The main thing going on with Part D cost-sharing is that there are multiple phases and each phase has different cost-sharing for different tired drugs. It works like this:

Part D Copayments and Coinsurance (Drug Tiers): In each Part D phase you’ll pay different amounts for each tiered drug. Each plan may have a different number of drug tiers and different amounts of them, but typically you’ll see 3 -5 tiers with generics being cheapest and specialty drugs being the most expensive.

Part D Annual Drug Deductible: Your deductible is the limit you have to reach on spending for covered drugs until you reach the deductible limit and enter the initial coverage phase. In the deductible phase cost-sharing isn’t going to be very generous, so keep this in mind when shopping for plans.

Part D Standard Initial Coverage Limit: The initial coverage limit is the limit you have to reach on spending for covered drugs until you enter the coverage gap phase (on most plans; some plans skip the coverage gap phase and go directly to the catastrophic coverage phase). Unless you spend a lot on drugs, the bulk of your spending is likely to happen in this phase on most plans, so keep the cost-sharing in this phase in mind.

Part D Coverage Gap limit (Catastrophic Coverage Threshold): Once you hit the plan’s coverage gap limit (AKA catastrophic coverage threshold) you exit the coverage gap phase and enter a catastrophic coverage phase. Please note that not all plans have a coverage gap phase and some plans provide additional gap coverage, this typically lowers out-of-pocket costs but results in a higher premium.

TIP: Once you are enrolled in a plan, make sure to review your “Evidence of Coverage” (EOC)¬†and “Annual Notice of Change” (ANOC) each year to make sure your plan still fits your needs.


  1. Costs for Medicare Advantage Plans. Medicare.Gov.