The Myths of “free” Medicare

The Real Cost of $0 Medicare Advantage Plans

If you’ve spent any time looking into Medicare options, you’ve probably seen the ads: “$0 monthly premium!” or “Extra dental and vision benefits included!”

It sounds almost too good to be true — and in many ways, it is. While Medicare Advantage (MA) plans provide valuable coverage to millions of people, the reality is that these plans actually cost the Medicare system far more than traditional Medicare. And those costs eventually trickle down to you — even if you’re not enrolled in an MA plan.

Let’s break down what’s really happening behind the scenes, and why understanding it matters for every beneficiary.

How Medicare Advantage Impacts Everyone

The original hope for Medicare Advantage was that private insurers could manage care more efficiently and save the government money. Instead, the opposite has happened.

According to the Medicare Payment Advisory Commission (MedPAC), an independent group advising Congress, Medicare will spend $84 billion more in 2025 on people enrolled in Medicare Advantage than it would if those same people were on traditional Medicare.

That’s about 20% more per person.

And it doesn’t just affect people enrolled in these plans. Those extra costs push everyone’s Part B premiums higher by about $198 per year — even if you’re on Original Medicare with a Medigap plan.

So yes, even if you’ve never touched a Medicare Advantage plan, you’re still paying more because of them.

Why Medicare Advantage Costs So Much More

The overspending boils down to three key factors:

1. Coding Intensity

Medicare Advantage plans are paid a flat monthly amount by the government for each enrollee. But here’s the catch: the amount is adjusted based on how “sick” the enrollee looks on paper. This is determined through a risk score.

• More diagnoses = higher score.
• Higher score = higher payment from Medicare to the insurance company.

To maximize these payments, plans often use tools like chart reviews and health risk assessments (HRAs). Sometimes these diagnoses aren’t even tied to actual doctor visits or treatments.

For example, MedPAC found that just one extra documented condition can increase a plan’s payment by an average of $3,400 per year.

That’s why, across millions of enrollees, Medicare Advantage members look about 16% “sicker” on paper than comparable people on Original Medicare. Even after adjustments, this adds about $40 billion in extra costs in 2025 alone.

2. Favorable Selection

The second driver is who actually chooses Medicare Advantage.

MA plans often attract people who are healthier than average, drawn in by the perks like dental, vision, and gym memberships. On paper, their risk scores may predict higher costs, but in reality, these enrollees use fewer services.

That means Medicare pays the plans for expenses that never materialize. In 2025, favorable selection will account for an estimated $44 billion in overpayments.

3. Quality Bonus Payments

Finally, there’s the quality bonus program. Plans that earn 4 stars or higher out of 5 receive extra payments from Medicare.

In theory, this rewards good performance. But in practice, these bonuses are not “budget neutral.” They add billions in new spending to the system every year.

In fact, MedPAC estimates that quality bonuses add $15 billion annually, and nearly 70% of all Medicare Advantage members are in plans receiving these bonuses.

What This Means for You

You might be thinking: “Okay, but I like my $0 premium and extra dental benefits. What’s the harm?”

Here’s the reality:

• Part B premiums are higher for everyone. If MA didn’t exist, the 2025 base Part B premium could be about $168.50/month instead of $185/month.
• The Medicare trust fund is strained. Projections suggest MA overpayments could total $1–1.4 trillion over the next decade, potentially moving up the insolvency date of the Part A trust fund by 3–5 years.
• National debt increases. Extra Medicare spending adds directly to federal deficits.

In other words, the “free” dental benefit you enjoy is being funded by everyone else’s higher premiums and by the long-term sustainability of Medicare itself.

Should You Avoid Medicare Advantage?

This is not about saying Medicare Advantage plans are bad or that you shouldn’t join one. They provide real coverage for millions of Americans, and sometimes they’re the best fit — especially for people who can’t afford Medigap premiums.

At our agency, we help clients enroll in both Medigap and Medicare Advantage plans. The key is understanding the trade-offs:

• MA plans may offer low upfront costs and extras, but they come with restrictions (networks, authorizations) and add strain to the overall system.
• Medigap plans cost more monthly, but they provide broader access and don’t contribute to the same degree of systemwide overpayment.

The right choice depends on your health, your budget, and your comfort level with trade-offs.

Looking Ahead

Policymakers are aware of these issues. Starting in 2026, Medicare will implement a new risk adjustment model that should reduce some coding intensity problems. Early estimates suggest this could save nearly $13 billion annually.

But even with reforms, the core challenges — coding, favorable selection, and quality bonuses — aren’t going away anytime soon.

Key Takeaway

Medicare Advantage plans aren’t truly “$0.” Their costs are real — they’re just hidden. And they’re shared by everyone in the Medicare system, not just those enrolled in the plans.

So next time you see an ad promising free premiums and extra benefits, remember:

• Those benefits are being funded by higher Part B premiums for everyone.
• The Medicare trust fund and long-term program stability are being squeezed.
• The choice you make affects not only your wallet, but the sustainability of the system as a whole.

At Giardini Medicare, our job is to give you clear, unbiased information so you can make the best choice for yourself and your family. If you’d like to compare plans or talk through your options, we’re here to help.

👉 Schedule a free call with our team today at gmedicareteam.com.