A Cost Plan Is a Type of Medicare Coverage Run by Health Maintenance Organizations
A Cost Plan is a Medicare coverage option run by a health maintenance organization (HMO) that works differently from Original Medicare or Medicare Advantage plans. Instead of paying a monthly premium to Medicare, you pay the HMO directly for the services you use — similar to how commercial health insurance works. The HMO then bills Medicare for its share of the cost.
Cost Plans are available in only a handful of counties across the United States, mostly in rural areas where other Medicare options are limited. If one operates in your area, it will appear as a choice during Medicare enrollment. Cost Plans are not the same as Medicare Advantage (Part C) plans, even though both are run by private insurers, because Cost Plans do not replace Original Medicare — they work alongside it.
The main reason to choose a Cost Plan is usually location: if you live in one of the few counties where it is offered and you want an alternative to Original Medicare, it may be your only private option besides Medicare Advantage. Understanding how Cost Plans differ from other Medicare choices helps you decide whether one makes sense for your situation.
Key Takeaways
- Cost Plans are HMO-run Medicare options available only in specific counties, mostly rural areas, and work by charging you directly for services rather than through a monthly premium.
- You must use doctors and hospitals in the Cost Plan's network, except in emergencies or when you are traveling outside the service area.
- Cost Plans work alongside Original Medicare rather than replacing it, so you keep both Medicare Part A and Part B coverage.
- You pay a copay or coinsurance for each service, and the HMO bills Medicare for the rest, similar to how employer health insurance operates.
- Cost Plans are rare and available in only a few counties; you can check whether one serves your area on Medicare.gov or by calling 1-800-MEDICARE.
How Cost Plans Charge You for Care
When you use a service covered by a Cost Plan, you pay a copay or coinsurance amount at the time of service. A copay is a flat fee — for example, $15 for a doctor visit. Coinsurance is a percentage of the cost — for example, 20 percent of what the doctor charges. The amount you pay depends on the specific service and the plan's design.
After you pay your share, the HMO bills Medicare for the remainder. You do not pay a separate monthly premium to the HMO in most Cost Plans, though some may charge a small premium. This is different from Medicare Advantage plans, which typically have a monthly premium you pay to the insurance company.
Because you pay per service rather than through a monthly premium, your total costs depend on how much care you use. If you rarely see a doctor, your out-of-pocket costs may be lower than they would be with a plan that charges a monthly fee. If you need frequent care, your copays and coinsurance can add up quickly.
Network Requirements and When You Can See Out-of-Network Doctors
Cost Plans require you to use doctors, hospitals, and other providers in the plan's network. If you see an out-of-network provider without authorization, you will pay the full cost yourself — the HMO will not pay anything toward it, and Medicare will not cover it either because you are enrolled in the Cost Plan.
The main exception is emergency care. If you have a medical emergency, you can go to any hospital or emergency room, whether in-network or not. The Cost Plan will cover emergency services the same way it covers in-network emergencies. You should still notify the plan as soon as possible after the emergency.
If you travel outside the Cost Plan's service area, you can also use out-of-network providers, though you will typically pay more out of pocket. Some Cost Plans cover emergency or urgent care while you are traveling; others do not. Check your plan documents or call the plan directly to understand what happens if you need care while away from home.
Cost Plans Versus Medicare Advantage and Original Medicare
| Feature | Cost Plan | Medicare Advantage | Original Medicare |
|---|---|---|---|
| Run by | HMO | Private insurer | Medicare (federal) |
| Monthly premium | Usually none | Yes, varies by plan | Part B premium only |
| Network required | Yes | Yes | No |
| Replaces Original Medicare | No | Yes | N/A |
| Availability | Very limited (few counties) | Widely available | Everywhere |
| Out-of-network coverage | Emergency only | Emergency only | Yes, anywhere in US |
The biggest difference between a Cost Plan and Medicare Advantage is that a Cost Plan does not replace Original Medicare. You keep your Medicare Part A and Part B coverage and use them alongside the Cost Plan. With Medicare Advantage, you give up Original Medicare and use the Advantage plan instead.
Cost Plans also typically do not charge a monthly premium, whereas most Medicare Advantage plans do. However, Cost Plans are available in far fewer places — usually only in rural counties where Medicare Advantage options may be limited or nonexistent. If you live in an area with both options, Medicare Advantage may offer more flexibility or additional benefits like dental or vision coverage.
Original Medicare has no network requirement, so you can see any doctor who accepts Medicare anywhere in the country. However, Original Medicare requires you to pay a deductible and coinsurance for many services. A Cost Plan's copay structure may be simpler to understand and predict than Original Medicare's deductible-and-coinsurance model, depending on how often you need care.
Where Cost Plans Are Available and How to Find One
Cost Plans operate in only a handful of counties, mostly in rural areas of a few states. As of recent years, Cost Plans are available in parts of Arizona, Connecticut, Florida, Illinois, Kentucky, Louisiana, Missouri, New York, Ohio, Pennsylvania, Texas, and a few other states. The list changes occasionally as plans enter or leave markets.
To find out whether a Cost Plan serves your county, visit Medicare.gov and use the plan finder tool, or call 1-800-MEDICARE and ask whether any Cost Plans are available in your area. You can also contact your State Health Insurance information Program (SHIP), which offers free counseling about Medicare options in your state.
If a Cost Plan is available where you live, it will appear as an option during your Medicare enrollment period. You can compare it side by side with other plans available to you, including Original Medicare and any Medicare Advantage plans. Enrollment happens during the Annual Enrollment Period (October 15 to December 7 each year) or during your Initial Enrollment Period when you first become may be able to access for Medicare.
Switching Out of a Cost Plan
If you enroll in a Cost Plan and later decide it is not right for you, you can switch to a different plan during the Annual Enrollment Period. You can also switch if you move out of the Cost Plan's service area or if the plan leaves your county.
If the Cost Plan you are in closes or stops serving your area, Medicare will send you a notice explaining your options. You will have a special enrollment period to switch to another plan without waiting for the Annual Enrollment Period. During this time, you can move to Original Medicare, a Medicare Advantage plan, or another Cost Plan if one is available.
Keep in mind that if you switch away from a Cost Plan to Original Medicare, you may want to purchase a Medigap (supplemental insurance) policy to cover the deductibles and coinsurance that Original Medicare does not pay. Medigap policies have their own enrollment rules and underwriting, so the timing of your switch matters.
Frequently Asked Questions
Do I have to pay a monthly premium for a Cost Plan?
Most Cost Plans do not charge a monthly premium, though some may charge a small one. You pay copays or coinsurance when you use services instead. You still pay your regular Medicare Part B premium to Medicare, just as you would with any other Medicare option.
Can I use my Cost Plan if I travel outside my home state?
Cost Plans typically only cover services within their service area. If you travel outside that area, you may have to pay out of pocket unless you have an emergency. Some plans cover emergency or urgent care while traveling; check your plan documents or call the plan to confirm what is covered away from home.
What happens if my Cost Plan closes?
If your Cost Plan closes or stops serving your area, Medicare sends you a notice with your options. You get a special enrollment period to switch to Original Medicare, a Medicare Advantage plan, or another plan without waiting for the Annual Enrollment Period. You will have at least 30 days to make your choice.
Is a Cost Plan the same as a Medicare Advantage plan?
No. A Cost Plan works alongside Original Medicare, while Medicare Advantage replaces it. Cost Plans are also much rarer — available in only a few counties — whereas Medicare Advantage is widely available. Both require you to use in-network providers except in emergencies.
How do I know if a Cost Plan is available in my area?
Use the plan finder on Medicare.gov, call 1-800-MEDICARE, or contact your State Health Insurance information Program. They can tell you whether any Cost Plans serve your county and help you compare them with other Medicare options available to you.