A Medicare Cost Plan is a type of Medicare managed care plan run by health maintenance organizations (HMOs)

A Medicare Cost Plan is a Medicare managed care option offered by HMOs in certain areas. Unlike a Medicare Advantage plan, a Cost Plan lets you see any Medicare-approved provider without needing a referral, and you can go to any hospital that accepts Medicare. You pay a monthly premium, a copay when you use a service, and sometimes coinsurance (a percentage of the cost). The plan covers the same services as Original Medicare Part A and Part B, plus prescription drugs in some cases.

Cost Plans are available in only a handful of states and counties. They are less common than Medicare Advantage plans, so your area may not have one. If one is offered where you live, it can be a middle ground between Original Medicare and a Medicare Advantage plan — you get managed care features without the network restrictions of an Advantage plan.

Key Takeaways

  • Medicare Cost Plans cover the same services as Original Medicare Part A and Part B, but you pay a monthly premium and copays instead of the Part B premium and deductible structure.
  • You can see any Medicare-approved doctor or hospital without a referral, which differs from most Medicare Advantage plans that require you to stay in-network.
  • Cost Plans are only available in a few states and counties, so you need to check whether one is offered in your area during the annual enrollment period.
  • If you enroll in a Cost Plan, you are still covered by Original Medicare rules and protections, and you can switch back to Original Medicare during the open enrollment period each year.

How a Medicare Cost Plan differs from Original Medicare

Original Medicare is fee-for-service coverage run directly by the federal government. You pay a Part B premium each month, a yearly deductible, and then 20 percent coinsurance for most services after you meet the deductible. There is no monthly premium beyond Part B, and you can see any Medicare-approved provider.

A Cost Plan is managed care, meaning an HMO runs the plan and negotiates rates with doctors and hospitals. You pay a monthly premium (which varies by plan), a copay for each visit or service (usually $10 to $50), and sometimes coinsurance. The total you pay out of pocket may be lower or higher than Original Medicare depending on how much care you use. Cost Plans often include prescription drug coverage, which Original Medicare does not — you would need a separate Part D plan with Original Medicare.

The biggest practical difference is that Cost Plans do not have the same network restrictions as Medicare Advantage plans. You are not locked into a specific group of doctors or hospitals. You can see any Medicare-approved provider, just as you can with Original Medicare.

What services a Cost Plan covers

A Medicare Cost Plan covers all the services that Original Medicare Part A and Part B cover. That includes hospital stays, doctor visits, lab tests, imaging, outpatient surgery, and preventive care like screenings and vaccines. If the plan includes prescription drug coverage, that is listed in the plan documents.

Cost Plans do not cover services that Original Medicare does not cover, such as dental, vision, hearing aids, or long-term care. If you want coverage for those services, you would need to buy a separate plan or pay out of pocket. Some Cost Plans may offer limited dental or vision benefits as an add-on, but this varies by plan.

When you use a service, you pay the copay amount set by the plan. If the plan has coinsurance, you pay a percentage of the cost after you meet any deductible. The plan's documents will spell out the exact copay and coinsurance amounts for each type of service.

How premiums and out-of-pocket costs work

You still pay the Medicare Part B premium each month (the standard amount is deducted from your Social Security check unless you arrange otherwise). On top of that, the Cost Plan charges its own monthly premium, which can range from zero to several hundred dollars depending on the plan and your location. Some Cost Plans have no monthly premium at all.

When you use a service, you pay a copay. A doctor visit might be $15, a specialist visit $40, a hospital stay $250 per day, and an emergency room visit $100. These amounts are set by the plan and are listed in the plan's Summary of Benefits and Coverage document, which you can request or read before you enroll.

Unlike Original Medicare, Cost Plans do not have an annual out-of-pocket maximum. This means there is no limit to how much you could pay in copays and coinsurance in a year. If you use a lot of health care, your costs could add up quickly. This is an important difference to understand before you enroll.

How to learn about a Cost Plan is available in your area

Medicare Cost Plans are offered in only a few states. As of now, they are available in Connecticut, Illinois, New York, Ohio, Pennsylvania, Texas, and Washington, though this can change. Even within those states, they may not be available in every county.

To see if a Cost Plan is offered where you live, visit Medicare.gov and use the Plan Finder tool. Enter your ZIP code and the tool will show you all the plans available in your area, including any Cost Plans. You can also call 1-800-MEDICARE to ask whether a Cost Plan is available in your county.

Cost Plans are only available during the annual Medicare open enrollment period, which runs from October 15 to December 7 each year. If you want to enroll in a Cost Plan, you must do so during this window. If you miss the important date, you cannot enroll until the next open enrollment period unless you have a may have access to life event.

When to switch from Original Medicare to a Cost Plan

A Cost Plan may make sense if you want managed care features (like included prescription drug coverage) but do not want to be restricted to a network of doctors and hospitals. If you see doctors in different parts of your state or travel frequently, the lack of network restrictions can be valuable.

A Cost Plan may not be a good fit if you use a lot of health care and want predictable costs. Because there is no annual out-of-pocket maximum, your costs could be very high in a year when you need a lot of services. If you have a chronic condition that requires frequent visits or hospitalizations, you might pay less with Original Medicare plus a Medigap plan, which does have an out-of-pocket maximum.

If you enroll in a Cost Plan and later decide it is not right for you, you can switch back to Original Medicare during the next open enrollment period. You can also switch to a Medicare Advantage plan or another Cost Plan if one is available. Your coverage will not be interrupted as long as you enroll in a new plan before your current one ends.

What to ask your doctor and plan before you enroll

Before you enroll in a Cost Plan, contact your current doctors and ask whether they accept the plan. Even though Cost Plans do not have strict networks, not all Medicare-approved providers participate in every plan. If your doctor does not accept the plan, you would have to pay out of pocket or find a new doctor.

Ask the plan directly for a list of participating providers in your area. You can also ask the plan's customer service line about the copay for a specific service, such as a specialist visit or an imaging test. This will help you estimate what you might pay if you enroll.

If you take prescription medications, ask whether the plan's drug formulary (the list of covered drugs) includes your medications. If a drug you take is not covered, you may have to pay the full cost or switch to a different medication. The plan can tell you this before you enroll.

Frequently Asked Questions

Can I use my Cost Plan outside my home state?

No. A Cost Plan only covers services from providers in the plan's service area, which is usually a specific state or region. If you travel or move, you would need to enroll in a different plan in that location. If you travel temporarily, you can use any Medicare-approved provider, but you will pay out of pocket and then file a claim for reimbursement.

Do I still need a Medigap plan if I have a Cost Plan?

No. A Cost Plan is a complete Medicare coverage option on its own. You cannot enroll in both a Cost Plan and a Medigap plan at the same time. However, because Cost Plans have no out-of-pocket maximum, some people find that a Medigap plan would have been cheaper if they use a lot of health care.

What happens to my Cost Plan coverage if I move to a different state?

Your Cost Plan coverage ends on the last day of the month you move. You will need to enroll in a new plan in your new state. If you move during the year, you have 60 days from the date you move to enroll in a new plan without waiting for the annual open enrollment period.

Can I enroll in a Cost Plan if I have a pre-existing condition?

Yes. Medicare plans cannot deny you coverage or charge you more because of a pre-existing condition. You can enroll in a Cost Plan regardless of your health status.

What is the difference between a Cost Plan and a Medicare Advantage plan?

The main difference is network restrictions. Medicare Advantage plans require you to use in-network doctors and hospitals (except in emergencies), while Cost Plans let you see any Medicare-approved provider. Cost Plans also do not have an annual out-of-pocket maximum, while Medicare Advantage plans do. Both are managed care options run by HMOs.