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What is a Medicare cost plan?
A Medicare cost plan is similar to a Medicare Advantage plan in that enrollees have access to a network of doctors and hospitals, and may have additional benefits beyond what’s provided by Original Medicare. But unlike Medicare Advantage plans, a cost plan offers policyholders the option of receiving coverage outside of the network, in which case the Medicare-covered services are paid for through Original Medicare.
Eligible enrollees who live within a Medicare cost plan’s service area can join the plan when it’s accepting new members. A cost plan that is accepting new enrollees must have an annual open enrollment window of at least 30 days, although they can set an enrollment cap and close enrollment once it’s reached. Insurers that offer both cost plans and Advantage plans in the same area cannot enroll new members in the cost plan.
If the cost plan offers optional supplemental Part D prescription coverage, enrollment in (or disenrollment from) the Part D coverage is limited to the normal annual open enrollment period for Part D plans. If the cost plan does not have a supplemental Part D plan available — or if it does and the enrollee would prefer a different Part D plan — enrollees can select from among any stand-alone Part D plan available in their area, with enrollment and plan changes limited to the normal Part D enrollment window.
Cost plan enrollees may decide to return to Original Medicare at any time, since a cost plan works in tandem with (as opposed to a replacement for) Original Medicare. And enrollees can join a cost plan even if they only have coverage under Medicare Part B. (Most people get Part A for free, but if you don’t have enough work history to qualify for that, Part A has a premium and some people opt only for Part B in that case.)
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (which rebranded Medicare+Choice as Medicare Advantage) created a competition clause that banned Medicare Cost plans from operating in areas where they faced substantial competition from Medicare Advantage plans. The implementation of the competition clause was delayed, but legislation enacted in 2015 (MACRA) required the competition clause to be implemented as of 2019.
As of 2018, there were about 625,000 people enrolled in Medicare cost plans nationwide. And two-thirds of them were in Minnesota. The rest were spread across Colorado, District of Columbia, Iowa, Illinois, Maryland, North Dakota, South Dakota, Texas, Virginia, and Wisconsin; most states do not have Medicare cost plans available.
But there were far fewer Medicare cost plan enrollees as of 2019, due to the implementation of the Medicare Advantage competition clause. CMS data showed just 253,529 people enrolled in cost plans as of mid-2022 (including 1876 and 1833 cost plans). An estimated 320,000 people in Minnesota alone had to pick new coverage for 2019 (either Medicare Advantage or Original Medicare — with the option to supplement the Original Medicare with a Part D plan and/or a Medigap plan). There were 27 cost plans available in Minnesota as of 2018, and although that dropped in 2019, there were still 21 plans available in Minnesota in 2020.
People who still have Medicare cost plans available in their area can still enroll.