How can Medicare Advantage plans have a $0 premium? Where does the money come from?

Question

Stephanie Floyd · Accepted Answer

Medicare Advantage plans can show a $0 premium because Medicare is basically paying the insurance company behind the scenes. Medicare sends them a set amount every month for each person on the plan, and if the plan doesn’t spend all of that on admin and benefits, they can use the leftover to drop your premium to $0 or even lower.

The amount Medicare pays changes by county, which is why some areas have tons of $0 plans and others barely have any.

And just to be clear — $0 premium does not mean $0 cost. You’ll still have copays, coinsurance, and out‑of‑pocket costs when you actually use the plan. It just means you’re not paying a monthly premium on top of that.

Jason Wisniewski · Answer

The reason Medicare Advantage plans can afford to charge $0 monthly premium is because instead of receiving money directly from members they are paid on a per member per month basis by the Federal Government. Medicare funds are paid each month to the Medicare Advantage plan usually around $800-$1200 per month depending on the area, star ratings and health condition of the members. Medicare Advantage plans pay all your claims instead of Medicare. Whereas when you have a Medicare Supplement plan Medicare pays first and the Supplement pays second, which is members who have Supplement plans pay the insurance company directly.

Answered by Jason Wisniewski on July 13, 2026

Broker Licensed in FL, AZ, CT & 10 other states

Answered by Jason Wisniewski Medicare Insurance Agent

Aaron Fielding · Answer

Medicare Advantage plans aren’t “free.” The government pays private insurers a fixed amount for every person enrolled, and that money is what the plan uses to run its benefits. Because they’re already getting that funding, some companies choose not to charge an additional monthly premium. Instead, they make up the difference through things like copays, deductibles, and network rules.

Answered by Aaron Fielding on April 27, 2026

Broker Licensed in CA, OR & TX

Answered by Aaron Fielding Medicare Insurance Agent

Duane Boebel · Answer

So how do Medicare plans have a zero premium? Why do they have a zero premium, and where do they get their money from?

Well, these plans, all insurance carriers that offer Medicare Advantage plans are contracted with the Centers for Medicare Services, also known as CMS. Depending on what county and state you live in, they're getting somewhere around $1,400 to $1,500 a month to take care of your care.

So when you're on these plans and you have a claim, that money they're paying these carriers, the carriers use that money to pay your Medicare share of those claims. And if they run out of money, so be it, it has to come out of their capital or what have you. But that's how they can afford to offer a zero premium plan.

And then also, where the money is coming from, it comes from the taxpayers. And also, in essence, they're running your Medicare program for you on behalf of the Medicare program.

Monica Hughes · Answer

$0 premium Medicare Advantage plans are possible because private insurers receive monthly, government-funded payments for each member. 
These companies cover costs by managing care, limiting networks, and charging copays for services, rather than charging members a monthly fee.

Gary Church · Answer

Generally, you'll find Medicare Advantage plans with a zero premium in larger metropolitan areas because they compete with other Medicare Advantage plans. Medicare pays them directly, so they often rely on high enrollment to keep premiums low or free. Usually, they have a restrictive network that limits you to only seeing in-network doctors.

Answered by Gary Church on June 8, 2026

Broker Licensed in CA, AZ, NV & TX

Answered by Gary Church Medicare Insurance Agent

Dino Pappadis · Answer

Medicare pays the insurance companies a certain amount per member per month and transfer responsibility of care to the plan. In exchange, the plans must offer actuarial benefits equivalent or better than Original Medicare

Answered by Dino Pappadis on April 27, 2026

Broker Licensed in FL

Answered by Dino Pappadis Medicare Insurance Agent

Jasmine Jones · Answer

Medicare allows a certain amount of funds to carriers that they then use to provide benefits to their recipients. The plans typically have a $0 monthly premium with copays for services such as doctors appointments and hospital visits

Answered by Jasmine Jones on April 27, 2026

Broker Licensed in VA, AL, AR & 20 other states

Answered by Jasmine Jones Medicare Insurance Agent

Lori Crivelli · Answer

Medicare does not pay anthing towards Medicare Advantage plans, therefore Medicare pays the carrier to handle 100% of the claim. Carriers can earn extra money based on their star ratings. Because they are being paid by Medicare to pay for your health care, they can offer $0 premium. You will have out of pocket expenses for some things.

Answered by Lori Crivelli on April 27, 2026

Broker Licensed in CA, AZ, FL & 6 other states

Answered by Lori Crivelli Medicare Insurance Agent

Chris Vari · Answer

Medicare advantage plans with zero premium do exist.  All Medicare advantage plans get a subsidy payment via the center for Medicare Medicaid services when a member belongs to a certain carrier.

Jim Kaefer · Answer

Hi,
Thank you for your question, Medicare Advantage plans are paid from Medicare and with the payment the plan receives they are responsible for your medical needs.

Rukshini Sandrasegaran · Answer

The government gives certain amount of money to Heath Insurance companies and value care providers. They are responsible for managing the patience's health and the money given to them by the government to provide best health service.

Answered by Rukshini Sandrasegaran on April 27, 2026

Broker Licensed in AZ

Answered by Rukshini Sandrasegaran Medicare Insurance Agent

How can Medicare Advantage plans have a $0 premium? Where does the money come from?

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