Medicare provides vital health coverage for Americans 65 and over, as well as younger people with certain disabilities. But one aspect that concerns many seniors is Medicare’s potential out-of-pocket costs. Understanding Medicare’s costs and whether there are limits to what you pay is key to budgeting for medical expenses in retirement.
So is there a maximum out-of-pocket limit with Medicare? The answer depends on whether you have Original Medicare Part A and Part B or a Medicare Advantage Plan (Part C).
Original Medicare Out-of-Pocket Maximum Costs
With Original Medicare, there is no annual cap on what you pay out-of-pocket for covered medical services. You are responsible for certain deductibles, copays and coinsurance costs all year long.
Some of the common out-of-pocket costs under Original Medicare include:
- Part A hospital deductible – $1,600 per benefit period in 2023
- Part B deductible – $226 per year in 2023
- 20% coinsurance for most Part B services – doctor visits, lab tests, durable medical equipment, etc.
- Skilled nursing facility daily copays – $194.50 per day for days 21-100
- Part B excess charges – up to 15% extra for doctors who don’t accept Medicare assignment
- Part D prescription deductibles and cost sharing – varies by drug plan
As you can see, your potential out-of-pocket liability for covered medical costs each year with Original Medicare is essentially unlimited. There is no cap or maximum limit.
The lack of an annual limit on out-of-pocket costs makes Medicare Supplement insurance popular among enrollees who want financial protection. Medigap Plans cover Medicare deductibles, copays and coinsurance to minimize your costs.
But even with a Medigap policy, there is still no capped maximum on your total potential out-of-pocket spending each year under Original Medicare Plan. You must continue to pay the monthly premiums for Part B coverage and a Medigap Plan all year.
Medicare Advantage Plan Maximum Out-of-Pocket Limit in 2023
Private Medicare Advantage Plans under Medicare Part C, however, are required to establish a yearly cap on your out-of-pocket costs for Part A and Part B medical services. This is known as the maximum out-of-pocket limit or MOOP.
Medicare regulations set the following standards for the annual maximum costs that Medicare Advantage enrollees have to pay:
- $8,300 for in-network services in 2023
- $12,450 for combined in-network and out-of-network services in 2023
- Plans can also establish lower out-of-pocket maximums
Any medical care costs under Part A and Part B that go toward a plan’s deductible, copays or coinsurance count toward these maximum out-of-pocket limits.
Once you reach your Medicare Plan’s MOOP, you will not have to pay any more out-of-pocket costs for covered Part A and Part B services for the rest of the year. The plan pays 100%.
Having this capped maximum spending amount each year helps give Medicare Advantage enrollees financial protection and cost predictability.
However, even with the required MOOP, keep in mind:
- You must continue paying your monthly Medicare Part B premium
- Services not covered by Medicare are not included under the MOOP
- Prescription drug cost sharing may not count toward the MOOP
- Out-of-network care may not count toward MOOP limits, depending on the plan
So while the maximum out-of-pocket limit with Medicare Advantage provides more cost protections, beneficiaries still have ongoing premium expenses plus any costs for non-covered services.
Typical Medicare Advantage Out-of-Pocket Costs
While individual plan options and costs vary by insurer, region and specific benefits, here are some typical Medicare Advantage out-of-pocket costs to be aware of in addition to the plan’s MOOP:
- $0 – $150 per month premium (in addition to your Part B premium)
- $0 – $500 annual deductible
- $10 – $50 copay for primary doctor visits
- $35 – $75 copay for specialist visits
- $150 – $350 copay for emergency room visits
- $200 – $400 copay per day for inpatient hospital stays
- 20% – 50% coinsurance for durable medical equipment
Even plans with zero premiums can have deductibles, copays and coinsurance. These costs all accumulate toward the plan’s out-of-pocket maximum.
Always check your Medicare Advantage Plan’s specific benefit details to understand your out-of-pocket responsibility. Costs can vary significantly by plan.
Out-of-Pocket Costs for Medicare Advantage Prescription Drug Coverage
Most Medicare Advantage Plans now include prescription drug coverage under Medicare Part D as part of the total package of benefits. This integrated Part D coverage is subject to cost-sharing rules separate from the medical services MOOP limits discussed above.
For Part D drug coverage, Medicare Advantage Plans can charge:
- A deductible up to $505 in 2023
- Copays or coinsurance of 25% – 37% on covered brand/generic drugs
- A separate maximum out-of-pocket limit (up to $7,400 in 2023)
Look closely at the plan’s formulary tiers, specific drug costs and Part D MOOP to understand your prescription medication expenses. These will be in addition to the plan’s medical services out-of-pocket maximum.
Strategies to Reduce Medicare Out-of-Pocket Spending
Whether you have Original Medicare or Medicare Advantage, some tips to minimize your potential out-of-pocket costs include:
- Purchase supplemental gap coverage if enrolled in Original Medicare
- Select Medicare Advantage Plans with lower maximum out-of-pocket limits
- Compare plans annually to find lowest cost-sharing options
- Use in-network providers and follow plan referral rules
- Ask about generic medication options
- Inquire if financial assistance programs are available
- Get preventive care to avoid illness complications
- Use urgent care instead of emergency rooms when appropriate
- Take advantage of wellness program benefits and rewards
Knowing Medicare’s out-of-pocket costs, protections and limits can help you make wise coverage decisions and reduce spending. While Original Medicare does not have a maximum cap, most Medicare Advantage Plans provide this additional financial safeguard. Evaluate both Medicare options to find the most affordable coverage for your needs.
We’re Here to Help
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What is the maximum out-of-pocket limit for a Medicare Part C plan?
Medicare Part C plans, also known as Medicare Advantage Plans, have an annual out-of-pocket maximum. In 2023, most Medicare Advantage Plans must have a maximum out-of-pocket limit of $7,500 for covered services. However, this amount can vary by plan.
How much does Medicare cover?
Original Medicare (Parts A and B) covers many, but not all, health care services and supplies. You pay out of pocket for any costs that Medicare does not cover, such as premiums, deductibles, coinsurance, and services/items not covered by Part A or Part B. Medicare aims to cover about half of most beneficiaries’ healthcare expenses on average, though your out-of-pocket costs may vary significantly depending on your health needs and Medicare coverage.
Do Medicare Advantage Plans have out-of-pocket maximums?
Yes, Medicare Advantage Plans (Part C) are required to have an annual limit on your out-of-pocket costs, excluding premiums. This annual limit is called an out-of-pocket maximum. For 2023, most plans must have a maximum out-of-pocket limit of $7,500 for covered services received in-network. However, each individual plan’s maximum may be lower.
What is the standard Part B monthly premium in 2023?
For 2023, the standard Part B monthly premium amount is $164.90. However, some people will pay more than the standard premium amount depending on their income. In addition to your Part B premium, you are also responsible for other out-of-pocket costs like deductibles and coinsurance when accessing care.
Does Medicare cover everything? No, Original Medicare doesn’t cover everything.
Even with Medicare Parts A and B, you’ll still likely have certain health care costs to pay out of pocket, like deductibles, coinsurance, and services/items Medicare does not cover. You can help lower your out-of-pocket costs with supplemental coverage like Medigap or Medicare Advantage Plans that cover many of these additional costs.
How much do I have to pay out of pocket for Medicare?
The amount you pay out-of-pocket for Medicare can vary greatly depending on your health services needed, supplemental coverage, and income level. Major out-of-pocket costs may include your Part A deductible, Part B premiums and deductible, and coinsurance/copays up to annual out-of-pocket limits. To better estimate your costs, consider factors like healthcare needs, income, and Options like Medigap or Medicare Advantage Plans. The Centers for Medicare & Medicaid Services (CMS) also offers tools and assistance to help Medicare beneficiaries understand their expected out-of-pocket costs.
Does Medigap Plan K cover the Part B deductible?
Yes, Medigap Plan K is one of the few plans that covers the annual Part B deductible, which is $233 in 2023. Once you meet your Part B deductible, Medigap Plan K helps cover coinsurance or copayment amounts for Medicare-approved services, and it caps your out-of-pocket costs when you need extensive medical treatment. This makes Medigap Plan K a relatively comprehensive secondary coverage option to Original Medicare.
What is the maximum out-of-pocket amount for a Medicare Advantage Plan in 2023?
For 2023, most Medicare Advantage Plans have a maximum out-of-pocket amount of $7,500. This maximum out-of-pocket limit applies to what the plan pays and what you pay out-of-pocket for in-network Medicare-covered services. While this is the standard limit set by Medicare, some Advantage Plans may have a lower maximum out-of-pocket amount. You should check with specific Advantage Plans for their out-of-pocket limits.
Do Medigap Plans cover prescription drug costs?
No, original Medigap Plans do not cover prescription drugs. Medigap only supplements costs left over after Original Medicare pays its share for other medical costs like doctor visits, hospital stays and outpatient care. To get coverage for prescription medications, you need a separate Part D prescription drug plan or a Medicare Advantage Plan that includes Part D coverage. All stand-alone Part D Plans and Medicare Advantage Plans with drug coverage offered have some level of out-of-pocket spending limits for prescription drugs.