- There is no limit on out-of-pocket costs in original Medicare (Part A and Part B).
- Medicare supplement insurance, or Medigap plans, can help reduce the burden of out-of-pocket costs for original Medicare.
- Medicare Advantage plans have out-of-pocket limits that vary based on the company selling the plan.
Medical care can be expensive, even when you are covered by Medicare. More than a quarter of all Medicare recipients spend about 20 percent of their annual income on out-of-pocket costs after Medicare reimbursements. People lower income or complex health conditions are likely to pay the most.
Determining Medicare costs is a complex process that can change based on each person’s situation and plan choices. Out-of-pocket maximums can be especially confusing when it comes to Medicare Advantage plans, which offer a wide variety of different options.
We’ll look at how out-of-pocket maximums work and much you’re likely to pay with each type of Medicare coverage.
Medicare out-of-pocket costs are the amount you are responsible to pay after Medicare pays its share of your medical benefits. Here’s a look at how this applies to each part of Medicare:
- Medicare Part A. With Part A, there is no out-of-pocket maximum. Most people do not pay a premium for Part A, but there are deductibles and limits to what is covered.
- Medicare Part B. In Part B, you pay a monthly premium and a deductible, but there is a limit beyond that to what Medicare covers. There is no limit to the out-of-pocket maximum you might pay beyond what Medicare covers.
- Medicare Part C. Medicare Part C (Medicare Advantage) plans are sold by private insurance companies and offer combined packages to cover your Medicare Part A, Part B, and even prescription drug costs. Your monthly premiums, deductibles, coinsurance, and other payments will vary based on the plan you choose, but there is a maximum out-of-pocket limit set that all plans must adhere to.
- Medicare Part D. Like Part C, Part D (prescription drug coverage) costs will vary based on the specific plan you choose. With Part D, you will reach an out-of-pocket maximum once you hit the “catastrophic coverage” amount, which changes slightly each year.
- Medicare supplement insurance. Medicare supplement insurance (Medigap) plans can help offset any out-of-pocket costs you may be responsible for paying. Currently, there are two Medigap plans available that come with an out-of-pocket max, but the other eight plan options do not.
While Medicare is designed to cover the bulk of your medical expenses, the system was designed with high cost sharing and no out-of-pocket limits in original Medicare. The more medical services you need, the more you’ll pay in Medicare costs.
The idea is that this will help drive responsible use of medical services. It also means that you could pay a lot out of pocket after Medicare has paid its share.
Medicare Part A out-of-pocket costs
There is no limit to the out-of-pocket costs you may have to pay for original Medicare, which includes Medicare Part A and Part B.
Medicare Part A costs include your share of expenses for any inpatient treatments or care. In 2021, the Part A deductible is $1,484. Once you’ve paid this amount, your coverage will kick in and you’ll only pay a portion of your daily costs, based on how long you’ve been in the hospital.
Here’s a breakdown of the daily out-of-pocket costs after you’ve met your Part A deductible:
|Out-of-pocket cost||Length of stay|
|$0||first 60 days of inpatient hospital care|
|$371 per day||days 61–90 of inpatient care|
|$742 per day||days 91+ of inpatient care until you exhaust your lifetime reserve days|
|all costs||after you’ve used all 60 lifetime reserve days|
Each time you are admitted as an inpatient to a hospital or other care facility, you begin a new benefit period. This periods ends after you’ve been out of the facility for at least 60 days. With every new benefit period, you’ll have to meet the $1,484 deductible before coverage begins. An unlimited number of benefit periods can occur within a year and within your lifetime.
Skilled nursing facility costs
When receiving care in a skilled nursing facility, the rates and benefit periods vary. Days 1 to 20 are fully covered without out-of-pocket costs to you, but days 21 to 100 will cost you $185.50 per day in 2021. You are responsible for the total cost of care from day 101 and beyond, with no out-of-pocket maximum.
Medicare Part B out-of-pocket costs
Medicare Part B covers outpatient medical care. Monthly premiums apply for this coverage and costs are driven by your income level. You will also pay an annual deductible in addition to the monthly premiums, and you must pay a portion of any costs after you meet the deductible.
There is no out-of-pocket maximum when it comes to how much you may pay for services you receive through Part B.
Here is an overview at the different out-of-pocket costs with Part B:
- Monthly premium. Premiums start at $148.50 per month in 2021 and increase with your income level.
- Annual deductible. In 2021, your Part B deductible is $203 per year. You must pay this amount once for the entire year and then your Part B coverage will kick in.
- Coinsurance. After you meet your deductible, you will pay 20 percent of the Medicare-approved amount for most of your medical costs. Some services, like preventive care, are supplied without a coinsurance cost.
- Out-of-pocket maximum. There is no out-of-pocket maximum for your share of Medicare Part B costs.
Medicare Advantage out-of-pocket maximums
Medicare Part C may be the most confusing when it comes figuring out your out-of-pocket costs and limits. Premiums, deductibles, coinsurance, and out-of-pocket costs vary among these plans, but there are some regulations.
Medicare Advantage plans are required to stick an annual limit set by Medicare, known as the maximum out-of-pocket (MOOP) limit. While some plans set their out-of-pocket limits below the MOOP, it can be no more than the set limit for the year.
Here is a breakdown of what cost-sharing looks like in Medicare Advantage plans:
- Out-of-pocket limit. In 2021, the Medicare Advantage out-of-pocket limit is set at $7,550. This means plans can set limits below this amount but cannot ask you to pay more than that out of pocket.
- Out-of-pocket limit levels. Plans may have two different out-of-pocket maximum levels — one for in-network providers and another for out-of-network providers.
- Fees that count toward out-of-pocket maximums. Deductibles, copayments, and coinsurance costs you pay as part of your Medicare Advantage plan count toward the out-of-pocket maximum.
- Premiums. Your monthly premium costs typically do not count toward your out-of-pocket maximum.
- Medicare Advantage Part D cost sharing. If you Medicare Advantage plan includes Part D coverage or medication costs, your Part D cost sharing also does not count toward your out-of-pocket maximum.
You may want a plan that costs more upfront with lower out-of-pocket costs, or you may prefer one with costs lower upfront with the chance that you may be responsible for more out-of-pocket costs later depending on how much care you need during the year.
Medicare Part D out-of-pocket maximums
Medicare Part D covers your prescription drug costs. These plans are offered by private insurance companies. If you elect to buy Medicare Part D coverage, there’s a variety of plans you can choose from.
Medicare Part D out-of-pocket costs include:
- Monthly premium. This is a monthly cost for your plan that can vary based on your income level.
- Annual deductible. You’ll pay this amount before your plan begins its coverage. The annual maximum deductible for 2021 is $445.
- Coinsurance and copayments. These are the costs you’ll pay out of pocket for your prescriptions after you’ve met your deductible.
- Coverage gap. Once your plan has paid out a certain amount for covered prescriptions, you may enter a coverage gap in the Part D plan known as the “donut hole.” In 2021, you will reach the donut hole when you spend $4,130 on your medications for the year. At this point, the manufacturer of the medication will pay 70 percent of the cost, your plan will pay 5 percent, and you will pay 25 percent. While you only pay 25 percent of the medication cost, the entire cost of the medication will count toward your out-of-pocket maximum to get you out of the donut hole. If you are in the Extra Help plan, you won’t enter the donut hole.
- Catastrophic coverage. Once you have paid $6,550 in out-of-pocket prescription costs in 2021, you come out of the coverage gap, or donut hole, and qualify for catastrophic coverage. Once you qualify for catastrophic coverage, you will pay a set coinsurance or copayment for your medications, which is $3.70 for generics and no more than $9.20 for some other higher-tier drugs.
- No out-of-pocket maximum. There is no overall out-of-pocket maximum to what you might pay for your medications.
Medigap out-of-pocket maximums
There are a number of private insurance products that can help cover the out-of-pocket costs of your Medicare coverage. These Medicare supplemental insurance plans are called Medigap, and they are regulated by both federal and state guidelines. Each plan is different, and out-of-pocket costs may vary by plan.
Here are the basics about Medigap costs and what these plan cover:
- Medigap plans help cover original Medicare costs including deductibles, copayments, and coinsurance.
- The price you pay for a Medigap plan can depends on which plan you choose, where you live, your age, and more.
- Only two Medigap plans — Plan K and Plan L — have out-of-pocket limits. For 2021, the out-of-pocket limit for Medigap Plan K is $6,220 and 3,110 for Plan L.
You can also use a special type of health savings account to help cover your out-of-pocket costs. Medicare savings accounts (MSAs) are offered by a small number of providers that offer high-deductible Medicare Advantage plans.
MSAs are savings accounts that are funded by Medicare and provide you with a nest egg that you can use for eligible healthcare costs that you would normally have to pay for out of pocket. If you have funds leftover in this account at the end of the year, they will roll over to the following year.
In some cases, you may need to pay for medical costs upfront and then file a claim to seek reimbursement from Medicare. While Medicare allows you to choose any provider, billing may be set up differently at different places. If you have a medical supply or provider bill that was not sent directly to Medicare for payment, you will need to print and complete a claim form for reimbursement.
How to submit a claim for MSA reimbursement
These steps explain how to complete your MSA reimbursement request:
- Print and complete the Patient’s Request for Reimbursement form.
- Follow the specific instructions at the end of the form for completion.
- Attach an itemized bill or statement for the items or services you’d like to be reimbursed for.
- Mail your claim to the processing center listed at the end of the form, which is based on your location.
- Medicare covers many of medical expenses of those who are eligible for the program.
- While you pay for Medicare coverage through taxes during your working years, you will still have to pay for a portion of your hospitalizations, doctor’s visits, medical equipment, and medications.
- Generally, people who use more medical services pay the most in out-of-pocket expenses.
- Your out-of-pocket limits will vary based on the type of plan or plans you choose and how much you are willing to pay upfront.