- There is no limit on out-of-pocket costs in original Medicare, or Medicare Part A and Medicare 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, and lower-income individuals and those with 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.
Medicare out-of-pocket costs are the amount you are responsible to pay after Medicare pays its share of your medical benefits.
In Medicare 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.
In Medicare 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 Advantage) plans are sold by private insurance companies and offer combined packages to cover your Medicare Part A, Medicare Part B, and even Medicare Part D 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 supplement insurance (Medigap) plans, can help offset any out-of-pocket costs you may be responsible for paying.
There is no limit to the out-of-pocket costs you may have to pay for original Medicare plans, which includes Medicare Part A and Medicare Part B. Medicare is a public medical insurance program aimed at providing medical care for the older adults and people with certain chronic diseases.
While Medicare is designed to cover a bulk of medical expenses for these populations, 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 your Medicare costs will be. The idea is that this will help drive responsible usage, but it also means that you could pay a lot out of pocket beyond what Medicare covers.
Medicare Part A out-of-pocket costs
Medicare Part A covers hospitalization costs. Most people will not pay a Medicare Part A premium, as they paid into the program throughout their working lives through their income taxes. However, each time you are hospitalized, you will bear a share of the costs. In 2020, you will pay:
Medicare hospital admission out-of-pocket costs
|Out-of-pocket cost||Time period||Rule|
|$1,408||Deductible per benefit period||Deductible cost per each individual hospital admission|
|The first 60 days of inpatient hospital care||All costs are covered days 1-60|
|$352 per day||Days 61-90 of inpatient care||No out-of-pocket maximum|
|$704 per day||Days 90+ of inpatient care||No out-of-pocket maximum|
|All costs||Hospital inpatient days 90+ beyond the lifetime limit of 60||You have 60 “lifetime limit” days of hospitalization after the 90th day of admission. All days after that you must pay for 100%. There is no out-of-pocket maximum.|
Skilled nursing care costs
For skilled nursing care, the rates and benefit periods vary. Days 1 to 20 are covered fully, but days 21 to 100 will cost you $176 per day. You are responsible for the total cost of care beyond day 100, with no out-of-pocket maximum.
Medicare Part B out-of-pocket costs
Medicare Part B covers other medical care beyond hospitalization, such as outpatient care. Monthly premiums apply for this plan but are driven by your income level. You will also pay an annual deductible in addition to the monthly premiums, and you must pay a share of any costs after you meet the deductible. There is no out-of-pocket maximum when it comes to your share, which includes:
- Monthly premium. Premiums start at $144.60 per month in 2020 and increase with your income level.
- Annual deductible. In 2020, your Part B deductible is $198 per year.
- Coinsurance. After you meet your deductible, you will pay 20 percent of your medical costs.
- No out-of-pocket maximum. There is NO out-of-pocket maximum for your share of Medicare Part B costs.
Medicare Part C may be the most confusing part of Medicare benefits when it comes figuring out your out-of-pocket costs and limits. Medicare Part C is a private insurance product that combines your Medicare parts A and B coverage. These plans may also include Medicare Part D, which covers prescription medicine costs.
Premiums, deductibles, coinsurances, and out-of-pocket costs vary among these plans, but there are some regulations. Medicare Advantage plans are required to set an annual limit, also known as the maximum out-of-pocket (MOOP). 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 2020, the Medicare Advantage out-of-pocket limit is set at $6,700. 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 coinsurances 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 does not count toward your out-of-pocket maximum.
Medicare Advantage plans will offer different products that you may choose from based on your healthcare needs and what you can spend. You may want a plan that costs more up-front with lower out-of-pocket costs, or 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.
To find the right mix of coverage as well as what your share of costs could be, visit the plan finder tool on Medicare’s website or call 800-MEDICARE to speak with an agent.
Medicare savings accounts (MSAs)
You can also use a special type of health savings account to help cover your out-of-pocket costs. These Medicare savings accounts (MSAs) are offered by a small number of providers of 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.
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.
- Attached an itemized bill or statement for the goods or services for which you are seeking reimbursement.
- Mail your claim to the designated processing center at the end of the form based on your location.
Medicare Part D is the Medicare program that covers prescription medicine. Part D plans are offered by private insurance companies. If you elect to have Part D coverage, there are a variety of plans you can choose from.
Medicare Part D out-of-pocket costs include:
- Monthly premium. A monthly fee that is based on your income level.
- Annual deductible. The amount you have to pay to start plan coverage begins which applies to some plans. For those with deductibles, the annual maximum for 2020 is $435.
- Coinsurance. This is the amount you pay after you have met your deductible.
- Copayment. This fee is a predetermined percentage of the drug cost that you pay.
- 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 2020, you will reach the donut hole when you spend $4,020 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 $6,350 in out-of-pocket prescription costs for 2020, 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.
- No out-of-pocket maximum. There is no overall out-of-pocket maximum to what you might pay for your medications.
You can compare Medicare prescription plans on Medicare’s website, or get additional information about Medicare prescription drug coverage by calling 800-MEDICARE.
There are a number of private insurance products that can help cover the out-of-pocket costs of your medical care. These Medicare supplement plans are called Medigap plans, 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 of costs of Medigap and which might apply towards your out-of-pocket maximum:
- Medigap plans help cover original Medicare costs including deductibles, copayments, and coinsurance.
- There are 10 different Medigap plans. Medicare offers a side-by-side comparison of the benefits that each of these standardized plans cover.
- The price you pay for a Medigap plan depends on which plan you choose.
- Only two Medigap plans — K and L — have out-of-pocket limits. For 2020, the out-of-pocket limit for Medigap plan K is $5,880, and the limit for plan L is $2,940.
- Medigap plans only cover a portion of your share of healthcare costs. It does not pay for additional services which are not included in your Medicare plans.
- Medicare covers the bulk of medical expenses for people of a certain age or with certain health conditions.
- 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.
- 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 you choose and how much you are willing to pay up front.