Does Original Medicare Have a Maximum Out-of-Pocket?

If you've had employer-sponsored health insurance or a marketplace plan, you're probably familiar with the safety net of a maximum out-of-pocket limit. A maximum out-of-pocket limit is a cap on your annual medical expenses that keeps costs from spiraling out of control. It's a standard feature of most health plans, so when people transition to Medicare, they naturally assume the same protection exists. But here's the surprise: the answer isn't as straightforward. Whether Medicare has a maximum out-of-pocket (MOOP) depends entirely on which parts of Medicare you have.

In this blog, we'll walk you through how out-of-pocket costs work in Medicare so you know exactly what protection you have and where you might need extra coverage.

The Short Answer: Does Original Medicare Have an Out-of-Pocket Maximum?

No, Original Medicare does not have an annual out-of-pocket maximum.

Why Original Medicare Doesn’t Include a Spending Cap

Original Medicare was established in 1965, and many things have changed since that time. However, Medicare was initially designed as a fee-for-service structure that involves cost-sharing responsibilities in the form of deductibles, copays, and coinsurance for those enrolled.

What Counts as Out-of-Pocket Costs Under Original Medicare?

So if Original Medicare does not place a cap on medical costs, what can you expect to pay? Original Medicare consists of two parts — Part A (hospital coverage) and Part B (medical coverage).

When you are enrolled in Original Medicare, you can expect to be responsible for:

• Part A deductibles and copayments
• Part B deductible and 20% coinsurance
• No cap on total spending

See Original Medicare costs for this year.

Find out more about Medicare Coverage & Costs

It's important to note that Original Medicare does not cover prescription drugs. If you do not obtain additional coverage, you will be responsible for all costs related to prescription medications. Additionally, if you fail to enroll in a drug plan when you are first eligible for Medicare, you may incur late enrollment penalties.

Learn More: How Does Medicare Part D Work?

Who Should Be Most Concerned About Out-of-Pocket Costs?

The truth is, everyone on Medicare needs to be aware of this information and concerned about potential costs. It's not just those in poor health or frequent healthcare users who are susceptible to high medical costs without a max-out-of-pocket. Anyone can have a rough year, an injury or an unexpected diagnosis that can quickly lead to insurmountable medical expenses.

However, it is arguable that managing your out-of-pocket medical costs is increasingly important for those on Medicare, most often seniors who are on fixed incomes, where high expenses can be detrimental. Fortunately, there are options available for Medicare beneficiaries to have more control over their medical costs and limit annual expenses.

Comparing Your Medicare Options to Manage Costs

There are several types of Medicare plans that can work alongside Original Medicare that help control your medical expense costs. The two most common are Medicare Part C Medicare Advantage Plans (MA/MAPDs) and Medigap Policies (Medicare Supplements).

How Medicare Advantage Plans Handle Out-of-Pocket Maximums

Medicare Advantage plans (MA/MAPD) are Medicare-approved plans offered by private insurance companies that cover everything that Original Medicare Part A and Part B covered. Additionally, Medicare Advantage Plans are required to have an annual out-of-pocket limit.

The out-of-pocket maximum varies from plan to plan, and typically, the higher the monthly premium, the lower your out-of-pocket maximum and cost exposure is. For example, a Medicare Advantage Plan with a $100 monthly premium may have a $4,000 annual out-of-pocket maximum, whereas a $50 monthly premium plan could have an $8,000 cap.

Medicare Advantage Plans do work differently from Original Medicare, and they establish their own provider networks, plan rules, and there may be referrals and prior authorization requirements.

Learn More: What is a Medicare Advantage Plan (And Do I Need One?)

How Medigap Plans Help Limit Out-of-Pocket Costs

Medicare Supplements, also known as Medigap policies, are another Medicare coverage option that can fill the gaps of original Medicare and protect you from exceedingly high medical costs. There are various types of Medigap policies, and the available options and their coverage can vary by state.

With a Medigap policy, Medicare is your primary payer, and the supplement plan pays after. This can help you manage costs predictably and limit your responsibility for Original Medicare's deductibles and coinsurance expenses.

Learn More: Medigap – What is It and Do I Need It?

Get Reliable Help Choosing the Right Medicare Coverage

At Twin City Underwriters, we know how confusing Medicare can be, which is why we are dedicated to providing free resources and Medicare education services. We offer monthly Medicare 101 webinars and in-person sessions in cities across the Minnesota Twin Cities Metro. For personalized support and guidance, our Medicare agents are available to answer your questions and support you throughout the enrollment process.

Schedule a no-cost, no-obligation Medicare review with our experienced team of Medicare brokers to learn more about your Medicare options and determine what type of coverage is ideal for you.

Choosing a Medicare plan can be difficult. Twin City Underwriters helps Medicare recipients in Minnesota, Wisconsin, North Dakota, South Dakota, Iowa and Florida find the Medicare plan that meets their unique needs. Schedule a one-on-one meeting with one of our Medicare insurance brokers to get your questions answered!

Do you need help with Medicare, insurance and health plans? Explore your options with Allina Health Aetna, BlueCross BlueShield of Minnesota, Medica, HealthPartners, United HealthCare and more. We work with you to find the best plan for your needs and budget. Contact us today to get started.