Out-of-pocket maximums are the most a person will pay for services in a year. Costs can vary depending on the Medicare plan, and extra help may be available.
Medicare is an insurance plan that the federal government administers, and parts A and B have no out-of-pocket maximums.
Medicare Part D does limit a person’s out-of-pocket charges for prescription drugs.
A person can get help paying out-of-pocket charges from several resources.
In this article, we identify out-of-pocket expenses, discuss exceptions, and explain how to get help with these costs.
There are different parts to Medicare:
- Part A, which covers in-hospital costs.
- Part B, which provides coverage for outpatient services, such as doctor’s office visits, durable medical equipment, some at-home healthcare, and limited prescription medication.
- Part C (Medicare Advantage), including plans that private medical insurance companies sell, which may bundle parts A, B, and D together.
- Part D, which covers prescription medication and can be part of a bundle within Part C or an individual product.
Insurance plans have out-of-pocket costs that an insurance plan does not cover. They include:
- Deductibles: The costs a person must pay before the insurance plan begins paying for medical charges.
- Coinsurances: A percentage amount that a person pays after the deductible is met.
- Copayments: A fixed amount that a person pays for covered health services after the deductible is met.
- Excess charges: A charge of up to 15% more than the Medicare allowable cost, permitted by some states, which a person must pay.
The Medicare out-of-pocket maximum is the most money a person will pay for a covered service in one year.
The maximum out-of-pocket expenses are different for Medicare parts A and B. They do not include:
- monthly premiums
- charges the insurance plan does not cover
- out-of-network services
- costs above the Medicare-allowed amount
- penalty charges
Part A maximums
There is no Medicare out-of-pocket maximum for Part A. Instead, Medicare determines how much a person will pay for Part A in each benefit period.
A benefit period starts on the day an individual enters a hospital or skilled nursing facility and ends 60 days after a doctor discharges them.
If a person returns to the hospital after 60 days of leaving, a new benefit period starts.
Out-of-pocket costs for Medicare Part A in 2021 are:
- a $1,484 deductible for every benefit period
- a $371 copayment each day from day 61 to 90
- a $742 copayment each day of lifetime reserve days from day 91 to 151
- all costs after day 151
It is important to note that on days 1 to 60 of each benefit period, a person pays no coinsurance.
Part B maximums
There is no annual out-of-pocket limit for Medicare Part B.
A person is first eligible for Part B when they turn 65, but if they delay enrollment, a penalty charge may apply to the premium for as long as Medicare Part B is active.
Many people pay the standard Part B premium, but a person may be eligible for an altered cost based on their modified adjusted gross income. In 2020, the standard premium is $148.50 for people filing an individual tax return with an income of $88,000 or less.
Part D maximums
Medicare Part D covers prescription drugs and has an annual deductible. This amount may vary, but cannot be more than $445 in 2020.
Most private plans also have a coverage gap known as the “donut hole” that begins after a person and their insurance have spent approximately $4,130 in 1 year on medications. This amount can change each year.
Medicare parts A and B do not have out-of-pocket limits, and there are no exceptions.
Private insurance companies who cover Medicare Part D keep a list of plan-approved prescription medication known as a formulary. Each formulary may list different drugs, depending on the insurance provider a person chooses.
If the plan approves a generic drug, a person or provider can ask for an exception for a branded, nonlisted alternative. An individual may be required to provide a written statement that should include a medical reason to justify the approval of the alternative drug.
Medicare Supplement Insurance (Medigap) plans help cover gaps that out-of-pocket expenses leave. As with Medicare Advantage and Part D, private medical insurance companies run Medigap plans.
It is important to note that a person cannot have a Medicare Advantage plan and a Medigap plan at the same time.
Medicare Savings Programs (MSPs) can help pay out-of-pocket expenses, such as:
- Part A premiums
- Part B premiums
As of January 1, 2020, no policies can help with Part B deductible costs.
Out-of-pocket costs are those that Medicare does not cover. These include deductibles, coinsurances, copayments, and excess charges.
There is no limit on the out-of-pocket costs for parts A and B.
Part D plans cover prescription medication, and private medical insurance companies offer different drug options. Part D has an out-of-pocket maximum of $445 in 2020.
There are no exceptions for Medicare parts A and B. However, a person can ask for an exception for a particular drug within Part D. A statement with the medical reason for the request is usually necessary.
A person can get help covering out-of-pocket expenses with Medigap. It is not possible to use Medicare Advantage and Medigap plans together.