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.
In 2020, Part B has a $203 deductible for the year. After this, a person generally pays 20% of the Medicare-approved cost for services.
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.
Helpful tools are available to compare plans and find the best coverage option for individual circumstances using either the Medigap web tool or the Medicare plan finder.
Medicare Savings Programs (MSPs) can help pay out-of-pocket expenses, such as:
- Part A premiums
- deductibles
- coinsurances
- copayments
- Part B premiums
As of January 1, 2020, no policies can help with Part B deductible costs.
A person may qualify for Extra Help for Medicare Part D. In 2020, people eligible for and enrolled in an Extra Help plan can expect to pay $3.70 for a generic drug and $9.20 for a brand name drug.
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.