Out-of-Pocket Maximum: What You Need to Know

Whether you currently have Medicare or another type of health plan, your insurance may include an out-of-pocket maximum. As you evaluate or choose your Medicare coverage, it’s important to know what costs are associated with different parts of Medicare. For example, how much do you need to budget for your Medicare Part A out-of-pocket maximum?

Medicare is divided into four parts, which come with various expenses and maximum out-of-pocket limits: Part A, Part B, Part C, and Part D.

Most individuals qualify for Part A and Part B upon turning 65, so long as they or their spouse worked at least 40 quarters. Parts A and B are considered “Original Medicare.”

Part C (also called Medicare Advantage) combines Parts A, B, and typically D into one plan. Medicare Part D covers prescription drugs. Parts C and D are additional coverage that you can purchase to bolster Original Medicare. While Medicare Parts A and B are mandated by federal and state governments, private insurance companies offer Part C and Part D plans.

Continue reading to learn more about maximum out-of-pocket costs for the four parts of Medicare coverage.

What is an Out-of-Pocket Maximum?

An out-of-pocket maximum is the most an individual will have to pay for covered medical expenses in a year. After you pay the maximum out-of-pocket costs (through deductibles, copayments, and/or coinsurance), your plan pays all covered medical expenses through the end of the plan year.

A deductible may or may not count towards your out-of-pocket maximum. In the case that it doesn’t, you are responsible for meeting both your deductible and your out-of-pocket limit before your health plan picks up any costs. Some plans or parts also charge a monthly premium in addition to your out-of-pocket expenses.

Medicare Part A

Medicare Part A covers inpatient care: hospitalizations, skilled nursing care, hospice, and home health care. As long as you or your spouse has worked at least 10 years by the time you turn 65, you receive Medicare Part A for no monthly premium.

There is no Medicare Part A out-of-pocket maximum. Depending on your plan, most beneficiaries pay deductibles or coinsurance.
For inpatient hospital services, Medicare requires that you pay a $1,484 deductible each benefit period. Once you pay that amount, Medicare covers all other costs for the first 60 days of inpatient care. However, beyond 60 days, you pay a daily coinsurance out-of-pocket. The table below outlines the Medicare Part A coinsurance rates for hospital stays.

Days in Hospital Daily Coinsurance
1-60 $0
61-90 $371
91+ (up to lifetime reserve) $742

Note: Past 90 days of hospitalization, you tap into your “lifetime reserve” of 60 additional days of hospitalization. If you use up this lifetime reserve, you pay all costs.

Medicare Part A also includes skilled nursing care: health care services given when you need skilled nursing or therapy staff to treat, manage, observe, and evaluate your care. Same as if you were hospitalized, if you receive skilled nursing care, Medicare pays all costs (beyond your deductible) for the first 20 days.

After 20 days, you pay a daily coinsurance out-of-pocket. The table below outlines the Medicare Part A coinsurance rates for skilled nursing care.

Days in Skilled Care Daily Coinsurance
1-20 $0
21-100 $185.50
100+ All costs

Note: If you purchase Medicare Advantage or Supplement coverage in addition to Original Medicare, your plan may require different out-of-pocket costs, or come with an out-of-pocket maximum. These figures apply to Original Medicare.

Medicare Part B

Medicare Part B generally covers outpatient and preventative care—ambulance services, health screenings, and medical equipment, for example. Like Part A, Medicare Part B has no maximum out-of-pocket limit.

All Medicare beneficiaries pay an annual deductible ($203) and monthly premium for Part B. The monthly premium can increase based on your income, but the starting rate is $148.50.

After you pay your deductible and premium, your Medicare coverage pays 80 percent of your health care costs for Part B services. You pay the remaining 20 percent.

Medicare Part C

Medicare Part C, also called Medicare Advantage, is available to purchase on top of Original Medicare. These plans combine Parts A and B, and they often include prescription drug coverage (Part D) and cover additional services that may not be included in Original Medicare. The Medicare Advantage out-of-pocket maximum is $7,550.

The federal government sets this out-of-pocket limit, coordinating with insurance carriers each year. While the overall limit on out-of-pocket costs is $7,550, Part C plans are priced competitively. Your Medicare Advantage out-of-pocket maximum could be lower than the federal standard, depending on the coverage you choose.

If your Medicare Advantage plan requires higher out-of-pocket costs, it may also offer a Medicare Savings Account (like a health savings account [HSA]) where you can store funds to pay for covered health care services.

Medicare Part D

Additionally, you can purchase prescription drug coverage on top of Original Medicare. Part D plans, like Part C, come with varying costs based on the plan, provider, and coverage you select. Prescription drug plans do not have a set out-of-pocket maximum.

Medicare Part D’s annual deductible is $445. Depending on your plan, you may also pay copays at the pharmacy or a monthly premium. If your income is above a certain level, you can pay a higher premium for your prescription drug coverage. Read more on that here.

When it comes to Medicare Advantage, Supplements, and drug plans, hundreds of plan options exist—so you can customize your Medicare coverage and costs based on your needs.

FAQs: Out-of-Pocket Maximums

Is there a Medicare Part A out-of-pocket maximum? What about Part B?
No—there is no limit to what you can pay for Original Medicare. However, parameters determine when and how you pay. If you purchase Supplement or Medicare Advantage coverage, your plan may come with an out-of-pocket limit.

What is the Medicare Advantage out-of-pocket maximum?
The most you will pay out-of-pocket on a Part C plan is $7,550. However, based on your Medicare coverage, some plans may offer lower maximums.

Does Medicare Part D have maximum out-of-pocket costs?
Not by default. However, individual carriers may set out-of-pocket maximum limits with prescription drug plans. It depends on the coverage you purchase.

Questions About Your Medicare Coverage?

RetireMEDiQ puts a team of trusted Medicare mentors at your fingertips, whether you’re trying to lower what you pay for Medicare Advantage out-of-pocket or determining the best Medicare plan for your needs. We can talk you through your expenses, including your out-of-pocket maximum, and ensure you receive the right coverage.

To speak with an advisor, you can call 1-866-407-5180. You can also email your Medicare questions to advice@retiremediq.com.

Already a RetireMEDiQ client? Client advisors are available at 1-877-222-1942 or client@retiremediq.com.

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