by Russell Noga | Updated September 5th, 2023
Original Medicare Parts A & B cover 80% of most Part A & B healthcare expenses. While that’s a huge relief, it means you have a financial responsibility to cover the remaining 20% of healthcare costs.
In some cases, this obligation can amount to thousands of dollars.
Dipping into your retirement savings to cover a percentage of a medical expense can dramatically alter your financial planning in your senior years.
A Medicare supplement plan (Medigap policy) can reduce your out-of-pocket costs, leaving you with nothing to pay, depending on your chosen plan.
Do Medicare supplement plans have an out-of-pocket maximum?
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Medigap Coverage and Benefits
All Medigap plans come with the following standardized benefits for Original Medicare Parts A & B.
- Part A coinsurance and hospital costs for up to 365 days after using up Medicare benefits.
- Part A hospice care coinsurance or copayment.
- Part B coinsurance or copayment.
- Blood transfusion costs for the first three pints of blood.
Plans F, G, and N offer additional Medicare Parts A & B benefits.
- Part A deductible.
- Part B excess charges (Plan N doesn’t cover these charges).
- Skilled nursing facility care coinsurance.
- 80% of emergency healthcare costs when traveling outside the US for 60 days. ($250 deductible and $50,000 maximum apply).
- Unlimited coverage for all out-of-pocket costs.
Understanding Medicare Out-of-Pocket Maximums
The out-of-pocket costs associated with Medicare Parts A & B are called gaps. These are expenses that Medicare beneficiaries are required to pay.
Here’s how out-of-pocket costs work for Parts A & B.
Medicare Part A – Covers hospitalization
Medicare Part B – Part B requires a monthly premium and annual deductible ($226 in 2023). There is a limit on what Medicare covers, but no limit on the out-of-pocket maximum you could pay beyond your Medicare coverage without a Medigap plan.
Medicare Part C – These are Medicare Advantage plans and an alternative to Medicare Parts A & B. Deductibles, monthly premiums, coinsurance, and copayments vary based on your policy.
Medicare Part D – This policy has out-of-pocket maximums when you reach the “catastrophic coverage” limit, which changes yearly.
What are the Out-of-Pocket Costs for Medicare Part A?
There’s no limit to out-of-pocket costs paid for Original Medicare. This includes Part A and Medicare Part B. Typically, Medicare Part A covers the expenses of hospitalization.
Most beneficiaries don’t pay a Part A premium; it comes from your social security and your years as a taxpayer while working.
The Part A deductible is $1,600 in 2023, and after you pay this amount, coverage kicks in, and you pay a portion of your daily hospital costs. Every time the medical team admits you to the hospital for inpatient care, you start a new benefits period.
The period ends 60 days after being released from the hospital or care facility. You’ll have to pay the $1,600 deductible for each new benefit period until your Medicare Part A coverage begins.
Beneficiaries have unlimited benefit periods occurring within a year and their lifetime.
The benefits and rates may vary when receiving care in a skilled nursing facility. You have full coverage for Part A expenses from day 1 to 20, with no out-of-pocket expenses due.
However, days 21 to 100 will cost $200 per day in 2023. The beneficiary is responsible for the total cost of care after day 100, and there are no out-of-pocket maximums.
What are the Out-of-Pocket Costs for Medicare Part B?
Medicare Part B covers beneficiaries for their outpatient medical care. Unlike Part A, there is a monthly premium for this policy. Medicare Part B is optional, however, you must have it in place in order to enroll in a Medicare Supplement plan.
The premium for Part B in 2023 is $164.90 in 2023, and you’ll need to pay the Part B deductible of $226 in 2023 before activating your Part B benefits. Copays and coinsurance can also apply to Part B services.
There’s no out-of-pocket maximum to how much you could pay for healthcare services received through Part B. The following is an overview of the out-of-pocket costs associated with Medicare Part B.
– As discussed, the premium is $164.90, and the deductible is $226 for 2023. These costs make increase or decrease each year.
– Coinsurance Responsibilities – Beneficiaries pay 20% of Medicare-approved amounts for medical costs after paying the deductible. Some preventive care services don’t feature coinsurance costs.
– Out-of-Pocket Maximums – There are no out-of-pocket maximums for the beneficiary’s share of Part B costs.
Do Medicare Supplement Plans Have an Out-of-Pocket Maximum?
Private healthcare insurers offer “Medigap” plans to help you cover the 20% of out-of-pocket costs associated with Original Medicare Parts A & B.
The most popular Medigap plans are Plans F, G, and N. These plans pay the additional 20%, with Plan G and N first having a deductible to meet. They do not have an out-of-pocket maximum as it does not apply to these plans.
However, two plans – K & L, have out-of-pocket limits. Plan K has a $6,940 limit, and Plan L has a $3,470 limit.
The Centers for Medicare & Medicaid Services (CMS) increases these limits based on the estimates for the United States Per Capita Costs of Medicare programs developed by the CMS.
Speak to our team if you need assistance understanding out-of-pocket costs and how they relate to Original Medicare Parts A & B and Medigap plans.
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Frequently Asked Questions
Do Medicare Supplement plans have an out-of-pocket maximum?
No, Medicare Supplement plans, also known as Medigap plans, do not have an out-of-pocket maximum as it doesn’t apply to these plans. Only Plans K and L have an out-of-pocket maximum.
Is there any limit to the cost-sharing expenses with Medicare Supplement plans?
Medicare Supplement plans do not have a cap on cost-sharing expenses like deductibles, copayments, or coinsurance. You are responsible for paying these costs as they arise.
Are there any other types of insurance that have an out-of-pocket maximum for Medicare beneficiaries?
Yes, Medicare Advantage plans (Part C) often have an out-of-pocket maximum. These plans are an alternative to Original Medicare and may offer additional benefits and cost-sharing protections.
How can I manage potential high out-of-pocket costs with Medicare Supplement plans?
Choosing the right Medicare Supplement plan can limit potential high out-of-pocket costs. Medicare Plans G and N both help with these costs.
Do Medicare Supplement plans cover all the costs that Original Medicare does not cover?
Medicare Supplement plans are designed to help fill the “gaps” in Original Medicare coverage, but they do not cover everything. They may help cover certain deductibles, copayments, and coinsurance, but they do not cover services excluded by Medicare.
Can I switch from a Medicare Supplement plan to a Medicare Advantage plan if I want an out-of-pocket maximum?
Yes, you can switch from a Medicare Supplement plan to a Medicare Advantage plan during the Annual Enrollment period from October 15th through December 7th. There are copays and coinsurance with Medicare Advantage plans, as well as prior authorization often needed for various services.
There is also a network you must adhere to, unlike with a Medigap plan.
Are there any financial assistance programs available to help with Medicare Supplement plan costs?
No, there are no financial assistance programs specifically for Medicare Supplement plan costs. However, you may be eligible for other assistance programs like Extra Help, which helps with prescription drug costs, or state-specific programs.
Find the Right Medicare Plan for You
Discovering a Medicare plan doesn’t have to be confusing. Whether it’s a Medigap plan, or you have questions about Medicare Advantage or Medicare Part D, we can help.
Call us today at 1-888-891-0229 and one of our knowledgeable, licensed insurance agents will be happy to assist you!
Russell Noga is the CEO of Medisupps.com, an online Medicare Agency and resource center helping Medicare beneficiaries learn about Medicare, Medigap and Part D drug plans, and Medicare Advantage plans since 2009. Russell is licensed in all 50 states and has been featured as a keynote speaker, and author of several publications, along with hosting the very popular Medisupps.com Youtube channel.