Do Medicare Supplement Plans Have an Out-of-Pocket Maximum?

by Russell Noga | Updated May 18th, 2023

The cost of medical care can be exorbitant – even for individuals who receive their coverage through Medicare.

In fact, did you know it’s estimated that more than one-fourth of those who are enrolled in Original Medicare spend around 20 percent of their yearly income on out-of-pocket expenses that aren’t covered by Part A and Part B?

If you’re approaching the age of retirement, there are two critical factors that you’ll need to plan for: healthcare and finances. If you’re already enrolled in Original Medicare or you’re planning on enrolling in the future, Medicare Supplement Insurance can address the aforementioned factors – and can help you keep a large portion of your savings where it belongs: in your pocket.

When it comes to the out-of-pocket expenses that are associated with Medicare Supplement Insurance plans, many beneficiaries wonder if Medicare Supplement plans have an out-of-pocket maximum. To ensure you have the vital information that you require so you can appropriately plan for your future medical and financial needs, keep on reading.

An Overview of Medicare Supplement Insurance

Before we discuss whether or not Medicare Supplement plans have an out-of-pocket maximum, it’s important to have a basic understanding of these plans, including what they are and how they work.

Medicare Supplement plans (also known as Medigap) are private health insurance plans that are designed to, as the name suggests, supplement Original Medicare. Original Medicare consists of two separate parts: Part A, which pays for expenses that are related to inpatient care (hospital stays, hospice care, etc.), and Part B, which pays for expenses that are related to outpatient care (office visits, preventative services, etc.).

Although Original Medicare does cover a large portion of these expenses, it doesn’t pay for everything. In fact, Part A and Part B will cover 80 percent of our medical expenses, and you’re responsible for the remaining 20 percent.

The out-of-pocket expenses that are associated with Original Medicare can be exorbitant and for many, can result in financial hardship. Medicare Supplement Insurance helps to make healthcare for Medicare beneficiaries more affordable by covering the expenses that Part A and Part B don’t cover. There are 10 Medigap plans, which are sold by private insurance companies and are regulated by the federal government.

The plans are named for letters (Plans A through Plan N), and offer different standardized benefits. Because Medicare Supplement Insurance is standardized, plans that are the same letter must offer the same standard benefits, regardless of the location and the provider.

What is an Out-of-Pocket Maximum?

An out-of-pocket maximum refers to the maximum amount you could spend each year for the medical costs that your Medigap plan covers; copayments, coinsurance, and deductibles, for example. Keep in mind that the monthly premiums that you have to pay your Medicare Supplement insurer are not included in your out-of-pocket expenses, nor does it include costs that your plan doesn’t cover.

Typically, if you have a plan that doesn’t have an out-of-pocket maximum, you could end up being hit with exorbitant expenses.

What’s the Out-of-Pocket Maximum for Original Medicare?

Original Medicare doesn’t have an out-of-pocket maximum. This means that if you are diagnosed with a serious illness that requires regular medical care and you are only enrolled in Medicare Part A and Part B, you could end up having to pay for 20 percent of those expenses (the amount that Original Medicare doesn’t pay for).  As you can probably imagine, given the high cost of healthcare, if such a situation occurred, you could experience serious financial hardship.

Do Medicare Supplement Plans Have an Out-of-Pocket Maximum?

No, most Medigap plans do not have an out-of-pocket limit. Upon learning this, a lot of beneficiaries worry that, in the event that their medical needs increase, they could end up going broke. While that concern is certainly understandable, it’s extremely unlikely.

Why don’t most Medicare Supplement plans have an out-of-pocket maximum? Because these policies are designed to supplement Original Medicare by reducing the expenses that aren’t covered by Part A and Part B; these plans aren’t intended to replace Original Medicare.

Additionally, these plans do not provide benefits beyond what Part A and Part B cover. In other words, since Medigap policies don’t offer additional benefits beyond what Medicare Part A and Part B cover, they do not have an out-of-pocket maximum.

So, what does this mean if you have a Medicare Supplement plan? It means that because Medigap can cover a large portion of the out-of-pocket expenses that are associated with Original Medicare, your exposure, in terms of your finances, is limited.

In other words, most Medicare Supplement Insurance plans don’t have an out-of-pocket maximum because it simply isn’t necessary.

Do Any Medigap Plans Have a Maximum Out-of-Pocket?

Yes, there are two Medicare Supplement Insurance plans that have out-of-pocket maximums: Plan K and Plan L. For Plan K, the maximum out-of-pocket limit is $6,940 with 50 percent cost-sharing. For Plan L, the maximum out-of-pocket limit is $3,740 with 25 percent cost-sharing. As such, your Part B excess charges and deductible charges don’t impact your out-of-pocket maximum.

How to Limit Medicare Supplement Out-of-Pocket Costs?

If you are planning on enrolling in a Medigap plan that doesn’t have an out-of-pocket maximum, there are some things that you can do to limit your expenses. Suggestions include:

• Pick a plan that offers more extensive coverage. Though the monthly premiums for plans that offer more extensive coverage might be higher, they can also cover more of your out-of-pocket expenses.
• Compare insurers. Different insurance companies can charge different rates for the same coverage and services. By shopping around, you can find a provider that charges better rates.
• Make use of preventive care. A lot of preventative services are covered by Original Medicare. By making use of these services, you can prevent health issues that might require more costly care down the line.

Frequently Asked Questions

What is a Medicare Supplement Plan?

A Medicare Supplement Plan, also known as Medigap, is a type of insurance policy that’s sold by private insurance companies to help cover some of the health care costs not covered by Original Medicare (Part A and Part B), such as copayments, coinsurance, and deductibles.

How does a Medicare Supplement Plan work with Medicare Part A and Part B?

A Medicare Supplement Plan complements your Original Medicare benefits. This means that Medicare Part A and Part B will first pay their share for any covered healthcare services you receive. Afterward, your Medicare Supplement Plan would kick in and pay its share for any remaining costs.

How does a Medicare Supplement Plan pay claims?

Once Medicare pays its approved amount for your covered healthcare service, it sends the remaining claim to your Medicare Supplement insurance company. The company then pays its share of the costs according to your plan’s policy.

Do Medicare Supplement Plans have out-of-pocket maximums?

Unlike Medicare Advantage Plans, Medicare Supplement Plans do not have an out-of-pocket maximum. This means that while the plans cover a significant portion of your healthcare costs, there is no annual limit to what you may need to pay out-of-pocket.

What does Medicare Part A cover and how does a Supplement Plan help?

Medicare Part A primarily covers inpatient hospital care, skilled nursing facility care, hospice, and some home health care. If you have a Medicare Supplement Plan, it can help cover the remaining costs after Medicare Part A has paid its share, such as coinsurance and hospital costs up to an additional 365 days after Medicare benefits are exhausted.

What does Medicare Part B cover and how can a Supplement Plan assist?

Medicare Part B mainly covers outpatient services, including doctors’ services, preventive services, and medical supplies. A Medicare Supplement Plan can aid by covering the Part B coinsurance or copayment, and some even cover the Part B deductible.

Are prescription drugs covered by Medicare Supplement Plans in 2024?

Medicare Supplement Plans in 2024 will not include prescription drug coverage. You would need to join a Medicare Prescription Drug Plan (Part D) to get drug coverage.

Can a Medicare Supplement Plan reject my application based on pre-existing conditions?

In some cases, yes. If you apply for a Medicare Supplement Plan after your Medigap Open Enrollment Period, the insurance company can use medical underwriting and may reject your application based on your health status or charge more for the policy.

Do all doctors accept Medicare Supplement Plans?

Doctors that accept Medicare generally accept Medicare Supplement Plans. However, it’s always wise to confirm with the specific healthcare provider.

Can I switch Medicare Supplement Plans if I am unhappy with my current one?

Yes, you can switch Medicare Supplement Plans at any time. However, if you’re past your Medigap Open Enrollment Period, you may have to go through medical underwriting and could be charged more or denied coverage based on your health status.

Contact Us for a Free Consultation on Medigap Plan

If you have questions about Medicare supplement plans, call our team at 1-888-891-0229. We offer professional advice on Medigap policies. Our fully licensed agents offer free consultations to give you all the information you need about Medigap.

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