Understanding Medicare's Out-of-Pocket Maximum and How It Protects You

Yes, Medicare has an out-of-pocket maximum, but it works differently than employer insurance

Medicare Part B and Part D have annual out-of-pocket limits that cap what you pay in a calendar year. For 2024, the Part B limit is $2,000 for covered services like doctor visits and hospital care. Part D (prescription drugs) has a separate limit tied to when you enter the catastrophic coverage phase — typically around $7,050 in total out-of-pocket spending, though this amount changes yearly. Once you hit these limits, Medicare or your plan covers the rest of your costs for the remainder of that calendar year.

The catch is that these limits do not cover everything. Premiums, balance billing from providers who do not accept Medicare assignment, and costs for services Medicare does not cover at all do not count toward your out-of-pocket maximum. If you have a Medigap or Medicare Advantage plan, that plan may have its own out-of-pocket limits that are lower than the standard Medicare limits.

Key Takeaways

Original Medicare Part B has an annual out-of-pocket maximum of $2,000 for covered services, after which Medicare pays 100 percent of approved amounts.
Part D prescription drug coverage has a separate catastrophic threshold around $7,050 in total out-of-pocket costs, after which your coinsurance drops to 5 percent.
Medicare premiums, balance billing, and non-covered services do not count toward either out-of-pocket limit.
Medicare Advantage plans and Medigap policies each set their own out-of-pocket maximums, which may be lower than the standard Medicare limits.
The out-of-pocket limits reset on January 1 each year, so costs from December do not carry over.

How the Part B out-of-pocket maximum works

Under Original Medicare Part B, once you have paid $2,000 out of pocket for covered services in a calendar year, Medicare pays 100 percent of the approved amount for the rest of that year. This includes your coinsurance (usually 20 percent of the approved amount) and your deductible ($240 in 2024). The limit applies only to services Medicare covers — things like office visits, hospital outpatient care, and diagnostic tests.

The $2,000 limit counts only what you pay directly to providers for covered services. It does not include your monthly Part B premium, which you pay to Medicare regardless of how much you use services. It also does not include any amount a provider charges above Medicare's approved amount if that provider does not accept Medicare assignment. If a provider bills you for the difference, that extra charge stays your responsibility even after you hit the $2,000 limit.

To track your spending toward this limit, check your Medicare Summary Notice (the statement Medicare sends you) or log into your Medicare account online. The notice shows what you paid and what counts toward your out-of-pocket maximum.

How Part D prescription drug coverage and catastrophic limits work

Part D has a different structure. You move through several cost phases as your spending increases. In the initial coverage phase, you pay a copay or coinsurance for each prescription. Once your total out-of-pocket spending reaches around $7,050 (the 2024 threshold), you enter catastrophic coverage. At that point, you pay only 5 percent coinsurance for brand-name drugs and generics for the rest of the year.

The $7,050 threshold counts only what you and your plan pay together toward covered drugs. It does not include your Part D premium. Some people reach catastrophic coverage in December and then the limit resets on January 1, so they start the year back in the initial coverage phase.

Part D plans vary widely in their copays and coinsurance amounts, so your actual spending before reaching catastrophic coverage depends on which plan you chose and which drugs you take. A plan with lower copays may cost more in premiums but get you to catastrophic coverage faster if you take many medications.

What does not count toward your out-of-pocket maximum

Medicare premiums — Part B, Part D, and any Medigap or Medicare Advantage premium — never count toward your out-of-pocket limit. You pay these separately and continuously, regardless of how much you use services.

Balance billing also does not count. If a provider does not accept Medicare assignment and charges you more than Medicare's approved amount, that extra charge is your responsibility and does not reduce what you still owe toward your out-of-pocket maximum. To avoid balance billing, always confirm that your provider accepts Medicare assignment before your visit.

Services Medicare does not cover — such as routine dental, vision, hearing aids, or long-term care — do not count either. If you need these services, you pay the full cost out of pocket, and it does not help you reach your out-of-pocket limit.

Out-of-pocket limits under Medicare Advantage and Medigap plans

Medicare Advantage (Part C) plans set their own out-of-pocket maximums, which are often lower than the standard Medicare limits. In 2024, the maximum out-of-pocket limit for Medicare Advantage plans is capped at $8,050 for in-network services. Once you hit that limit, your plan covers 100 percent of in-network covered services for the rest of the year. Out-of-network services may have a higher limit or different rules.

Medigap (supplemental insurance) plans work differently. They do not have an out-of-pocket maximum in the traditional sense. Instead, they cover certain costs that Original Medicare leaves you responsible for — like coinsurance and copays. Once you pay your Medigap premium, many Medigap plans cover most or all of your cost-sharing, so your out-of-pocket spending is capped by your premium rather than by a service limit.

If you have a Medicare Advantage plan, check your plan documents or call your plan to learn your specific out-of-pocket maximum and whether it applies to in-network and out-of-network care differently.

How to track your out-of-pocket spending throughout the year

Medicare sends you a Medicare Summary Notice (MSN) every three months if you use services. This notice lists what you paid and what counts toward your out-of-pocket maximum. Review it carefully to make sure the amounts are correct and to watch your progress toward the limit.

You can also check your spending anytime by logging into your Medicare account at Medicare.gov. Your online account shows your claims, what you paid, and a running total of your out-of-pocket costs. If you have a Medicare Advantage plan, log into your plan's website or app instead, as they track spending differently.

If you notice an error on your MSN or in your online account, contact Medicare or your plan right away. Errors can delay your reaching the out-of-pocket maximum and affect how much you owe for future services.

What happens when you reach your out-of-pocket maximum

Once you hit the Part B limit of $2,000, Medicare automatically pays 100 percent of the approved amount for covered services for the rest of that calendar year. You do not have to do anything — the change happens automatically in Medicare's system. Your provider will see the updated cost-sharing and bill you accordingly.

For Part D, reaching catastrophic coverage is also automatic. Your plan will notify you when you cross the threshold, and your copays or coinsurance will drop to 5 percent. This usually happens mid-year or later, depending on your drug costs and which plan you chose.

The out-of-pocket maximum resets on January 1 each year. Any spending from December does not carry over, so you start fresh in January with a new $2,000 Part B limit and a new Part D threshold.

Frequently Asked Questions

Do my Medicare premiums count toward my out-of-pocket maximum?

No. Your Part B premium, Part D premium, and any Medigap or Medicare Advantage premium are separate from your out-of-pocket maximum. You pay premiums regardless of how much you use services, and they do not reduce what you owe toward the limit.

What if my doctor charges more than Medicare allows?

If your doctor accepts Medicare assignment, they can charge only what Medicare approves, and that amount counts toward your out-of-pocket maximum. If they do not accept assignment, they can charge up to 15 percent more than the approved amount, and that extra charge is your responsibility and does not count toward your limit. Always confirm your doctor accepts assignment before your visit.

Can I reach the Part B out-of-pocket maximum in one month?

Yes, if you have a major surgery or hospitalization, you can reach the $2,000 limit quickly. Once you do, Medicare covers 100 percent of approved amounts for the rest of that calendar year. Keep your Medicare Summary Notice handy to track your progress.

Do dental and vision costs count toward my out-of-pocket maximum?

No. Original Medicare does not cover routine dental, vision, or hearing services, so those costs do not count toward your out-of-pocket limit. Some Medicare Advantage plans offer dental or vision coverage with their own cost-sharing, which would count toward that plan's out-of-pocket maximum.

What is the difference between the Part B and Part D out-of-pocket limits?

Part B covers medical services like doctor visits and hospital care, with a $2,000 annual out-of-pocket limit. Part D covers prescription drugs, with a separate catastrophic threshold around $7,050. They are tracked separately, so you could reach both limits in the same year.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.