Your out-of-pocket maximum is the most you will pay in a calendar year for covered services under Medicare Part B and Part D, after which Medicare covers 100 percent of most remaining costs.

The out-of-pocket maximum exists to protect you from unlimited medical bills. Once you reach this dollar amount in a single year, your cost-sharing stops for most services — Medicare picks up the full cost for the rest of that calendar year. The amount changes yearly and depends on which type of Medicare coverage you have.

Understanding this limit matters because it shapes how much you budget for healthcare and when you might want to schedule certain treatments. It also affects which plan makes sense for your situation, since plans with lower premiums often have higher out-of-pocket maximums.

Key Takeaways

  • Your out-of-pocket maximum is a yearly spending cap; once you reach it, Medicare covers 100 percent of most remaining covered services for the rest of that calendar year.
  • Original Medicare (Part A and Part B) has no out-of-pocket maximum, but Medicare Advantage plans have annual limits that vary by plan and insurer.
  • The out-of-pocket maximum includes deductibles, copayments, and coinsurance you pay for covered services, but not premiums or out-of-network costs.
  • Tracking your spending throughout the year helps you know when you are approaching your maximum and can inform decisions about elective procedures.

How the out-of-pocket maximum differs between Original Medicare and Medicare Advantage

Original Medicare — the federal program run directly by the Centers for Medicare & Medicaid Services — has no annual out-of-pocket maximum. You pay your share of costs for covered services for the entire year with no cap. This means your costs can grow without limit if you need extensive care. Many people with Original Medicare buy a Medigap policy (supplemental insurance) to set their own spending ceiling.

Medicare Advantage plans (Part C) are required by law to have an out-of-pocket maximum. These are private insurance plans that cover Medicare benefits. The maximum amount varies by plan and by insurance company — there is no single number across all plans. In 2024, most Medicare Advantage plans set their out-of-pocket maximum between $5,000 and $10,000 per year, though some plans offer lower limits. You can find the exact maximum for each plan you are considering in its Summary of Benefits document.

Part D (prescription drug coverage) also has an out-of-pocket maximum, which is separate from your medical services maximum. Once you reach the Part D limit in a calendar year, the plan covers 100 percent of your prescription costs for the rest of that year.

What counts toward your out-of-pocket maximum

Your out-of-pocket maximum includes money you pay as deductibles (the amount you pay before insurance kicks in), copayments (a fixed dollar amount per visit or service), and coinsurance (a percentage of the cost you share with the plan). These three types of cost-sharing all count toward reaching your maximum.

What does not count: your monthly premium payments, services that are not covered by your plan, care from out-of-network providers (in Medicare Advantage), and any amounts above what the plan allows. If you see a provider who does not accept your plan, those costs typically do not count toward your maximum.

For Medicare Advantage plans, the out-of-pocket maximum usually applies to in-network services only. If you use an out-of-network provider, you may pay more, and those extra costs often do not count toward your maximum. This is why staying in-network is important with these plans.

Tracking your spending throughout the year

Most insurance companies send you an explanation of benefits (EOB) after each claim is processed. This document shows what you paid and what counts toward your out-of-pocket maximum. Keep these records or log into your plan's online portal to see your running total.

Around mid-year, add up what you have paid so far in deductibles, copayments, and coinsurance. This tells you how much more you can spend before hitting your maximum. If you are approaching the limit and have elective procedures planned (like dental work or vision care that Medicare does not cover anyway), you might schedule them before or after the year ends based on your other healthcare needs.

If you have a serious illness or injury late in the year, reaching your out-of-pocket maximum can mean substantial savings on any remaining care that year. Conversely, if you reach it early, you have the security of knowing most of your remaining medical costs are covered.

How the out-of-pocket maximum resets each year

Your out-of-pocket maximum resets on January 1 of each year. Any money you spent in December counts toward that year's limit, not the next year's. This means if you reach your maximum in November, you have only two months of full coverage before the clock resets.

The dollar amount of the maximum itself also changes each year. Medicare Advantage plans adjust their limits annually, and the Part D out-of-pocket maximum is set by federal law and increases most years. Your plan documents or your insurer's website will show the current year's maximum.

Medigap as an alternative to Medicare Advantage out-of-pocket limits

If you have Original Medicare and want a spending cap similar to a Medicare Advantage out-of-pocket maximum, a Medigap policy can provide that protection. Medigap plans are sold by private insurers and cover some or all of the costs that Original Medicare does not — including deductibles and coinsurance.

Some Medigap plans (such as Plan G or Plan N) cover most of your cost-sharing, which effectively creates a ceiling on what you pay out of pocket. However, Medigap premiums are separate from your Medicare premium and vary by age, location, and plan type. You pay both your Medicare premium and your Medigap premium, but your total out-of-pocket costs for covered services may be lower than with Original Medicare alone.

Frequently Asked Questions

Does my Medicare premium count toward my out-of-pocket maximum?

No. Your monthly Part B premium, Part D premium, or Medicare Advantage premium does not count toward your out-of-pocket maximum. Only deductibles, copayments, and coinsurance for covered services count.

What happens if I reach my out-of-pocket maximum in November?

Once you reach your maximum, Medicare covers 100 percent of most covered services for the rest of that calendar year — in this case, November and December. On January 1, your maximum resets and you begin paying cost-sharing again.

If I have both Medicare Advantage and a Medigap policy, which out-of-pocket maximum applies?

You cannot have both at the same time — Medicare rules prohibit it. You choose either Original Medicare with Medigap, or Medicare Advantage. If you have Medicare Advantage, your plan's out-of-pocket maximum applies. If you have Original Medicare with Medigap, your Medigap plan's coverage determines what you pay.

Do out-of-network costs count toward my Medicare Advantage out-of-pocket maximum?

Usually not. Most Medicare Advantage plans only count in-network costs toward your maximum. Out-of-network care costs more and does not count toward your limit, so staying in-network is important to protect yourself from surprise bills.

How do I find my plan's out-of-pocket maximum for next year?

Check your plan's Summary of Benefits document, which your insurer mails each fall during open enrollment, or visit your plan's website. You can also call your plan's customer service number — it is on your insurance card — and ask for the exact out-of-pocket maximum for the coming year.