What Medicare's Out-of-Pocket Limit Means for Your Costs

How Medicare's Out-of-Pocket Maximum Works

Medicare Part D (prescription drug coverage) and Medicare Advantage plans each set a yearly out-of-pocket limit. Once you reach that limit in a calendar year, your plan pays for most or all of your remaining covered costs for the rest of that year. Original Medicare (Parts A and B) does not have an out-of-pocket maximum — you can face unlimited costs for hospital stays, doctor visits, and other services.

The out-of-pocket limit is the total amount you pay in deductibles, copayments, and coinsurance for covered services. It does not include your monthly premiums. The exact dollar amount changes each year and varies by plan.

For 2024, Medicare Advantage plans must cap out-of-pocket costs at $8,300 for in-network services (or $12,500 if the plan includes out-of-network coverage). Part D plans do not have a federally set limit, but plans must have a catastrophic coverage phase that kicks in after you spend a certain amount on drugs. These numbers shift annually, so you should check your plan documents or call your plan each year.

Key Takeaways

Medicare Advantage plans have a yearly out-of-pocket cap; Original Medicare does not, meaning you could face unlimited costs for hospital and doctor care.
The out-of-pocket limit includes what you pay for deductibles, copayments, and coinsurance, but not your monthly premium.
For 2024, Medicare Advantage in-network out-of-pocket limits are capped at $8,300, though this amount changes yearly.
Part D drug plans enter a catastrophic coverage phase once you reach a spending threshold, after which you pay a small percentage of drug costs.
Your actual out-of-pocket costs depend on which services you use, which doctors and pharmacies you visit, and which plan you choose.

Original Medicare Has No Out-of-Pocket Cap

If you have Original Medicare (Parts A and B), there is no yearly limit on what you can spend out of pocket. You pay a Part A deductible for hospital stays, a Part B deductible for doctor visits and outpatient services, and then 20% coinsurance for most services after that. If you need months of hospital care or ongoing specialist visits, these costs can add up quickly with no ceiling.

Many people with Original Medicare buy a Medigap (supplemental insurance) policy to cover some or all of these costs. Medigap plans have their own structure and do not follow the same out-of-pocket rules as Medicare Advantage. Some Medigap plans cover the deductible and coinsurance almost entirely, while others cover less. The trade-off is that Medigap premiums are usually higher than Medicare Advantage premiums.

Medicare Advantage Out-of-Pocket Limits

Medicare Advantage plans must limit your yearly out-of-pocket costs for in-network care. In 2024, that limit is $8,300 per person. If your plan includes out-of-network coverage, the out-of-pocket limit for combined in-network and out-of-network services is $12,500. Once you hit the in-network limit, the plan pays 100% of your covered in-network services for the rest of the year.

This limit includes deductibles, copayments for doctor visits and emergency room trips, and coinsurance for hospital stays and other services. It does not include your monthly premium, which you pay separately. Some plans also charge copayments for prescription drugs, and those count toward the out-of-pocket limit as well.

The specific copayments and coinsurance amounts vary widely by plan. One plan might charge $15 for a primary care visit, while another charges $40. One might charge 20% coinsurance for a hospital stay, another 15%. You need to look at your plan's summary of benefits to know what you will actually pay before you hit the limit.

Part D Drug Coverage and Catastrophic Phase

Part D prescription drug plans do not have a federally mandated out-of-pocket maximum like Medicare Advantage does. Instead, they have a catastrophic coverage phase. In 2024, once you and your plan together have spent $7,050 on covered drugs, you enter catastrophic coverage. At that point, you pay 5% of the cost of covered drugs for the rest of the year, and your plan pays the rest.

Before you reach catastrophic coverage, you move through several phases: the deductible (which you pay in full), the initial coverage phase (where you pay copayments or coinsurance), and the coverage gap, sometimes called the "donut hole" (where you pay a higher percentage). The coverage gap has narrowed in recent years — in 2024, you pay 25% of brand-name drug costs and 25% of generic drug costs in the gap, down from higher percentages in earlier years.

If you take expensive medications, reaching catastrophic coverage can significantly lower your costs. If you take few or inexpensive drugs, you may never reach it. Your actual out-of-pocket drug costs depend on which drugs you take and which plan you choose.

How to Find Your Plan's Specific Out-of-Pocket Limit

Your plan's out-of-pocket limit is listed in your Summary of Benefits and Coverage document, which your plan sends to you each year. You can also find it on your plan's website or by calling the customer service number on your insurance card. When you call, ask for the 2024 out-of-pocket maximum for in-network services and whether your plan covers out-of-network care.

If you are comparing plans during the annual enrollment period (October 15 to December 7), use the Medicare Plan Finder tool on Medicare.gov. You can enter your current medications and preferred doctors to see which plans cover them and what your estimated out-of-pocket costs would be. This tool shows you the out-of-pocket limit for each plan side by side, making it easier to compare.

What Counts and What Does Not Count Toward Your Limit

Deductibles, copayments, and coinsurance for covered services all count toward your out-of-pocket limit. If your plan covers dental, vision, or hearing services, copayments for those count too. Prescription drug copayments in a Medicare Advantage plan count toward the medical out-of-pocket limit.

Your monthly premium does not count, no matter how high it is. Costs for services your plan does not cover do not count — for example, if your plan does not cover dental work, you pay for that out of pocket, but it does not count toward your limit. Costs for going out of network when your plan does not cover out-of-network care also do not count toward the limit (and you may owe the full bill).

Planning for Out-of-Pocket Costs

To estimate your yearly out-of-pocket costs, list the services you expect to use: routine doctor visits, specialist visits, hospital stays, prescription drugs, or other care. Then look up the copayment or coinsurance for each service in your plan's benefit summary. Add them up to see roughly where you might land relative to your plan's out-of-pocket limit.

If you have a chronic condition that requires frequent care or expensive medications, you are more likely to reach your out-of-pocket limit. In that case, a plan with a lower out-of-pocket limit might save you money overall, even if the premium is higher. If you are generally healthy and use few services, a plan with a higher limit and lower premium might be better.

Keep track of your out-of-pocket spending throughout the year. Your plan sends you an explanation of benefits (EOB) each time you use a service, showing what you paid and what counts toward your limit. Once you are close to your limit, you can plan any elective procedures or fill prescriptions before the year ends, knowing that the plan will cover most of the cost.

Frequently Asked Questions

Does my monthly Medicare premium count toward my out-of-pocket limit?

No. Your monthly premium for Part B, Part D, or Medicare Advantage is separate from your out-of-pocket limit. You pay the premium regardless of whether you use any services that year. Only deductibles, copayments, and coinsurance count toward the limit.

What happens after I reach my out-of-pocket limit?

Once you reach your plan's out-of-pocket limit, your plan pays 100% of your covered in-network services for the rest of that calendar year. You pay nothing for covered care. This resets on January 1 of the next year, and you start over with a new deductible and new out-of-pocket limit.

Can I switch plans if my out-of-pocket costs are too high?

You can switch plans during the annual enrollment period (October 15 to December 7) each year. You can also switch if you have a may have access to life event, such as moving, losing other insurance, or getting married. Outside these windows, you generally cannot change plans until the next enrollment period.

Does Original Medicare with a Medigap plan have an out-of-pocket limit?

Original Medicare itself has no out-of-pocket limit, but your Medigap plan may limit what you pay. Some Medigap plans cover most or all of your deductibles and coinsurance, which effectively caps your costs. Check your Medigap plan documents to see what it covers.

What if I use an out-of-network doctor with Medicare Advantage?

If your plan does not cover out-of-network care, you may owe the full bill, and it does not count toward your out-of-pocket limit. If your plan does cover out-of-network care, you pay more (higher copayments or coinsurance), and those costs count toward a separate out-of-network out-of-pocket limit. Always check your plan's network before scheduling care.

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.