Bottom Line: How Much
- Enrolling in Medicare Part A and Part B, without additional coverage, is not a wise decision. It may save money on premiums initially. But get sick and, because there is no cap, the bills may never stop.
- Adding a Medicare supplement plan to Part A and Part B provides protection from unlimited costs. For example, pay the premium for Plan G and, when using healthcare providers wholl see Medicare patients, the maximum out-of-pocket costs for the year will be the Part B deductible.
- Medicare Advantage plans offer lower premiums and have a maximum out-of-pocket limit. But check the plans details. That limit can be $7,550.
This post has been updated to reflect 2021 changes.
Caps For Medicare Advantage And Part D
Out-of-pocket expenses can be worrisome, especially if you are diagnosed with a serious illness or have a chronic medical condition. Such costs can draw the focus away from getting proper medical care.
Data from a 2019 GallupWest Health survey found that one in four people have delayed medical treatments due to cost, and 45% of people fear bankruptcy if they were to have a health crisis.
As much as Medicare is touted as being affordable, it can still be costly. Annual deductibles, monthly premiums, coinsurance, and copays add up, and Original Medicare has no cap on out-of-pocket spending.
There are, however, out-of-pocket limits set on prescription drug plans and Medicare Advantage .
What Should You Do
- Realize this may have an impact on you. There are almost 600 plans that will have the maximum limits in 2021. I found them from Connecticut to California. A family member in Arkansas just shared that the maximum limits in her PPO plan are increasing by $1,800 in-network and $6,200 for in- and out-of-network combined.
- Read your plans Annual Notice of Changes. It will note the out-of-pocket maximum.
- Check the maximum you pay for health services, whether youre electing Medicare Advantage for the first time or shopping for a new plan. In the Medicare Plan Finder, youll find this item on the plans available, plan comparison and plan details pages. Unfortunately, there is no filter for sorting by maximum limit.
- Look for a new plan, if you dont want to face the $7,550/$11,300 maximum limits, and enroll by December 7.
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What Is The Out
The Medicare out of pocket maximum for Medicare Advantage plans in 2021 is $7,550 for in-network expenses and $11,300 for combined in-network and out-of-network expenses, according to Kaiser Family Foundation. What this means is that once you reach the out-of-pocket limit, your plan pays 100% of your health care expenses for covered medical services for the remainder of the year.
The average out-of-pocket limit for Medicare Advantage plans decreased from 2018 through 2020, according to eHealth research. This data was limited to submitted applications for Medicare Advantage plans during the Annual Election Periods 2018-2020.*
Its important to keep in mind, however, that even though Medicare imposes a maximum limit, Medicare Advantage plans are free to set their own voluntary out-of-pocket limits, as long as they are below the maximum.
What Is A Maximum Out
When it comes to health insurance, there are lots of terms that get thrown around. However, not all of them are a simple as they seem. One of these terms is the out-of-pocket maximum. It is important to be aware of what this term means and how it relates to your Medicare Advantage plan.
What is an Out-of-Pocket Maximum?The out-of-pocket maximum is also known as the out-of-pocket limit. This is the maximum amount that the policy holder will be expected to pay out-of-pocket each year. Once a person meets their maximum, your Medicare Advantage provider is responsible for paying 100 percent of the total medical expenses.
Having an out-of-pocket maximum offers protection for both the policy holder and the health insurance company. For the recipient, a maximum provides a cap for their share of the healthcare costs. For the insurance company, this amount protects their risk by making the policy holder responsible for paying for some of the associated annual healthcare costs.
For 2020, the largest out-of-pocket maximum that a plan can have is $8,150 for an individual plan and $16,300 for a family. These numbers are up from $7,900 and $15,600 in 2019. In general, if you select a plan with a lower monthly premium, it is associated with a higher out-of-pocket maximum amount. The opposite is also true, as lower out-of-pocket maximums often carry higher premium payments. Some people may qualify for reduced out-of-pocket maximum payments if they have lower income amounts.
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What Is A Medicare Advantage Plan Out Of Pocket Maximum
All Medicare Advantage plans have an out of pocket maximum. A Medicare Advantage out of pocket maximum is a limit on the amount you will pay out of pocket before your covered medical expenses are paid for the rest of the calendar year.
In 2018, the Medicare Advantage out of pocket maximum was $6,700. Some Medicare Advantage plans may have lower out of pocket maximums, for example $4,900.
An out of pocket maximum can be a reassuring thing. Without one, you could end up paying tens of thousands of dollars or more on medical bills if you need a lot of care. An out of pocket maximum resets every year, meaning what you paid in 2017 will not count towards your out of pocket maximum in 2018.
Basic Terms For Medicare Costs
Lets begin by defining the different forms of Medicare costs that you may experience.
Premium: The amount you pay each month to be covered by Medicare, Medicare plan, or other insurance.
Deductible: The amount you pay out of your own pocket for Medicare-covered health-care services and supplies before Original Medicare, your Medicare plan, or other insurance begins to cover expenses.
Copayment: A flat dollar amount that you must pay for a service after youve reached any deductibles that apply and after Original Medicare or your Medicare plan begins to cover your health-care expenses. This is one form of cost sharing you may be responsible for after Medicare has paid its share of costs. Some examples of situations when you may need to pay a copayment include doctor appointments or when you fill a prescription.
Coinsurance: Another form of cost sharing, this is a percentage of the total cost of the Medicare-covered equipment or service you may need to pay after you have reached any deductibles that apply for Original Medicare or your Medicare plan. For example, you might pay 20%, while Medicare pays 80% of the cost.
Annual out-of-pocket maximum: The maximum amount you must pay out of your own pocket each year before your Medicare plan pays 100% of your covered health-care expenses. Original Medicare doesnt have an out-of-pocket annual maximum limit. Medicare Advantage plans have out-of-pocket maximum limits.
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Can You Explain The Out
Medicare Advantage plans must limit how much their members pay out-of-pocket for covered Medicare expenses. Medicare set the maximum but some plans voluntarily establish lower limits. After reaching the limit, Medicare Advantage plans pay 100% of eligible expenses.
Beginning in 2011, Medicare set the maximum out-of-pocket limit for in-network services at $6,700 and $10,000 for in- and out-of-network combined. That will change as of January 1, 2021. The maximum limits will increase to $7,550 for in-network and $11,300 for in- and out-of-network combined.
There is an explanation for this change. For the first time, those diagnosed with end-stage renal disease or kidney failure will be able to enroll in a Medicare Advantage plan. Previously, if someone who had elected Medicare Advantage was diagnosed with ESRD, he could continue with the coverage. However, those with the condition could not enroll in a plan. The Centers for Medicare and Medicaid Services now considers those costs when calculating the limits.
Here are some facts to know.
Check the Medicare Advantage plans evidence of coverage for details on the out-of-pocket limit.
What Are The Coverage Limits During The Medicare Part D Donut Hole
Medicare Part D prescription drug plans feature a temporary coverage gap, or donut hole. During the Part D donut hole, your drug plan limits how much it will pay for your prescription drug costs.
- Once you and your plan combine to spend $4,430 on covered drugs in 2022, you will enter the donut hole.
- Once you enter the donut hole in 2022, you will pay no more than 25 percent of the costs for brand name drugs and generic drugs until you reach the catastrophic coverage phase.
- After you spend $7,050 out-of-pocket on covered drugs in 2022, you leave the donut hole coverage gap and enter the catastrophic coverage stage. Once you reach this stage, you only pay a small coinsurance or copayment for your covered drugs for the rest of the year.
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Is There A Limit On Out
There is no out-of-pocket spending limit with Original Medicare .
Medicare Advantage plans, however, do feature an annual out-of-pocket spending limit for covered Medicare expenses.
While each Medicare Advantage plan carrier is free to set their own out-of-pocket spending limit, by law it must be no greater than $7,550 in 2022. Some plans may set lower maximum out-of-pocket limits.
Medicare Advantage plans are offered by private insurance companies. When you enroll in a Medicare Advantage plan, it replaces your Original Medicare coverage and offers the same benefits that you get from Medicare Part A and Part B.
Most Medicare Advantage plans provide prescription drug coverage, which is not typically covered by Original Medicare.
Some Part C plans also offer other benefits that Original Medicare doesnt cover, which may include:
- Routine hearing, dental and vision coverage
- Non-emergency transportation to approved locations
- Over-the-counter medication allowances
- Health and wellness programs, such as SilverSneakers
Depending on where you live, you may be able to find $0 premium Medicare Advantage plans.
Are There Income Limits For Medicare Premiums
Medicare Part B and Part D have income limits that can affect how much you pay for your monthly Part B and/or Part D premium.
Higher income earners pay an additional amount, called an IRMAA, or the Income-Related Monthly Adjusted Amount.
- The standard Part B premium in 2022 is $170.10 per month for anyone with an income under the IRMAA limit.
- Part D premiums are dictated by the Part D plan carrier, but beneficiaries with an income over the IRMAA limit must pay an additional amount.
The limits are based on your reported income from two years prior, so the 2022 IRMAA is based on your 2020 income.
The table below shows the Part B IRMAA amounts for various income limits.Medicare Part B IRMAA
More than or equal to $500,000
More than or equal to $750,000
More than or equal to $409,000
$77.90 + your plan premium
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What Costs Are Credited To Your Moop
Copayments and coinsurance for Medicare-approved services apply toward your annual MOOP limit. Your deductible and monthly premiums typically do not apply toward your MOOP.
Medical Services Copayments and Coinsurance That Apply Toward Your MOOP
- Diagnostic or imaging services
- Skilled nursing facility stays
Typically, any out-of-pocket costs you would have with Original Medicare would apply toward your MOOP limit in a Medicare Advantage plan.
But your Medicare Advantage plan may also allow other out-of-pocket costs such as vision, dental or hearing services not covered by Original Medicare to apply to your MOOP as well.
Average Annual Medicare Advantage Costs
A 2019 study published by the Kaiser Family Foundation found that, in 2016, people enrolled in original Medicare spent an annual average of $3,166 in medical services and $2,294 in premiumsâfor a total out-of-pocket cost of $5,460. This study excluded Medicare Advantage enrollees, however, because the terms of each Advantage plan are different.
A 2016 Journal of the American Medical Association Oncology study found that the average annual out-of-pocket cost for Medicare Advantage health maintenance organization beneficiaries with cancer was $5,976. Your individual costs can vary greatly depending on the terms of your plan, the cost of premiums, costs associated with providers, and your plan’s total out-of-pocket maximum.
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The Part D Coverage Gap Aka The Donut Hole
After meeting your planâs deductible and initial coverage limit, but prior to reaching the TrOOP limit and catastrophic coverage, youâll fall into the Medicare Part D coverage gap, also called the donut hole. Once your out-of-pocket costs reach the initial coverage limit â $4,130 in 2021 and $4,430 in 2022 â your plan covers less of the costs for your prescription drugs.
Once youâve entered the donut hole, your plan covers less of the costs for your prescription drugs.
This ends once you reach your TrOOP and enter catastrophic coverage. The specifics of what youâre expected to pay changes each year, so keep that in mind if youâre getting close to the donut hole. For 2021, youâre expected to pay 25 percent of both the brand-name and generic drug costs. Previously, you paid more for generic drug costs, but in 2020, the coverage gap âclosed,â meaning it bottomed out at you paying 25 percent for both brand-name and generic drugs, the same rate as you do in your initial coverage phase.
D National Base Beneficiary Premium
Do not confuse the national base beneficiary premium with your monthly premium. Although the rates could technically be the same, they rarely are.
The NBBP is a value used to calculate how much you owe in Part D penalties if you sign up late for benefits. Your best bet is to avoid Part D penalties altogether, so be sure to use this handy Medicare calendar to enroll on time.
The NBBP is set at $33.37 in 2022, an increase from $33.06 in 2021.
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What Else Should I Know About Medicare Advantage Plans And Maximum Out
Costs associated with your Part D Prescription Drug Plan dont count toward your Medicare out of pocket maximum for Medicare Advantage plans. Part D plans have their own out-of-pocket limits before catastrophic coverage kicks in.
If your Medicare Advantage plan has an annual deductible, this also counts toward your maximum out-of-pocket limit. Monthly premiums, however, do not.
Be sure to consider both premiums and out-of-pocket maximums when youre comparing Medicare Advantage plans. A plan with a higher monthly premium and copayments but a low out-of-pocket maximum may actually save you money over the course of the plan year compared to one with a lower premium and copayments.
Do you want to find a Medicare Advantage plan that will limit your Medicare out of pocket costs? Feel free to use enter your zip code on this page to browse and compare Medicare plan options in your location. We can help you find Medicare plan options that address your Medicare needs.
*Source: Medicare Index Report: Annual Enrollment Period for 2020 Coverage, eHealth, October 2020.
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How To Predict Out Of Pocket Costs On Medicare Advantage
Medicare Advantage, or private health insurance available through Medicare, is significantly more affordable than traditional health insurance plans, but it is not free. You’ll pay monthly premiums and medical co-pays, and you’ll have to pay for any medical services that are not covered by your plan. Because Medicare Advantage plans cap annual out-of-pocket expenses, however, it’s possible to get a fairly accurate estimate of your total costs.
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What Will I Pay In Premiums
Since you get Medicare Advantage plans from private, Medicare-approved insurance companies, premiums vary widely among plans. For example:
- If you pay a $25 premium per month, youll pay $300 a year in Medicare Advantage premiums.
- If you pay a $40 premium per month, youll pay $480 a year in Medicare Advantage premiums.
Some plans have premiums as low as $0, but plans may have other costs deductibles, copayments, and/or coinsurance, for example.
If you have Medicare Advantage you also must pay your Medicare Part B premium. The standard Part B premium is $170.10 in 2022. If you pay $170.10 monthly for your Medicare Part B premium and $40 a month for your Medicare Advantage premium, youll pay a total of $2,262 a year in health coverage premiums. This is just an example again, Medicare Advantage plans premiums vary among plans.
What Costs Count Towards The Medicare Advantage Plans Out Of Pocket Maximum
Many Medicare Advantage plans have networks. Generally the amount you pay for covered medical services in-network count towards your out of pocket maximum. Examples of costs that generally count towards your out of pocket maximum would include for example:
- A $35 copayment you pay to visit a specialist
- A $25 copayment for eyeglasses
- A $875 copayment for an inpatient hospital stay
Other copayments that generally count towards your out of pocket maximum include emergency room copayments, coinsurance for X-rays and radiology, copayments for outpatient rehabilitation, and coinsurance for durable medical equipment. Copayments and coinsurance not listed here may count as well.
Your insurance plans Summary of Benefits and Evidence of Coverage will provide detailed information about the actual deductibles, copayments, coinsurance, and other out-of-pocket costs that may apply to your Medicare Advantage out of pocket maximum.
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Kidney Failure Driving The Change
Since the beginning of Medicare Advantage plans, individuals diagnosed with end-stage renal disease , or kidney failure, have not been able to enroll in an Advantage plan. If they were already in a plan and then diagnosed, they could keep it. But beginning in January, those who have ESRD can enroll in a Medicare Advantage plan. Because these beneficiaries typically incur higher costs, the Centers for Medicare and Medicaid Services will consider that when calculating plan limits.
Remember, the maximum limit does not apply to Part D prescription drug coverage, Original Medicare or Medicare supplement plans