59 million people in the U.S. are enrolled in Medicare, the federal health insurance program for people 65 and older. Interestingly, only one in 10 people rely exclusively on Medicare for health coverage. Most have a supplemental policy.
One of the biggest reasons for that is cost, specifically the additional costs that Medicare recipients must bear. We’ll take a closer look at the Medicare out of pocket maximum and how a supplemental policy may help keep your costs down.
What Are Out of Pocket Costs?
Whether you have Medicare or insurance through an employer, the definition of out of pocket costs is the same. These are expenses that you pay after your insurance covers its share.
These include expenses like co-pays at the doctor’s office, deductibles, out-of-network costs, and long hospital stays. Out of pocket expenses can easily reach into the thousands of dollars, depending on your medical needs.
Is There a Medicare Out of Pocket Maximum?
The short answer is no, but it also depends on the type of coverage you have. Here’s a quick look at the Medicare plans. You may be enrolled in one or more of these.
Medicare Part A covers hospital stays. It also covers care in a skilled nursing facility and hospice care.
Medicare Part B covers medical services and supplies. That includes doctors’ appointments, preventative care, and medical equipment.
Medicare Part D covers your prescription medications.
Medicare Parts A and B make up what is now commonly referred to as “original Medicare”.
There is no out of pocket maximum under original Medicare (Parts A and B). Another way to say it is, there is no cap on what you might have to pay.
That means you could be responsible for tens of thousands of dollars in expenses after Medicare pays its share of your medical costs. More than a quarter of the people who have original Medicare spend 20 percent of their income on out of pocket costs.
Here’s just one example. Under Part A, Medicare limits the number of days it will pay for hospital stays. Once you reach that limit, you pay the entire cost.
What About Medicare Advantage?
Medicare Advantage, also called Medicare Part C, is the name of insurance plans sold by private companies. These plans typically combine Parts A and B, and most offer prescription drug coverage as well.
More than one-third of the people who are eligible for Medicare are enrolled in a Medicare Advantage plan. One reason why these plans are popular is the cap on out of pocket expenses.
In 2020, the Medicare Advantage out of pocket limit is $6,700. That means the most you would have to pay every year for medical expenses is $6,700. The federal government sets that limit.
Because private insurance companies sell these plans, the companies determine the cost of things like deductibles and out of pocket maximums. It’s possible your plan may have an out of pocket maximum that’s even less than what the government requires.
You may hear these policies referred to as Medigap policies. As the name suggests, Medigap policies cover what original Medicare doesn’t.
There are 10 plans available. Each is assigned a letter. Your cost and your level of coverage depending on which plan you choose. 97 percent of Medigap recipients have either Plan F, Plan G, or Plan N.
We’re here to help answer any questions you have about the Medicare out of pocket maximum, and if a supplemental policy might work best for you.
Contact our office any time with questions or to schedule an appointment. We’re here to help.