Medicare Maximum Out Of Pocket

We are often asked, does Medicare have a maximum out of pocket limit?  In conversations with those who contact  us as well as other agents who are relatively new to Medicare I have found a tremendous amount of confusion.  In this article I will be covering the subject of maximum out-of-pocket limits for Original Medicare (Medicare Part A and Medicare Part B), Medicare Advantage  Plans and Medicare supplement plans.

What Is The Medicare Maximum Out-of-Pocket?

When a person first enrolls in Medicare, they typically start with Medicare Part A inpatient services and Medicare Part B, outpatient services.   It is possible to get Medicare Part A months or year before Part B, but still, these are the two parts of Medicare that are required before deciding on a Medicare supplement or Medicare Advantage Plan.

Original Medicare does not have an annual maximum out-of-pocket limit.  It was never intended to be a stand-alone full coverage options for seniors.  The only way to place a maximum out-of-pocket on your financial risk is to either purchase a Medicare supplement Plan or a Medicare Advantage Plan.

We are often asked, does Medicare have a maximum out of pocket limit? In conversations with those who contact us as well as other agents who are relatively new to Medicare I have found a tremendous amount of confusion. In this article I will be covering the subject of maximum out-of-pocket limits for Original Medicare (Medicare Part A and Medicare Part B), Medicare Advantage Plans and Medicare supplement plans.

Medigap Out of Pocket Maximum

Do Medicare Supplement Plans have an out-of-pocket maximum? 

The short answer is YES.  The Medigap maximum out-of-pocket is much, much lower than any Medicare Advantage Plans.  But there is a lot of confusion about this subject.  What I found while Googling the subject to see what others had written before me was shocking.

So, stay with me and I will go over Medicare supplement plans maximum out-of-pocket limits step-by-step.

Do Medicare supplement plans have a maximum out-of-pocket.  Yes, most Medicare supplement plans (aka Medigap Plans) have a defined annual maximum out-of-pocket that limits the financial risk for the consumer.  In fact, of all your Medicare choices nothing comes close to the limit  on your financial risk that you can achieve with a Medicare supplement.  Unfortunately, I hear from people and have seen written that Medicare supplement do not have a maximum out-of-pocket.  Where does the confusion come from?    Believe it or not, it’s Medicare.    It’s from very poorly communicated benefits directly from Medicare publications.

Medicare Supplement Benefit Table

Benefits Medicare Supplement Insurance (Medigap) Plans
A B C D F* G* K L M N
Part A coinsurance and hospital costs (up to an additional 365 days after Medicare benefits are used) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Part B coinsurance or copayment 100% 100% 100% 100% 100% 100% 50% 75% 100% **100%
Blood (first 3 pints) 100% 100% 100% 100% 100% 100% 50% 75% 100% 100%
Part A hospice care coinsurance /copayment 100% 100% 100% 100% 100% 100% 50% 75% 100% 100%
Skilled nursing facility coinsurance - - 100% 100% 100% 100% 50% 75% 100% 100%
Part A deductible 100% 100% 100% 100% 100% 100% 50% 75% 100% 100%
Part B deductible - - 100% - 100% - - - - -
Part B excess charge - - - - 100% 100% - - - -
Foreign travel (up to plan limits) - - 80% 80% 80% 80% - - 80% 80%
Out-of-pocket max limit NA NA ## ## ## ## $6,620 $3,310 NA ##

NA – Not Applicable

* Plans F and G also offer a high-deductible plan in some states. With this option, you must pay for
Medicare-covered costs (coinsurance, copayments, and deductibles) up to the deductible amount of
$2,490 in 2022 before your policy pays benefits. (Plans C and F are not available to people who were
newly eligible for Medicare on or after January 1, 2020.)

For Plans K and L, after you meet your out-of-pocket yearly limit and your yearly Part B deductible, the Medigap plan pays 100% of covered services for the rest of the calendar year.

## The Plan G max out-of pocket (MOOP) is equal to the Medicare Part B deductible. The Plan N MOOP is equal to the Part B deductible plus visit copays when you avoid excess charges. The High Deductible Plan MOOP is equal to the Medigap deductible.

*** Plan N pays 100% of the Part B coinsurance, except for a copayment of up to $20 for some office visits and up to a $50 copayment for emergency room visits that do not result in inpatient admission.

 

Here it is.  The downloadable version of the table, as originated on the Medicare website, is the source of the confusion.  The Medicare supplement benefit table.    It’s the exact same table we used to find on the Medicare.gov website and in their publications.

The benefit table shows twelve different Medicare supplement plans.  Ten across, then asterisks on the F and G to indicate those plans have a high deductible option.

Medicare’s Mistake

Simple enough, one would think.

In studying this table you will quickly notice that both Plans K & L have this extra box titled “out-of-pocket limit”.  But then, none of the other supplement plans show a row with the same title?  

Because of this failure in communications, it’s easy to assume that those plans must not have an annual maximum out-of-pocket.  Right?  That is certainly what most people assume, including many insurance agents that are supposed to know better.

You know what they say about assumptions.  Of course.

But the blame here lies directly at the feet of Medicare for a poorly designed presentation and it’s the governments’ fault.  The government doesn’t typically have ears for consumer feedback. I can also tell you from years of experience, many of the government publications are not written by industry experts.

Let’s look at why these two Medigap plans, K and L show a maximum out-of-pocket designation where the other plans simply don’t need one.

Who Needs A Maximum Limit When The Plan Pays 100%

You might notice when you look closely at the table, most of the Medicare supplement Plans show 100% coverage for the major benefits.

For example, Part B coinsurance or copayment.  That is the 20% that Medicare Part B does not cover. You have 100% coverage.  Everything is paid for until you reach Plans K and L.  Medigap Plan K has only 50% coverage.  Medigap Plan L has only 75% coverage.

Look at Part A Hospital coinsurance.  With no supplement you have 60-days of coverage before you start paying a daily copay.  That copay is covered 100% by a Medicare supplement plan, except for Plans K & L.  Plan K only covers 50%.  Plan L covers 75%.

Skilled Nursing.  Medicare Part A covers the first 20-days 100%, with the consumer paying a daily copay for days 21 through 100 totaling no more than $15,365.50. That’s the maximum for 2022.

If you have Medicare supplement Plan A or Plan B, you will pay whatever Medicare doesn’t pay. Which means if you spend 100-days in a skilled nursing facility you will pay up the maximum of $15,365.   If you have any other supplements except supplement plans K and L, you have 100% coverage.  100-days of skilled nursing care cost you nothing out-of-pocket. Zero. ($0).

Plan K & L, The Only Partial Coverage Plans

So, the reason that Medicare supplement Plans K & L have an out-of-pocket maximum is because they only offer only partial coverage for major services.  The consumer has a large financial exposure to medical bills because you do not have 100% coverage for these major services.  Without a set maximum out-of-pocket limit for those two plans, the consumer would have unlimited financial exposure.

Think of the out-of-pocket maximum as only referencing the benefits that are covered at either 50% or 75% by these two plans.

Another way to describe this is simply with a question.  How can a consumer have any financial risk if the Medicare supplement is paying 100% of the Medicare bill?

So Many Professionals Got This Wrong!

With that covered, this next part is where it gets mind blowing.  Hopefully, if my explanation of this is good, a light bulb will go off and it will all finally come together.   Please let me know in the comment section below if the way I illustrate this made the light bulb go off or if I need to do more work on my explanations.

There are two pieces to this puzzle that you need to know for all of this to make sense.

Medicare Is Not Long-Term Care

First is that Medicare is not Long-term Care.   Long-term care needs are not even considered on this benefit table.

For example, your Skilled Nursing Care benefits end at 100-days.  At 101-days of Skilled Nursing you have no Medicare benefits, and no Medicare supplement benefits.  It doesn’t matter if these supplement plans have zero coverage for Skilled nursing like Plan A and Plan B or 100% coverage like Plans C, G and Plan N and so on, or just 50% and 75% coverage like Plans K and L.  At day 101 your Medicare coverage is depleted.  You are on your own unless you have Long-Term Care Insurance.  That is where your Long-Term Care insurance policy will begin.

Does 100% Mean Everything?

Second, and this is key, the maximum out-of-pocket limit is only referencing what the Medicare supplement covers.

For example, the maximum out-of-pocket shown for Plan K is $6,620.  But that $6,620 is only applicable to what the supplement plan covers.  It does not cover the Part B deductible. That’s an additional expense not included in the maximum out-of-pocket.  It doesn’t cover Excess Charges.  If you have Excess Charges they are in addition to the maximum out-of-pocket.

Now let’s apply that information to the Medicare supplements Plan A and Plan B.  For the Medicare services that Plan A or Plan B cover, they cover at 100% of the Medicare bills not paid for by Original Medicare.  The out-of-pocket maximum only references the portion of Medicare services covered by the supplement.  There is no out-of-pocket maximum listed because for the benefits they cover, the cover at 100%.   There is simply no supplemental insurance for Skilled Nursing.

That means you have a maximum out-of-pocket of zero for the benefits it covers.  It just doesn’t cover as much as the other plans. There are inconvenient holes in the coverage.

Does that make sense?

What Is The Medigap Plan G Out of Pocket Maximum?

Considering what you now know, what is the maximum out-of-pocket for a Medicare supplement Plan G?

Well, we have to exclude Foreign Travel because Medicare itself does not cover any foreign travel emergency healthcare.   That is simply an extra benefit provided by the supplement.

Medicare supplement Plan G covers 100% of every Medicare service it covers. The only inpatient or outpatient Medicare service it does not cover is the annual Medicare Part B deductible.  That is $233 for 2022.    That’s it.  If you have a Medicare supplement Plan G, your maximum out-of-pocket financial risk for 2022 is $233.

If you were to list a maximum out-of-pocket the way this table is designed, it would be zero.  But considering real life, your maximum out-of-pocket will be the Medicare Part B deductible.  This is a heck of a lot less than the financial exposure you have with Medicare supplement Plans K and L.  In fact, it is the lowest maximum out-of-pocket financial risk a consumer can choose with Medicare.

Considering real life and not the limits of this table, let us look at the maximum out-of-pocket for the other popular Medicare supplements.

Medigap Plan N Out of Pocket Maximum

When a Medicare supplement does not cover the Part B Excess Charges, like Medigap Plan N and Medigap Plan D for example, we presume the consumer will avoid excess charges.  It’s very easy to do.  Please see my video on Best Medicare Supplement Plans for a detailed explanation of how easy it is.

Medicare itself does not cover Part B / Outpatient Excess Charges.

With the presumption that excess charges will be avoided, the Medicare Supplement Plan N maximum out-of-pocket will be the amount of the Medicare Part B deductible ($233 for 2022) plus any of the copays you pay for office visits.  There is a maximum of $20 for an office visit and a maximum of $50 for a hospital emergency room visit.

You may not have foreknowledge of the exact number of office visits you will have in a year, but for all practical purposes that cost will likely be less than the cost of the Part B deductible.

In case you were not aware, not all office visits qualify for the $20 copay.  For details, please see my video on Best Medicare Supplement Plans linked below and above my left shoulder.

The maximum out-of-pocket limit for a Medicare supplement Plan N is among the lowest available in Medicare.    For all practical purposes it will be a number less than twice the Medicare Part B deductible and certainly much, much lower than Medicare supplement Plans K and L.

Medigap High Deductible Plan G or Plan F Out of Pocket

What about the high-deductible Medicare supplements?  That’s easy.  The maximum out-of-pocket is equal to the deductible.  That deductible is $2,490 for the year 2022.  It increases each year with increases in the Consumer Price Index -U rounded to the nears $10 increment.

That $2,490 deductible is much a lower maximum out-of-pocket than Medicare supplement Plans K and L which are $6,620 and $3,310 respectively.

With this understanding of the benefit table design, you should find it easy to define the maximum out-of-pocket limits for each of the supplement plans.

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