Out-of-Pocket Costs

by David Bynon, last updated

What are Out-of-Pocket Costs?

Most health insurance, including Medicare, has deductibles, copayments, and/or coinsurance that are paid when healthcare services are used. These are health insurance out-of-pocket costs.1Medicare.gov, “What’s Medicare Supplement Insurance (Medigap)?“, Accessed September 9, 2021

Key Takeaways

  • Out-of-pocket costs are deductibles, copayments, and coinsurance paid when healthcare services are received.
  • Some health plans put an annual cap on out-of-pocket costs. When the cap is reached, the plan picks up all remaining out-of-pocket costs for the rest of the year.
  • In Original Medicare, there are no limits on out-of-pocket costs. Medicare supplement insurance limits the risk of high out-of-pocket costs.
  • All Medicare Advantage plans have a maximum out-of-pocket (MOOP) limit. For 2021, a plan’s MOOP cannot exceed $7,550.

What is the Maximum Out-of-Pocket for Medicare in 2021 for a Person with Part A and Part B?

There is no maximum out-of-pocket limit for Original Medicare, the sky is the limit for what beneficiaries can expend outside of what Medicare covers. There are, however, Medicare Supplement Insurances like Medigap to help protect beneficiaries from excessive insurance payments1Medicare.gov, “What’s Medicare Supplement Insurance (Medigap)?“, Accessed September 9, 2021.

To enroll in a Medigap plan, beneficiaries will have to have both Medicare Part A and Part B, and they will have an additional monthly premium along with their Orginal Medicare premium. Medigap also does not help cover health care services that are not strictly medically necessary, such as vision and dental services1Medicare.gov, “What’s Medicare Supplement Insurance (Medigap)?“, Accessed September 9, 2021.

What is the Average Out-of-Pocket Cost for Medicare?

For Original Medicare, which is Medicare Part A (hospital insurance) and Medicare Part B (medical insurance), the beneficiary’s monthly premiums would be $471 and $148.50 respectively2Medicare.gov, “Medicare costs at a glance“, Accessed September 9, 2021. The beneficiary’s deductibles are what they must pay completely before their coverage kicks in, which does not include their monthly premiums.

For Part A, the deductible is based on each time the beneficiary is admitted into inpatient care called a benefit period. Each benefit period has a $1,484 deductible before their insurance starts covering costs. Once that deductible for their hospital stay has been reached the beneficiary begins a copay where they pay a set amount of money each day they are in the hospital; $371 for the 61st-90th days and $742 for the 91st day onward3Medicare.gov, “Part A costs“, Accessed September 9, 2021.

The Part B deductible is $203, after which Part B starts to provide coverage with coinsurance4Medicare.gov, “Part B costs“, Accessed September 9, 2021. The beneficiary’s Part B coinsurance will cover 80% of their outpatient medical expenses, not including their monthly premiums.

What are the Costs for Medicare for Individuals with Disabilities?

The out-of-pocket costs for Original Medicare for individuals with disabilities are no different than for those without disabilities. Enrolling in Medicaid can provide additional health care coverage on top of the coverage provided by Medicare5Medicare.gov, “Medicaid“, Accessed September 9, 2021. Dual-eligible beneficiaries qualify for both Medicare and Medicaid Services which can provide a greater range of covered services for their health care expenses.

If a beneficiary has both Medicare and Medicaid, their Medicare coverage pays first for the services they cover, and only once they no longer provide further coverage does Medicaid step in to cover what they can. If they get Medicaid and still have trouble affording their Medicare Part D (Prescription Drugs) costs, they may be eligible for the Social Security program Extra Help which can help mitigate their prescription drug costs6Medicare.gov, “Find your level of Extra Help (Part D)“, Accessed September 9, 2021.

Beneficiaries may also join a Medicare Advantage plan, which are private health insurances that have Special Needs Programs that tailor to specific disabilities7Medicare.gov, “Special Needs Plans (SNP)“, Accessed September 9, 2021. Because Medicare Advantage plans are private insurance, their fees are not strictly regulated by the federal government. Their healthcare costs may end up being higher for the medical services their members need if they chose the wrong plan.


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