Key Takeaways

• Medicare does not provide a true cap on your total annual out-of-pocket costs, especially if you rely solely on Original Medicare.

• Understanding the gaps in coverage, cost-sharing rules, and optional protections like Medigap is critical to avoid unexpected medical bills.

The Illusion of a Spending Cap

You might assume that Medicare protects you from catastrophic costs once you enroll. That belief is common—and unfortunately, it’s not entirely accurate. While Medicare offers significant coverage, it does not place a definitive limit on how much you can spend out-of-pocket for medical services under Original Medicare (Parts A and B).

Original Medicare requires you to pay a deductible, coinsurance, and copayments for covered services. And there’s no ceiling on what those costs could add up to in a year if you experience a serious illness or require extensive treatment.

What Original Medicare Covers (and What It Doesn’t)

Original Medicare is split into two parts:

• Part A (Hospital Insurance) covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care.

• Part B (Medical Insurance) covers outpatient care, doctor visits, durable medical equipment, and preventive services.

Both parts involve cost-sharing:

• Part A: In 2025, you pay a $1,676 deductible for each benefit period. After 60 days in the hospital, daily coinsurance starts—$419/day from days 61 to 90 and $838/day for lifetime reserve days.

• Part B: The monthly premium is $185, and you must meet a $257 annual deductible. After that, Medicare generally pays 80% of approved services, and you pay the remaining 20% with no upper limit.

That 20% share under Part B can accumulate quickly, especially with services like surgeries, diagnostic tests, and outpatient therapies.

No Out-of-Pocket Maximum for Original Medicare

Here’s the part many enrollees overlook: Original Medicare does not include an annual out-of-pocket maximum. That means there’s no automatic financial stop-loss if your medical bills keep rising.

Let’s say you have several hospitalizations in a year or receive regular outpatient treatments—there’s nothing in Original Medicare that says, “You’ve paid enough this year. We’ll cover the rest.” You continue to be responsible for your share indefinitely.

This is very different from most employer-based insurance plans or even private insurance options that include a yearly out-of-pocket cap.

When High Costs Add Up

Even if you’re healthy now, things can change. Here’s where high costs could sneak up on you:

• Frequent hospital stays leading to repeated Part A deductibles.

• Extended outpatient treatments under Part B, such as chemotherapy or dialysis.

• Medical equipment and supplies not fully covered.

• Multiple specialist visits and diagnostic tests.

Each service brings its own set of charges—and the more complex your care, the higher your share of the cost.

What About Drug Costs?

Prescription drug coverage under Medicare Part D is separate and involves its own structure of deductibles, copayments, and coinsurance. However, 2025 brings a major update: a $2,000 out-of-pocket cap on Part D drug expenses for the year.

That cap applies only to covered prescription drugs and only under Part D plans. It does not apply to costs under Parts A or B. So while this change is a welcome one, it doesn’t protect you from medical service expenses that fall under other parts of Medicare.

Options to Help Limit Your Spending

You do have choices that can help reduce your out-of-pocket exposure, but they come with trade-offs. Understanding them is key.

Medicare Supplement Insurance (Medigap)

If you stay with Original Medicare, you may consider purchasing a Medigap policy. These plans are designed to cover the cost-sharing aspects that Original Medicare does not, like:

• Part A and B deductibles

• Coinsurance and copayments

• Extended hospital costs

Medigap plans are sold by private insurance companies, but standardized by federal rules. Keep in mind:

• You must be enrolled in both Part A and Part B.

• Premiums are paid monthly and vary by plan.

• Not all Medigap policies cover everything.

Medicare Advantage Plans (Part C)

These are bundled alternatives to Original Medicare, combining Part A, Part B, and often Part D. One major difference is that Medicare Advantage plans do have an annual out-of-pocket maximum for covered services.

In 2025, the maximum in-network out-of-pocket limit for these plans is $9,350. However, costs and networks vary. And these limits only apply to Medicare-covered services, not necessarily extras.

Services Not Covered by Medicare

Even with the best planning, there are services that Original Medicare doesn’t cover at all:

• Routine dental care

• Eye exams for prescription glasses

• Hearing aids

• Long-term custodial care

These services must be paid for out-of-pocket or through separate insurance.

If you require any of these on a recurring basis, your overall healthcare expenses may be much higher than anticipated.

Planning Ahead: Things You Can Do Now

Even if you’re already enrolled, or approaching eligibility at 65, there are steps you can take to reduce financial risks:

• Review your coverage every year during the Annual Enrollment Period (October 15 to December 7).

• Compare Medigap and Medicare Advantage options based on your health needs.

• Keep track of your out-of-pocket spending to anticipate future trends.

• Look into savings programs like the Medicare Savings Program (MSP) or Extra Help for drug costs if you have limited income.

Don’t Assume You’re Covered for Everything

It’s easy to think of Medicare as a catch-all system—but it’s not. The absence of an out-of-pocket maximum in Original Medicare leaves you exposed unless you take action to supplement it.

Understanding the structure and limits of your current coverage is not just smart—it’s essential.

Why It Matters More Than Ever in 2025

Healthcare costs continue to rise. In 2025, even a short hospital stay or several outpatient visits can leave you with thousands in bills. The safety net you thought Medicare provided may not be as secure as you hoped.

What’s changing:

• The out-of-pocket cap on Part D gives some relief—but only for drug costs.

• Services and care needs increase with age and chronic conditions.

• Budgeting for uncovered services like dental or long-term care is more urgent now than ever.

Speak With Someone Who Can Help You Make Sense of It

No one expects to spend tens of thousands on care, but it happens. Medicare is a powerful program, but it isn’t a complete solution without added protection. If you’re unsure about your current setup or overwhelmed by the options, don’t guess.

You can reach out to a licensed agent listed on this website for advice tailored to your situation and guidance on how to close the gaps in your Medicare coverage.