Few Dollar Limits on Out-of-Pocket Costs

Q. Is there an annual cap on the payments I make out of my own pocket in Medicare?

A. If you’re enrolled in the traditional Medicare program, there’s no annual dollar limit on your out-of-pocket expenses. The more services you use, the more your expenses mount up—through copayments for outpatient care (usually 20 percent of the cost) and deductibles for inpatient care ($1,068 for each hospital benefit period in 2009).

If you’re enrolled in a Medicare Advantage private health plan, check with your plan or look at your “evidence of coverage” document. Some plans offer annual caps on out-of-pocket spending (typically between $3,000 and $5,000), but usually only for certain services specified by your plan. In other words, some services don’t count toward the limit.

One type of MA plan, known as a Medicare medical savings account, has a different kind of out-of-pocket limit. After you’ve used up the money that the plan initially places in your account, you then enter a deductible period in which you pay 100 percent of the costs for Medicare services up to a certain annual dollar limit set by the plan. Once you’ve met this limit, the plan pays all your costs until the end of the year.

If you’re enrolled in a Medicare Part D prescription drug plan—whether a stand-alone plan that provides only drug coverage or part of a Medicare private health plan—you have some protection against very high drug costs. Once you’ve spent a certain amount out of pocket on drugs in a calendar year ($4,350 in 2009), your expenses drop to small copays for each prescription until the end of the year—or to nothing if you qualify for full Extra Help under Part D’s benefit for people with limited incomes.

Patricia Barry is a senior editor at the AARP Bulletin.