AARP Hearing Center
AARP Backs Senate Bill to Cap Out-of-Pocket Health Care Costs in Original Medicare
Proposed $5,000 spending limit would apply to nearly half of Medicare enrollees
5-minute read
Rob Dobi
Key takeaways
- Millions on original Medicare need out-of-pocket limit.
- Medicare Advantage plan enrollees have a similar cap.
- Cap offers safety net to all, 2028 benefits to 3.2 million.
- Proposal also simplifies low-income enrollee assistance.
AARP is urging Congress to pass legislation that would cap annual out-of-pocket health care costs for the 34.3 million people who have original Medicare.
Studies suggest the lower expenses that people who choose Medicare Advantage expect to pay are an important factor in the near doubling of the plans’ enrollment in 10 years — from 18 million in 2017 to 35 million in 2026. During that same decade, the share of people with Medicare Advantage increased from 35 percent to 55 percent of people enrolled in Medicare Part A and Part B.
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The Medicare Cost Cap Act of 2026 (S. 4886) would limit what original Medicare enrollees could pay out of pocket for Part A hospital services and Part B outpatient care to $5,000 in 2028, giving them protections similar to those with Medicare Advantage plans. In subsequent years, the cap would increase to reflect annual growth in average per-capita spending in Part A and Part B.
Similar to Medicare Advantage plans and private insurance, the limit doesn’t include premiums but does include deductibles, copayments, coinsurance and other cost sharing for those two parts of Medicare. Prescription drug Part D plans, including Medicare Advantage plans with drug coverage, already have an out-of pocket threshold of $2,100 in 2026 and $2,400 in 2027.
The legislation would help shield beneficiaries in original Medicare from devastating health care costs if they’re hospitalized or stricken with a serious illness. The spending cap would save enrollees an average of $1,255 a year, according to researchers at Brown University.
Fifteen Senate Democrats, including Democratic Leader Chuck Schumer of New York, Senate Finance Committee Ranking Member Ron Wyden of Oregon and Sen. Lisa Blunt Rochester of Delaware, introduced the proposal, which has been sent to the Finance Committee.
No one should face huge medical bills, AARP says
If enacted, the bill would put original Medicare enrollees on a similar footing with 35.9 million people in Medicare Advantage plans from private insurers.
“Capping out-of-pocket costs in Medicare Part A and Part B would protect these Americans [in original Medicare] from the kind of catastrophic medical bills no one should face,” Nancy LeaMond, AARP’s chief advocacy and engagement officer, said in a letter of support to bill sponsors.
“Capping out-of-pocket costs in Medicare Part A and Part B would protect these Americans [in original Medicare] from the kind of catastrophic medical bills no one should face,” Nancy LeaMond, AARP’s chief advocacy and engagement officer, said in a letter of support to bill sponsors.
Medicare Advantage plans are required to limit annual out-of-pocket spending for Part A and Part B at $9,250 for in-network services in 2026. For in-network and out-of-network services combined, the spending limit is $13,900. But Medicare Advantage plans can offer lower ceilings, and the 2026 average is $5,421 in network and $9,825 out of network, according to KFF, a nonpartisan health policy nonprofit.
“While Medicare Advantage, Medicare Part D, Medicaid, employer-sponsored coverage and individual marketplace coverage all have various caps on out-of-pocket expenses, original Medicare places no limit on how much an individual spends on health care in a year,” LeaMond said. “A person with a chronic condition or significant illness could face tens of thousands of dollars in personal expenses” without the cap.
$5,000 spending cap would offer peace of mind
An estimated 3.2 million original Medicare enrollees who aren’t dually eligible for Medicaid are expected to exceed the spending cap in 2028, according to research from Brown University’s Center for Advancing Health Policy Through Research. Over 10 years, 52.3 percent of the same population would likely exceed the $5,000 cap at least once and 17.6 percent would do so at least three times.
Older adults with low incomes and those in poor health would benefit the most, says Gretchen Jacobson, vice president of Medicare at the Commonwealth Fund. The New York-based foundation promotes greater access to health care.
“For those people who are lower income but don’t qualify for Medicaid, such a cap would help to provide more financial security,” she says. And for anyone on a fixed income, “the financial certainty that an out-of-pocket cap provides is of significant value.”
The Medicare Payment Advisory Commission (MedPAC) highlighted the lack of an out-of-pocket cap for original Medicare in its June report to Congress, noting that enrollees without Medigap or other supplemental coverage can face substantial financial risk. The report also cited a 2022 Commonwealth Fund survey of more than 1,600 Medicare enrollees showing that 1 in 5 chose Medicare Advantage mainly because of those plans’ spending limits.
A Medigap plan can help protect people from original Medicare’s open-ended cost sharing, and about 4 in 10 people with original Medicare had that coverage in 2022, according to KFF. But the private Medicare supplement insurance comes with its own cost: For the most popular Plan G, average annual premiums in 2023 varied from $1,680 to $2,832 depending on the state in which the coverage was issued.
The Brown University study predicts that Medigap premiums would go down if the $5,000 out-of-pocket cap became law because Medigap plans would no longer be responsible for covering expenses above the limit. But by how much is uncertain.
One in 4 people on Medicare lived on incomes below $24,600 per person in 2024, and half had incomes below $43,200 per person, KFF says.
Aid could be easier for low-income enrollees
The Senate bill also would eliminate asset tests and streamline enrollment for Medicare Savings Programs and the Part D Extra Help program. Both programs provide financial assistance with out-of-pocket costs for low-income Medicare enrollees.
And because the average Medicare beneficiary spent 36 percent of their annual Social Security income on health care premiums and out-of-pocket expenses in 2023, AARP is urging Congress to add provisions to the legislation that protect against premium increases.
“We cannot limit copays and coinsurance with one hand and then raise premiums with the other,” LeaMond said. “Instead, we must address the root causes of high health care spending.”
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