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Medicare Advantage Enrollment: What Is An Out-Of-Pocket Limit?

By Nadia-Elysse Harris
Medicare Advantage caps the medical expenses a person must pay in an out-of-pocket maximum.

Medicare plans cover a wide range of medical services. Medicare Advantage often pays for even more, including services not covered by traditional Medicare, such as dental and vision coverage. But that doesn't mean your medical care will be completely free, which is where co-pays and other out-of-pocket expenses come in.

A 2019 Kaiser Family Foundation analysis found that, on average, Medicare beneficiaries spent $5,460 on out-of-pocket medical expenses in 2016. Because coverage rates vary so much with Medicare Advantage enrollment, that study specifically excluded Medicare Advantage recipients.

However, a 2016 Journal of the American Medical Association Oncology study offers some key insights. The study looked specifically at people with cancer who were enrolled in Medicare Advantage health maintenance organization (HMO) plans. These beneficiaries spent an average of $5,976 of their own money to pay for their care.

Additionally, traditional Medicare plans have no out-of-pocket maximum, whereas Medicare Advantage plans do have out-of-pocket maximums that cap the amount a beneficiary has to pay for health care.

Understanding Medicare Advantage Premiums

Medicare beneficiaries have to pay a premium for Part B medical insurance. Those who choose Medicare Advantage also have to pay premiums. The monthly cost of premiums depends on the specific plan you choose, as well as the type of plan.

HMOs, for example, typically have lower premiums. Premiums for both Medicare and Medicare Advantage are typically much lower than the rates associated with traditional private insurance. In 2019, the average Medicare Advantage beneficiary paid $29 per month, according to the Kaiser Family Foundation. 

Your Medicare Advantage premiums do not cover all healthcare costs. You may also have to pay a copay for medical services. If you have a preferred provider organization (PPO) plan and seek care outside of your plan's coverage network, you'll have to pay more. HMOs, on the other hand, do not typically cover any out-of-network services.

Medicare Advantage Out-of-Pocket Maximums

Each Medicare Advantage plan must cap the amount a person pays annually for covered services. This is known as an out-of-pocket maximum. This figure is different from a deductible. A traditional health insurance deductible is the amount you must pay before some coverage kicks in. In contrast, an out-of-pocket maximum prevents you from paying excessive medical costs. Some states set specific limits. You must review each plan carefully to understand your out-of-pocket maximum. Sometimes this figure varies depending on the services you receive. For example, a PPO might have a higher out-of-pocket maximum for out-of-network providers.

Once you've hit your out-of-pocket maximum, the plan must cover the full cost of covered services. However, you might still have to pay for some services, including:

  • Out-of-network providers (if you choose an HMO)
  • Prescription drugs (if your plan does not include prescription drug coverage)
  • Any additional services the plan does not cover
  • Extra plan benefits, such as certain vision or dental services

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Interested in learning more about Medicare, Medigap, and Medicare Advantage plans? WebMD Connect to Care Advisors may be able to help you.