Out-of-Pocket Maximum
The annual cap on a beneficiary's cost-sharing; Original Medicare has no out-of-pocket maximum, while Medicare Advantage plans must cap in-network costs at $8,850 or less in 2024.
The absence of an out-of-pocket maximum is the single most significant financial vulnerability in Original Medicare. Unlike commercial insurance plans required under the ACA to cap cost-sharing, Medicare Parts A and B have never included such a cap. A beneficiary who experiences a catastrophic illness can face six-figure out-of-pocket costs without a Medigap policy.
Medicare Advantage plans are required by CMS to include a mandatory out-of-pocket maximum for in-network services. In 2024, the CMS-set maximum is $8,850 for in-network services and $13,300 for combined in- and out-of-network services. Individual plans may set lower maximums as a competitive feature; many zero-premium HMO plans advertise $2,000–$4,500 in-network maximums. After reaching the maximum, the plan covers 100% of costs for covered services for the rest of the year.
For beneficiaries who choose Original Medicare, Medigap Plan G effectively creates an out-of-pocket maximum equal to the Part B deductible ($240/year) plus the Plan G premium — providing financial certainty without network restrictions. The cost-benefit decision between MA (low premium, fixed OOP max) and Original Medicare + Plan G (higher combined premium, no hard OOP max but unlimited flexibility) is the central financial planning question in Medicare selection.
Real-World Example
A Medicare Advantage enrollee with a $4,000 in-network OOP maximum was hospitalized for 12 days with pneumonia; total Medicare-approved charges were $87,000, the plan paid $83,000, and the patient's total exposure was $4,000 — their OOP maximum was reached by day 4.