Do Medicare Supplement Plans Have an Out-of-Pocket Maximum?

Medicare Supplement Plans, often called Medigap, are private insurance policies designed to work in conjunction with Original Medicare. These plans help individuals manage healthcare costs that Original Medicare does not fully cover.

How Medicare Supplement Plans Function

Medicare Supplement Plans operate by complementing Original Medicare, which consists of Part A (Hospital Insurance) and Part B (Medical Insurance). After Original Medicare pays its designated share of approved healthcare costs, a Medigap policy then pays its portion of the remaining expenses. This arrangement helps cover cost-sharing amounts such as deductibles, coinsurance, and copayments for Medicare-approved services.

These plans are standardized across most states, meaning that plans of the same letter (e.g., Plan G or Plan N) offer the same basic benefits regardless of the private insurance company selling them. Medigap policies are designed to fill the “gaps” in Original Medicare’s coverage, providing a more comprehensive financial safety net for beneficiaries. A Medigap policy covers only one person, requiring spouses to purchase separate policies if both desire coverage.

Understanding Out-of-Pocket Maximums

An out-of-pocket maximum represents the highest amount a policyholder is required to pay for covered medical expenses within a calendar year. Once this predetermined limit is reached, the health insurance plan covers 100% of all additional covered healthcare costs for the remainder of that year.

Costs that count towards an out-of-pocket maximum include deductibles, copayments, and coinsurance. However, monthly premiums paid for the insurance plan itself do not count towards this limit. Similarly, expenses for services not covered by the plan, or charges incurred from out-of-network providers, do not contribute to meeting the out-of-pocket maximum.

Medicare Supplement Plans and Out-of-Pocket Maximums

Most Medicare Supplement Plans currently sold do not feature an annual out-of-pocket maximum. This is primarily because these plans are structured to cover nearly all of the deductibles, coinsurance, and copayments associated with Original Medicare-approved services. For many Medigap plans, once Original Medicare pays its share, the supplement plan covers the remaining cost-sharing, effectively minimizing a beneficiary’s out-of-pocket liability for covered services.

Two specific Medigap plans, Plan K and Plan L, are exceptions as they do include annual out-of-pocket maximums. For 2025, the out-of-pocket limit for Plan K is $7,220, and for Plan L, it is $3,610. These plans operate with a cost-sharing model where the beneficiary pays a percentage of costs until the maximum is met, after which the plan pays 100% for covered services.

Medigap plans differ from Medicare Advantage (Part C) plans, which are required to have an out-of-pocket maximum. For example, in 2025, Medicare Advantage plans have a federally mandated in-network out-of-pocket maximum of $9,350, with a combined in-network and out-of-network limit of $14,000. Original Medicare itself, without a supplement, does not have an out-of-pocket maximum.

What Costs Medicare Supplement Plans Don’t Cover

While Medicare Supplement Plans provide substantial coverage for expenses left by Original Medicare, they do not cover every healthcare cost. Beneficiaries must continue to pay their monthly Medigap premium in addition to their Medicare Part B premium.

Furthermore, Medigap policies do not cover services that Original Medicare itself does not cover. This includes most routine dental care, eye exams, eyeglasses, and hearing aids. Long-term care, such as assistance with daily activities in a nursing home, and private-duty nursing are also excluded from Medigap coverage. Prescription drugs are another significant category not covered by Medicare Supplement Plans. Individuals needing prescription drug coverage must enroll in a separate Medicare Part D plan. Additionally, some Medigap plans, such as Plan N, require small copayments for office visits or emergency room visits that do not result in inpatient admission, and do not cover Medicare Part B excess charges.