Unlike most health insurance, Medicare does not currently have a cap on beneficiaries’ out-of-pocket (OOP) costs. As a result, millions of people in Medicare can face extremely high OOP expenses if they are sick, unless they have purchased extra private insurance or have other supplemental coverage.
Using this Medicare Calculator, you can design a policy in Medicare to protect beneficiaries from extremely high OOP costs. This calculator displays the effects of implementing the policy, including the number of people who would save on OOP expenses and their average savings by demographic characteristics. The Calculator also estimates the policy's budgetary impact on Medicare as it fills this OOP coverage gap.
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Medicare Calculator: Adding an Out-of-Pocket (OOP) Cap
Design a Medicare policy that caps OOP expenses and analyze the impacts
Design the Policy
Step 1
What will the Medicare out-of-pocket (OOP) cap be?
Details on caps
Step 2
Will the cap only apply to individuals’ OOP costs, or will it also apply to Medicaid’s costs on behalf of Medicare beneficiaries?
Policy details
Step 3
Which year do you want to view?
2021
2029
2021
Step 1
What will the Medicare out-of-pocket (OOP) cap be?
Details on caps
Step 2
Will the cap only apply to individuals’ OOP costs, or will it also apply to Medicaid’s costs on behalf of Medicare beneficiaries?
Policy details
Step 3
Which year do you want to view?
Summary of Policy Impacts,
Scroll to explore more information behind these numbers
Number of Beneficiaries with OOP Savings after Cap
Number of Beneficiaries with OOP/Medicaid Savings after Cap
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Number of Medicare beneficiaries with OOP savings after the Cap
This count equals the number of Medicare beneficiaries without supplemental insurance whose OOP spending exceeds the cap by at least $25. If the cap also applies to state Medicaid spending on behalf of beneficiaries, then applicable beneficiaries are included in the count.
Average OOP Savings after Cap
Average OOP/Medicaid Savings after Cap
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Average OOP/Medicaid savings
This amount equals average, per-capita savings among Medicare beneficiaries without supplemental insurance whose OOP spending exceeds the cap by at least $25. If the cap also applies to state Medicaid spending on behalf of beneficiaries, this average includes per-capita Medicaid savings by states.
Medicare Budget Impact
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(<1% of Total Medicare Spending)
Medicare budget impact
This amount represents the estimated increase in Medicare spending due to its coverage of beneficiaries’ cost-sharing liability above the cap. Under the policy option that applies to Medicaid’s expenses, states would enjoy savings.
Scroll to explore more information behind these numbers
Number of Beneficiaries with OOP Savings after Cap
Number of Beneficiaries with OOP/Medicaid Savings after Cap
Number of Medicare beneficiaries with OOP savings after the Cap
This count equals the number of Medicare beneficiaries without supplemental insurance whose OOP spending exceeds the cap by at least $25. If the cap also applies to state Medicaid spending on behalf of beneficiaries, then applicable beneficiaries are included in the count.
Average OOP Savings after Cap
Average OOP/Medicaid Savings after Cap
Average OOP/Medicaid savings
This amount equals average, per-capita savings among Medicare beneficiaries without supplemental insurance whose OOP spending exceeds the cap by at least $25. If the cap also applies to state Medicaid spending on behalf of beneficiaries, this average includes per-capita Medicaid savings by states.
Medicare Budget Impact
(<1% of Total Medicare Spending)
Medicare budget impact
This amount represents the estimated increase in Medicare spending due to its coverage of beneficiaries’ cost-sharing liability above the cap. Under the policy option that applies to Medicaid’s expenses, states would enjoy savings.
How many Medicare beneficiaries would save on out-of-pocket (OOP) costs in ?
How many Medicare beneficiaries would have out-of-pocket (OOP)/Medicaid savings in ?
653K Medicare beneficiaries without supplemental coverage would save on OOP costs after reaching the cap.
653K Medicare beneficiaries would have either OOP savings or Medicaid savings after reaching the cap.
What do these results mean?
Number of Medicare beneficiaries with savings
Adding an OOP cap to Medicare would lower individual costs for the relatively small, but vulnerable number of Medicare beneficiaries who have extremely high medical costs and no supplemental coverage. A catastrophic cap would particularly help beneficiaries who experience serious illness, such as cancer and need high-cost chemotherapy, or are hospitalized during the year. Relative to flat OOP caps, more beneficiaires would save under an income-related policy because a disproportionate share of Medicare beneficiaries have incomes below 200% of poverty.
If the cap applied to Medicare beneficiaries in Medicaid, states would save on additional high-cost Medicare beneficiaries.
How does this number vary by group?
How much would Medicare beneficiaries save in OOP costs in ?
How much would Medicare beneficiaries and Medicaid save per person in ?
Average OOP savings would be $4,299 for beneficiaries who reach the OOP cap.
Average OOP and Medicaid saving would be $4,299 per person after the cap.
What do these results mean?
Out-of-pocket savings
Under a catastrophic, out-of-pocket cap, beneficiaries in poorer health and those with higher levels of service are likely to save more. Accordingly, among beneficiaries who exceed the cap, those with two or more hospital stays, and those with hospital stays requiring post-acute care would have higher savings, on average.
How do these savings in OOP costs vary by group?
How do these savings in OOP costs vary by group?
Income-related OOP cap
Under this policy, the individual income-related cap is:
$3,350 for incomes up to 150% of poverty; $6,700 between 151-800%; $7,500 between 801-900%; $8,500 between 901-1000%; and $9,500 above 1000%.
How would it impact Medicare's budget in and over 10 years?
Federal spending on Medicare would increase by $ (<1% of total Medicare spending) under this policy in . Over 10 years (2020-2029), the Medicare budget impact will be $.
What do these results mean?
Impact on Medicare’s Budget
Medicare spending would increase if Medicare established a catastrophic, out-of-pocket cap because it would cover beneficiaries’ cost-sharing liability above the designated cap. This increase in Medicare spending is lowest for the ‘Individual OOP’ policy and higher for the ‘Individual OOP+Medicaid’ policy. Under this latter policy, states would enjoy savings because they would no longer be liable for Medicare cost-sharing above the cap for Medicaid recipients.
What does this look like relative to total Medicare spending?
Projected Total Spending on Medicare
Total includes Medicare spending on the OOP cap plus Medicare expenditures projected in the 2020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.
Out-of-pocket caps
The out-of-pocket cap would only apply to spending on Medicare Part A and Part B services for people in Traditional Medicare. Therefore, the cap would not apply to expenses related to outpatient prescription drugs (Part D) or services not covered by Medicare (e.g., routine dental care).
The income-related cap would be: $3,350 for incomes up to 150% of the Federal Poverty Level (FPL); $6,700 between 151-800% FPL; $7,500 between 801-900% FPL; $8,500 between 901-1000% FPL; $9,500 for >1000% FPL.
The out-of-pocket caps would start at the specified level, but would be indexed annually by projected growth in per-capita healthcare spending.
Details on cap application
The “Individual OOP” policy would apply the cap to beneficiaries’ own out-of-pocket costs. The “Individual OOP+Medicaid” policy would also apply the cap to Medicaid’s cost sharing payments made on behalf of Medicare beneficiaries. Payments made by private organizations (e.g., employers or insurers) would not count towards an individual’s out-of-pocket limit.
The out-of-pocket cap would only apply to spending on Medicare Part A and Part B services for people in Traditional Medicare. Therefore, the cap would not apply to expenses related to outpatient prescription drugs (Part D) or services not covered by Medicare (e.g., routine dental care).
Appendix
What is the chance that a Medicare beneficiary will be hospitalized one or more times during the year?
People often experience high out-of-pocket liability for healthcare costs when they have an illness or injury that requires a hospitalization. In Medicare, cost sharing can be very high for the services that beneficiaries receive before, during, and after a hospitalization. In addition to the hospital deductible, these expenses can include liability for 20% cost sharing for physician services, including high-cost drugs, such as chemotherapy that is often administered in physician offices. Beneficiaries with extended stays in a hospital (over 60 days) or skilled nursing facility (over 20 days) are also liable for daily coinsurance.
Chance of a hospitalization for people in Medicare
Data Source: Medicare benefit modeling, Actuarial Research Corporation, 2020.