A catastrophic cap is the maximum amount you’ll pay out of pocket for covered health care services during a calendar year. Once your eligible expenses hit that dollar limit, your insurance covers 100% of remaining costs for the rest of the year. The term is most commonly associated with TRICARE, the health plan for military service members and their families, though Medicare Part D uses a similar concept for prescription drug coverage.
How a Catastrophic Cap Works
Throughout the year, your out-of-pocket spending on things like copayments, cost-shares, and deductibles adds up toward a running total. The moment that total reaches your plan’s catastrophic cap, your insurer picks up the full cost of covered services for every remaining day of that calendar year. The cap resets on January 1, and the count starts over.
For TRICARE specifically, once you hit the cap, TRICARE pays your portion of the allowable charge for all covered services. If you’re enrolled in TRICARE Prime or TRICARE Select, you also stop paying enrollment fees for the rest of that year. Beneficiaries on TRICARE Reserve Select, TRICARE Retired Reserve, TRICARE Young Adult, or the Continued Health Care Benefit Program stop paying for covered services and supplies, but still owe their monthly premiums.
2025 Catastrophic Cap Amounts for TRICARE
Your specific cap depends on two things: your beneficiary category (active duty family member vs. retiree) and which enrollment group you fall into (Group A or Group B). Group A generally includes beneficiaries who were enrolled before a specific legislative cutoff date, while Group B includes those who enrolled after.
For active duty family members in 2025, the catastrophic cap ranges from $1,000 to $1,288 depending on plan and group. The cap is identical whether you’re on TRICARE Prime or TRICARE Select within the same group.
For retirees, the numbers are higher. TRICARE Prime Group A retirees have a $3,000 cap, while Group B retirees face a $4,509 cap. TRICARE Select Group A retirees have a $4,261 cap, and Group B retirees are also at $4,509. One exception: survivors of active duty deceased sponsors, medically retired service members, and their dependents on TRICARE Select Group A have a lower cap of $3,000.
What Counts Toward the Cap
Only certain out-of-pocket costs accumulate toward your catastrophic cap. Your deductibles, copayments, and cost-shares for TRICARE-covered services all count. These are the amounts you pay at the time of care or are billed for afterward.
Several common expenses do not count:
- Services not covered by TRICARE, such as cosmetic procedures
- Point-of-service fees, charged when you seek care outside the Prime network without a referral
- Balance billing from non-participating providers, which can be up to 15% above the TRICARE-allowable charge
- Monthly or quarterly premiums for Reserve Select, Retired Reserve, Young Adult, or CHCBP plans
- Extended Care Health Option costs, which cover certain services for dependents with disabilities
This distinction matters because it means a large medical bill from a non-participating provider could leave you with costs that never move you closer to your cap. Staying within your plan’s network and using TRICARE-covered services ensures your spending counts.
Medicare Part D and Catastrophic Coverage
Medicare uses a similar concept for prescription drugs under Part D, though the mechanics differ. Starting in 2025, the Inflation Reduction Act introduced a $2,000 annual out-of-pocket cap on Part D drug costs. Once you’ve spent $2,000 on covered prescriptions (counting your deductible and coinsurance), you enter what Medicare calls the “catastrophic phase” and pay nothing for covered drugs for the rest of the year.
Before this change, there was no hard cap on Part D spending, and beneficiaries in the catastrophic phase still owed 5% of drug costs, which could add up to thousands of dollars for people on expensive medications. The new structure has three straightforward phases: you pay your annual deductible, then 25% coinsurance during the initial coverage phase, then zero once you cross the $2,000 threshold.
How It Differs From a Standard Out-of-Pocket Maximum
If you’ve had employer-sponsored insurance or an Affordable Care Act marketplace plan, you’re probably familiar with the term “out-of-pocket maximum.” A catastrophic cap serves the same basic function: it’s a ceiling on what you pay in a year. The difference is mostly in terminology and the specific rules about what counts toward the limit.
ACA marketplace plans are required by law to cap out-of-pocket costs (for 2025, the limit is $9,200 for an individual), and premiums never count toward that number. TRICARE’s catastrophic cap works similarly in excluding premiums, but it also excludes point-of-service fees and balance billing, which can surprise beneficiaries who assume all their medical spending is being tallied. Knowing exactly which expenses qualify is the key to understanding how close you are to your cap at any point in the year.