Original Medicare (Parts A and B) has no maximum out-of-pocket limit. There is no annual cap on what you can spend, which means your costs can keep climbing as long as you keep receiving care. Medicare Advantage plans, by contrast, are required by law to set an annual out-of-pocket maximum, and as of 2025, prescription drug coverage under Part D now caps your spending at $2,000 per year.
Why Original Medicare Has No Spending Cap
If you’re enrolled in Original Medicare, you pay a 20% coinsurance on most Part B services (doctor visits, outpatient care, durable medical equipment) after meeting your annual deductible. That 20% has no ceiling. A $500,000 cancer treatment means $100,000 in coinsurance from your pocket, with no point at which Medicare picks up the full tab. A few services are exceptions: lab work, home health care, and annual depression screenings cost you nothing.
Hospital stays under Part A follow a different structure but carry the same problem. You pay a per-benefit-period deductible and then nothing for the first 60 days. After that, daily coinsurance kicks in and increases the longer you stay. Once you exhaust your lifetime reserve days, Medicare stops covering inpatient care entirely. There is still no annual maximum limiting your total exposure.
This open-ended cost structure is the single biggest financial risk for people on Original Medicare, and it’s the primary reason supplemental coverage exists.
How Medigap Plans Fill the Gap
Medigap (Medicare Supplement Insurance) policies are specifically designed to cover the costs Original Medicare leaves behind. Most Medigap plans pay 100% of your Part B coinsurance, effectively eliminating that uncapped 20%. Plans K and L are partial exceptions: Plan K covers 50% of Part B coinsurance and Plan L covers 75%, with each plan setting its own annual out-of-pocket limit after which it pays the remaining share. Plan N covers Part B coinsurance fully but may charge small copayments for certain office and emergency room visits.
If you’re staying on Original Medicare and want predictable costs, a Medigap policy is the standard way to create an effective spending cap where Medicare doesn’t provide one. The tradeoff is a monthly premium, which varies by plan type, your age, and where you live.
Medicare Advantage Out-of-Pocket Maximums
Every Medicare Advantage plan (Part C) is legally required to cap your annual out-of-pocket spending. For 2025, the absolute maximum any plan can set is $9,350 for in-network services. Many plans choose lower limits. CMS divides the caps into three tiers:
- Lower MOOP: up to $4,150 for in-network costs
- Intermediate MOOP: $4,151 to $6,750 for in-network costs
- Mandatory MOOP: $6,751 to $9,350 for in-network costs
Once you hit your plan’s limit, the plan pays 100% of covered services for the rest of the year. For 2026, the mandatory ceiling rises slightly to $9,250, though most plans will continue setting their limits below the maximum.
PPO Plans and Out-of-Network Costs
If you’re in a Medicare Advantage PPO, your plan sets two separate limits: one for in-network spending and a higher one for combined in-network and out-of-network spending. For 2025, the combined cap can go as high as $14,000. That means seeing out-of-network providers can significantly increase your total exposure before the safety net kicks in. HMO plans only cover in-network care (except emergencies), so they carry a single, lower cap.
The $2,000 Cap on Prescription Drugs
Starting in 2025, the Inflation Reduction Act introduced a hard $2,000 annual cap on out-of-pocket spending for Part D prescription drugs. This is a major change. In previous years, people taking expensive medications could face thousands more in costs. In 2024, there was a transitional cap that applied once you hit $8,000 in true out-of-pocket drug costs. The 2025 rule simplifies this: once your out-of-pocket drug spending reaches $2,000 in a calendar year, you pay nothing for covered prescriptions for the rest of that year.
This cap applies whether you get Part D through a standalone drug plan or through a Medicare Advantage plan that includes drug coverage. It covers your share of costs at the pharmacy, including deductibles, copayments, and coinsurance for covered drugs.
Extra Help for Lower-Income Enrollees
If your income and resources are limited, Medicare’s Extra Help program (also called the Low Income Subsidy) can reduce your drug costs well below the $2,000 cap. In 2025, qualifying enrollees pay no premium and no deductible for their drug plan. Copayments are fixed at up to $4.90 for generics and up to $12.15 for brand-name drugs. Once your total out-of-pocket drug costs reach $2,000, including payments made on your behalf through the program, you pay $0 for covered medications the rest of the year.
Putting the Numbers Together
Your total out-of-pocket exposure depends entirely on which version of Medicare you have and whether you carry supplemental coverage:
- Original Medicare alone: No cap on medical costs. The 20% coinsurance on Part B and escalating hospital coinsurance under Part A are unlimited. Drug costs are capped at $2,000 under Part D.
- Original Medicare with Medigap: Most Medigap plans eliminate or sharply reduce your coinsurance, creating a practical ceiling. You still pay the Medigap premium and your Part D drug costs up to $2,000.
- Medicare Advantage: Your plan sets a firm annual maximum, no higher than $9,350 in-network for 2025. Many plans cap costs lower. Drug coverage, if included, follows the same $2,000 Part D cap.
The gap between “no limit at all” under Original Medicare and a firm cap under Medicare Advantage is the most consequential financial difference between the two paths. If you’re on Original Medicare without supplemental insurance, a single serious illness or prolonged hospital stay can generate costs that would be capped at a few thousand dollars under an Advantage plan or covered almost entirely by a good Medigap policy.