Original Medicare (Parts A and B) does not have an annual out-of-pocket maximum. There is no cap on how much you can spend in a given year on covered services, which makes it fundamentally different from most employer-sponsored health insurance and marketplace plans. However, Medicare Advantage plans, Medigap policies, and a new prescription drug cap all offer ways to limit your financial exposure.
Why Original Medicare Has No Spending Cap
Most health insurance plans have a built-in safety net: once you spend a certain amount in a year, the plan covers everything else. Original Medicare doesn’t work this way. After you meet your Part B deductible, you typically owe 20% of the Medicare-approved amount for each service, and that 20% coinsurance continues no matter how high your bills get. If you need surgery, cancer treatment, or extended hospital care, that 20% can add up to tens of thousands of dollars with no ceiling in sight.
This is one of the most significant gaps in Original Medicare’s design. A single major illness or injury can leave you responsible for costs that would be capped under almost any other type of insurance. It’s the primary reason most people on Original Medicare pair it with some form of supplemental coverage.
Medicare Advantage Plans Have a Built-In Cap
Medicare Advantage plans (Part C) are required by law to include an annual out-of-pocket maximum. Once you hit that limit, the plan pays 100% of your covered services for the rest of the year. Many plans set separate limits for in-network and out-of-network care, so the cap you reach depends on where you get treatment.
The specific dollar amount varies by plan. Some plans set their maximums well below the federal ceiling, so it’s worth comparing options during open enrollment. The tradeoff is that Medicare Advantage plans typically require you to use a network of providers and may need referrals for specialists, restrictions that don’t exist in Original Medicare.
Medigap: Adding a Cap to Original Medicare
If you want to stay on Original Medicare but still have financial protection, Medigap (Medicare Supplement Insurance) policies can fill the gap. Most Medigap plans cover some or all of your coinsurance, which effectively limits what you spend. But two specific plans, K and L, work with explicit out-of-pocket maximums similar to what you’d find in an employer plan.
Medigap Plan L has a 2026 out-of-pocket limit of $4,000, and Plan K’s limit is $8,000. Once you reach those amounts in a calendar year, the plan covers 100% of your Part A and Part B coinsurance for the remainder of the year. Other Medigap plans (like the popular Plan G) don’t use a formal cap because they cover so much of your cost-sharing upfront that your out-of-pocket spending stays low regardless.
One important timing note: you get the best access to Medigap plans during your initial enrollment period, the six months starting when you turn 65 and are enrolled in Part B. During that window, insurers can’t deny you coverage or charge more for pre-existing conditions. Outside that window, availability and pricing vary by state.
The New $2,000 Prescription Drug Cap
One area where Medicare recently added a hard spending limit is prescription drugs. Starting in 2025, Medicare Part D plans cap your annual out-of-pocket drug costs. For 2026, that cap is $2,100. This applies to everyone with Medicare drug coverage, whether through a standalone Part D plan or a Medicare Advantage plan that includes drug benefits.
Before this change, people taking expensive medications for conditions like cancer, multiple sclerosis, or rheumatoid arthritis could face thousands of dollars in drug costs each year during the so-called “catastrophic” phase of coverage. The new cap eliminates that exposure. Once you hit the limit, you pay nothing more for covered prescriptions for the rest of the year.
Medicare also introduced a payment plan option that lets you spread your drug costs across the year in monthly installments rather than paying large amounts at the pharmacy counter when you first fill expensive prescriptions.
Inflation Protections for Part B Drugs
A separate provision reduces costs for certain drugs administered in a doctor’s office or clinic (covered under Part B rather than Part D). When drugmakers raise prices faster than the rate of inflation, your coinsurance is calculated on a lower, inflation-adjusted amount instead of the actual price. This has been in effect since April 2023 and applies automatically. You don’t need to do anything to benefit from it.
Help for Lower-Income Beneficiaries
If your income and savings are limited, Medicare Savings Programs can reduce or eliminate your out-of-pocket costs entirely. These state-run programs cover Part B premiums and, depending on the program, may also cover deductibles, coinsurance, and copayments.
There are three main tiers based on income. The most comprehensive, the Qualified Medicare Beneficiary (QMB) program, covers nearly all Medicare cost-sharing. For 2026, you may qualify as an individual with monthly income up to $1,350 and resources (savings, investments, not counting your home) up to $9,950. Married couples qualify with monthly income up to $1,824 and resources up to $14,910. The other two programs, SLMB and QI, have higher income limits but cover only the Part B premium. Limits are slightly higher in Alaska and Hawaii.
Extra Help (also called the Low-Income Subsidy) is a separate program that reduces Part D prescription drug costs. You can qualify for both a Medicare Savings Program and Extra Help simultaneously.
Choosing the Right Protection
Your best option depends on how you use healthcare and how much financial risk you’re comfortable carrying. Medicare Advantage gives you a built-in spending cap but limits your choice of doctors. Medigap paired with Original Medicare lets you see any provider who accepts Medicare, with predictable costs, but premiums can be higher. Staying on Original Medicare alone, without any supplemental coverage, is the cheapest month to month but leaves you exposed to unlimited cost-sharing if something serious happens.
For prescriptions, the new annual cap applies regardless of which path you choose, as long as you have Part D or Medicare Advantage drug coverage. That’s one area where every Medicare beneficiary now has a firm financial ceiling.