The Gap Most People Do Not Know About
Most health insurance plans, including employer-sponsored plans, ACA marketplace plans, and Medicare Advantage plans, include an annual out-of-pocket maximum. Once you hit that limit, the insurance pays 100% of covered costs for the rest of the year. Original Medicare Parts A and B have no such cap. There is no year in which Medicare will say: "You have paid enough. We cover everything from here." Your financial exposure under Original Medicare is theoretically unlimited, and in practice can reach tens or even hundreds of thousands of dollars for beneficiaries with serious illnesses.
This is one of the most important and least-discussed facts in all of Medicare. Many people assume that because Medicare is federal health insurance, it provides comprehensive coverage. In reality, Original Medicare was designed in 1965 as a cost-sharing program. The expectation was always that beneficiaries would supplement it with additional coverage. The two primary ways to do that are Medicare Supplement (Medigap) plans and Medicare Advantage plans.
How the Exposure Accumulates
Under Original Medicare, costs come from multiple directions with no aggregate cap:
- Part A deductible: $1,676 per benefit period in 2025 (can occur multiple times per year if you have multiple hospitalizations)
- Part A coinsurance: $419 per day for days 61-90 in the hospital, $838 per day for lifetime reserve days beyond day 90
- Part B deductible: $257 per year in 2025
- Part B coinsurance: 20% of all approved outpatient costs with no annual cap
- Skilled nursing facility coinsurance: $209.50 per day for days 21-100 of an SNF stay in 2025
- No cap on any of the above: These costs accumulate independently, and there is nothing to stop all of them from occurring in the same year
A Realistic Catastrophic Scenario
Consider a 70-year-old with Original Medicare who has a heart attack in March requiring a 12-day hospital stay, followed by 30 days in a skilled nursing facility, followed by three months of outpatient cardiac rehabilitation twice a week, a stent procedure in October, and a second 5-day hospitalization in November.
Under this scenario (not unusual for a cardiac patient), costs could include: the Part A deductible twice ($3,352 total), SNF coinsurance for days 21-30 ($2,095), 20% coinsurance on the outpatient rehabilitation (potentially $2,000-$4,000 depending on billing), 20% coinsurance on the stent procedure (potentially $5,000-$8,000 depending on facility charges), and the Part B deductible. Total out-of-pocket exposure could easily exceed $15,000 to $20,000 in a single year, and in more severe cases, could be far higher.
The Two Solutions
Option 1: Medigap Plan G is the most comprehensive solution available. Plan G covers the Part A deductible, all Part A coinsurance, the Part B 20% coinsurance after you pay the annual Part B deductible ($257 in 2025), skilled nursing facility coinsurance for days 21-100, and foreign travel emergencies. Under Plan G, in the catastrophic scenario above, your out-of-pocket exposure would be limited to the annual Part B deductible. Plan G works with any doctor or hospital that accepts Medicare, nationwide, with no network restrictions. The tradeoff is a monthly premium, which varies by age, gender, and state.
Option 2: Medicare Advantage with a low MOOP adds an annual out-of-pocket maximum to your coverage. CMS capped in-network MOOPs at $9,350 in 2025 for Medicare Advantage plans. Some plans offer MOOPs of $3,000 to $5,000 for in-network care. Once you hit the MOOP, covered in-network services are paid at 100% for the rest of the year. The tradeoff is network restrictions and the need to use plan-approved providers and facilities.
Which Solution Is Right for You?
People with serious or complex health conditions often prefer the predictability and nationwide provider access of Plan G. People who are healthier and want lower monthly premiums may prefer a Medicare Advantage plan with a competitive MOOP. Neither is universally better. The right answer depends on your health history, preferred doctors, travel habits, and financial risk tolerance.
What is not an option, for most people, is staying on Original Medicare alone with no supplemental coverage and hoping for the best. The financial consequences of a serious illness without supplemental coverage can be devastating. Call Insurance Innovators LLC at (530) 395-5309 to find the approach that gives you real protection.