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out-of-pocket maximum

Q: Are there out-of-pocket caps for Medicare?

There is no out-of-pocket maximum for Original Medicare , which is why most enrollees have supplemental coverage (from an employer-sponsored plan, Medigap , or Medicaid). Medicare Advantage plans must cap out-of-pocket costs at no more than $9,350 in 2025.[efn_note]" Preliminary Contract Year (CY) 2025 Standards for Part C Benefits, Bid Review and Evaluation " Centers for Medicare & Medicaid Services. Feb. 21, 2024[/efn_note] But that only applies to services that would otherwise be covered under Medicare Part A and Part B. It does not include out-of-pocket costs for prescription drugs covered by the Part D coverage that's integrated with most Advantage plans, nor does it include out-of-pocket costs for extra benefits like dental and vision. Medicare Part D coverage historically did not have a cap on out-of-pocket costs. However, that changed as of 2024, under the Inflation Reduction Act , when out-of-pocket costs were eliminated once a Part D enrollee reached the catastrophic coverage level. And starting in 2025, a new $2,000 out-of-pocket cap (indexed annually) applies to Part D coverage. This is true regardless of whether the Part D coverage is included in a Medicare Advantage plan or obtained as a stand-alone plan.

What is an out-of-pocket maximum?

An out-of-pocket maximum is a predetermined, limited amount of money that an individual must pay before an insurance company or (self-insured health plan) will pay 100% of an individual's covered, in-network health care expenses for the remainder of the year.

Health insurance plans can set their own out-of-pocket maximums, but they're constrained by federal regulations that impose an upper limit on how high out-of-pocket costs can be.

2025: The upper limits are $9,200 for an individual, and $18,400 for multiple family members on the same plan.¹ These are lower than the 2024 limits; 2025 was the first time there had ever been a decrease since out-of-pocket limits debuted in 2014.
2026: The limits will increase significantly, to $10,600 and $21,200, respectively.²

(The Biden administration had initially finalized 2026 caps of $10,150 and $20,300,³ but the Trump administration subsequently proposed a rule change that resulted in a higher out-of-pocket cap. This is described in more detail below.)

It's important to note that the allowable out-of-pocket limits for HSA-qualified high-deductible health plans (HDHPs) are lower, at $8,300 for an individual and $16,600 for a family in 2025.⁴ These will grow to $8,500 and $17,000, respectively, in 2026.⁵

Out-of-pocket caps apply to in-network care that's considered an essential health benefit, and only to plans that are not grandfathered or grandmothered or exempt from ACA regulations (such as short-term health insurance), as those plans do not have restrictions on their out-of-pocket exposure.

The out-of-pocket limit applies to all other types of private (non-Medicare/Medicaid) health insurance, including individual, small group, large group, and self-insured health plans.

The federal government publishes new guidelines each year that include the highest out-of-pocket maximum that health plans can impose.

(Through 2022, this was published in the annual benefit and payment parameter notice; for 2023 and future years, it's published in guidance that HHS issues no later than January of the prior year; the guidance for 2025 was issued in November 2023,⁶, and the guidance for 2026 was issued in October 2024.³ But as noted above, the 2026 guidance was replaced as part of a subsequent rule issued by HHS in 2025. This rule changed the methodology for calculating out-of-pocket limits, resulting in higher out-of-pocket limit caps for 2026 and future years.²)

So the highest allowable out-of-pocket maximum changes annually. In 2014, it was just $6,350 for an individual, but by 2026, it will have increased by 67%. Many health plans, however, have out-of-pocket maximums that are well below the highest allowable amounts.

How have out-of-pocket limits changed over the years?

Here are the federally allowed maximum out-of-pocket amounts since they debuted in 2014:

2014: $6,350 for an individual; $12,700 for a family
2015: $6,600 for an individual; $13,200 for a family.
2016: $6,850 for an individual; $13,700 for a family (there was also a requirement starting in 2016 that individual maximum out-of-pocket limits be embedded in family plans).
2017: $7,150 for an individual; $14,300 for a family.
2018: $7,350 for an individual; $14,700 for a family.
2019: $7,900 for an individual; $15,800 for a family
2020: $8,150 for an individual; $16,300 for a family.
2021: 8,550 for an individual; $17,100 for a family.
2022: $8,700 for an individual; $17,400 for a family (note that these are lower than initially proposed; CMS explains the details here)
2023: $9,100 for an individual; $18,200 for a family.
2024: $9,450 for an individual; $18,900 for a family.
2025: $9,200 for an individual; $18,400 for a family.
2026: $10,600 for an individual; $21,200 for a family (higher than initially finalized, as explained by CMS).

How does HHS determine the out-of-pocket maximum?

The out-of-pocket maximum is set each year by HHS. In most years, HHS has used a formula that calculates how much the average premium for employer-sponsored health insurance in the preceding year exceeds the average 2013 premium for employer-sponsored health insurance. The out-of-pocket maximum is then based on adjusting the 2014 out-of-pocket maximum by that same percentage growth.

But 2020 and 2021,⁷ and starting again in 2026, HHS changed the formula to also include the growth of individual market health insurance premiums since 2013.⁸ This approach results in higher out-of-pocket limits, meaning consumers can pay more in out-of-pocket costs.

The math behind how out-of-pocket limits are calculated

We can get a better understanding for how the out-of-pocket limits are calculated by looking at examples from some recent years. For 2025, HHS looked at how much average employer-sponsored premiums in 2024 ($7,110) exceed average employer-sponsored premiums in 2013 ($4,897). The growth amounted to 45.2%. So that means the maximum out-of-pocket for 2025 is 45.2% higher than the maximum out-of-pocket in 2014. That works out to $9,220, and they round down to the nearest $50, for a 2025 maximum out-of-pocket of $9,200.⁶

For 2026, the out-of-pocket cap was initially calculated in the fall of 2024 by the Biden administration, using the formula that only considered premium growth for employer-sponsored plans. That amounted to 60% growth from 2013 to 2025, because the projected premium for 2025 had grown to $7,833. This pushed the out-of-pocket cap to $10,150 for a single individual — 60% higher than it had been in 2014.³

But the Trump administration proposed and finalized a change in the methodology, reverting to the process that had briefly been used during the first Trump administration. When they considered both employer-sponsored and individual market premium growth since 2013, it amounted to a 67% increase. This meant the out-of-pocket cap for 2026 would be 67% higher than it had been in 2014, instead of the previously announced 60%. As a result, the highest-allowable out-of-pocket limit for 2026 will be $10,600 for an individual and $21,200 for multiple family members covered on the same policy.⁸

Are there out-of-pocket caps for Medicare?

There is no out-of-pocket maximum for Original Medicare, which is why most enrollees have supplemental coverage (from an employer-sponsored plan, Medigap, or Medicaid).

Medicare Advantage plans must cap out-of-pocket costs at no more than $9,350 in 2025.⁹ But that only applies to services that would otherwise be covered under Medicare Part A and Part B. It does not include out-of-pocket costs for prescription drugs covered by the Part D coverage that's integrated with most Advantage plans, nor does it include out-of-pocket costs for extra benefits like dental and vision.

Medicare Part D coverage historically did not have a cap on out-of-pocket costs. However, that changed as of 2024, under the Inflation Reduction Act, when out-of-pocket costs were eliminated once a Part D enrollee reached the catastrophic coverage level. And starting in 2025, a new $2,000 out-of-pocket cap (indexed annually) applies to Part D coverage. This is true regardless of whether the Part D coverage is included in a Medicare Advantage plan or obtained as a stand-alone plan.