Medigap Out-of-Pocket Limits Explained
Most Medigap plans eliminate out-of-pocket costs, but Plan K and L have annual caps. Learn how these limits compare to Medicare Advantage maximums in 2026.
Medicare Supplement (Medigap) plans typically eliminate out-of-pocket limits because they cover most cost-sharing upfront, but Plans K and L impose specific annual caps. In 2026, Medigap Plan K limits your spending at $8,000, while Plan L caps it at $4,000. Once you reach these thresholds, the plan pays 100% of covered Medicare services for the rest of the year. In contrast, Original Medicare has no out-of-pocket maximum, leaving you exposed to unlimited 20% coinsurance.
Why do most Medigap plans lack out-of-pocket caps?
The structure of standard Medicare Supplement plans is designed to fill the gaps left by Original Medicare. The Centers for Medicare & Medicaid Services (CMS) mandates that standardized Medigap plans (such as A, B, C, D, and N) cover specific coinsurance and copayments. Because these plans pay 100% of the beneficiary’s share of Medicare-approved costs, an annual out-of-pocket limit is rendered redundant. You do not accrue a deductible or coinsurance that needs capping; the insurance simply pays what Medicare does not. This makes comprehensive Medigap plans expensive premiums, as the insurer is assuming the full financial risk of your medical utilization.
How do Medigap Plan K and Plan L caps work?
Plans K and L are distinct because they are cost-sharing policies rather than first-dollar coverage. They are designed to be more affordable than comprehensive plans but require you to pay a portion of costs before the insurer takes over. For 2026, CMS sets the out-of-pocket limit for Plan K at $8,000 and for Plan L at $4,000. These figures include both the annual Part B deductible and any coinsurance payments you make throughout the year. The Part B deductible in 2026 is $283. Once your total out-of-pocket spending hits the plan-specific cap, the Medigap policy covers 100% of approved Medicare services for the remainder of the calendar year.
What is the difference between Medigap and Medicare Advantage limits?
Many beneficiaries confuse the out-of-pocket maximums (MOOP) of Medicare Advantage plans with Medigap limits. For 2026, the CMS sets the in-network MOOP ceiling for Medicare Advantage plans at $9,250. This limit applies to doctor visits, specialist care, and hospital stays within the plan’s network. It is important to note that Medicare Advantage MOOPs do not include prescription drug costs; those are governed separately by Part D rules. Medigap, conversely, does not cover Part D drugs, so you must pair a Medigap plan with a standalone Part D plan or a drug benefit to cover prescriptions. While the $9,250 Medicare Advantage cap is slightly higher than the Plan K cap of $8,000, the nature of the coverage differs significantly. Medicare Advantage restricts you to provider networks, whereas Medigap allows you to use any provider that accepts Medicare.
Which limit is better for your wallet?
There is no single "better" limit, only the limit that fits your healthcare usage and budget. A healthy individual who sees a primary care physician once a year may find that the low premium of a Medigap Plan K or L is sufficient, as they are unlikely to hit the $8,000 or $4,000 caps. However, a retiree with chronic conditions requiring frequent specialist visits and surgeries might find that the higher premium of a comprehensive Medigap plan or a Medicare Advantage plan with a lower, plan-specific MOOP is a safer financial bet. The Medicare Advantage plan average premium in 2026 is projected to be around $14.00 per month, which is often lower than the premiums for comprehensive Medigap plans.
What are the specific 2026 out-of-pocket figures?
To plan your budget accurately, you must understand the baseline costs before caps are applied. The standard Part B premium for 2026 is $202.90 per month. The Part B annual deductible is $283. For hospital stays under Part A, the deductible is $1,736 per benefit period. If you choose Medigap Plan K, you pay 50% of Medicare costs until you hit the $8,000 cap. If you choose Plan L, you pay 25% of Medicare costs until you hit the $4,000 cap. These percentages are the key differentiator: Plan L has a higher upfront cost-sharing rate but a much lower cap, meaning you reach "full coverage" sooner than with Plan K.
| Plan Type | 2026 Out-of-Pocket Cap | Cost Sharing Ratio | Network Restrictions |
|---|---|---|---|
| Original Medicare | None | 20% Coinsurance (Unlimited) | None (Any Medicare provider) |
| Medicare Advantage | $9,250 (CMS Ceiling) | Varies by Plan | Yes (HMO/PPO Networks) |
| Medigap Plan K | $8,000 | 50% of Costs | None (Any Medicare provider) |
| Medigap Plan L | $4,000 | 25% of Costs | None (Any Medicare provider) |
What common mistakes do families make regarding caps?
Many families assume that the Medicare Advantage out-of-pocket maximum includes prescription drugs, but in fact, it does not. The MOOP for Part C plans applies only to the medical benefits (doctors, hospitals). Prescription drug costs are tracked separately under Part D rules, and the annual out-of-pocket limit for drugs was raised to $2,000 in recent years, creating a separate safety net. Another critical misconception is assuming that Medigap premiums are static. CMS allows insurers to adjust premiums based on risk, and in many states, rates can rise as you age or based on local market competition. Therefore, a cap on out-of-pocket medical costs does not guarantee a cap on your total annual healthcare spend, because your premium bill may change annually.
How can you check your specific plan limits?
While the federal government sets standardized limits for Medigap K and L, individual Medicare Advantage plans can set their MOOPs below the $9,250 CMS ceiling. To ensure you are not surprised by a bill, you should perform the following verification steps during your Open Enrollment period.
- Review your Medicare Advantage Summary of Benefits document, which explicitly lists your in-network and out-of-network MOOP amounts.
- Verify if your Medigap policy is Plan K or L by checking your policy contract, and confirm the current year’s dollar cap matches the CMS announcement.
- Calculate your projected annual healthcare spend. If it consistently approaches the $8,000 Plan K cap, consider if the premium difference for Plan L or a comprehensive plan is justified.
- Check if you qualify for the Part D Low-Income Subsidy (LIS), which can reduce your out-of-pocket costs for prescriptions regardless of your medical plan.
- Re-evaluate your choice during Annual Election Periods (October 15 to December 7) to switch between Medigap and Medicare Advantage if your health needs change.
Frequently Asked Questions
Does Original Medicare have an out-of-pocket limit?
No, Original Medicare Parts A and B have no annual out-of-pocket maximum. You remain responsible for 20% coinsurance on Part B services indefinitely, which is why many people purchase Medigap or enroll in Medicare Advantage to cap their costs.
What is the Medigap Plan K out-of-pocket limit for 2026?
The annual out-of-pocket limit for Medigap Plan K in 2026 is $8,000. This limit includes the Part B deductible and all coinsurance payments. Once this amount is met, the plan covers 100% of Medicare-approved services for the rest of the year.
Is the Medicare Advantage MOOP the same as the Medigap limit?
No. The Medicare Advantage MOOP is set by the CMS at $9,250 for in-network care in 2026, though individual plans may set it lower. Medigap limits are specific to the plan letter (K or L) and apply to services outside of network restrictions. They do not include prescription drug costs.
Can I switch from a Medigap Plan K to a Medicare Advantage plan?
Yes, but timing is critical. You can usually switch from a Medigap plan to a Medicare Advantage plan during the annual enrollment period. If you have had Medicare Advantage for more than 12 months, you may also be able to switch during a Medicare Advantage Open Enrollment Period. Always compare the network restrictions and premium differences before making a switch.
How do copayments affect the Medigap K and L caps?
For Medigap Plan K, you pay 50% of Medicare costs, and for Plan L, you pay 25%. These amounts count toward your out-of-pocket cap. Plan N, by contrast, has small fixed copayments for office visits that may or may not count toward a limit, depending on the specific policy terms, but Plan N does not have a dollar cap like K and L do.