An Out-Of-Pocket Spending Cap Would Make Medicare More Affordable For Millions

Young woman taking blood pressure of another woman in office.

A $5,000 out-of-pocket spending cap for traditional Medicare would reduce expenses for enrollees with the greatest healthcare needs by more than 50 percent.


The Issue

Traditional Medicare does not have an out-of-pocket spending cap, unlike in Medicare Advantage and most commercial plans (like employer-based coverage) available to people under age 65. This can result in very high expenses for enrollees with significant health problems.

Key Findings

More than 4.5 million Medicare enrollees (12 percent) will incur over $5,000 in cost-sharing expenditures next year. A $5,000 out-of-pocket spending cap for traditional Medicare would:

  • Save beneficiaries an average of $5,500 a year, for those individuals whose annual out-of-pockets exceed $5,000.

  • Decrease out-of-pocket costs for high spending enrollees by 51 percent; reduce supplementary plan spending by about 51 percent; and lower Medicaid spending by about 58 percent.

  • Increase Medicare spending by $38.8 billion in 2023 relative to current law.


A $5,000 out-of-pocket spending cap for traditional Medicare would result in significant savings for enrollees with the greatest healthcare needs. An out-of-pocket spending cap would also result in reductions in supplementary insurance payments, premiums for Medigap plans, and federal Medicaid expenditures for enrollees dually covered by Medicare and Medicaid.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.