Legislation introduced by Sen. Ron Wyden would place a $5,000 annual cap on out-of-pocket spending for enrollees in traditional Medicare Parts A and B.
Under the current system, Medicare enrollees are required to pay 20% of their covered medical costs after meeting deductibles, with no upper spending limit in place.
That uncapped liability means a serious illness such as cancer or a prolonged hospital stay can result in beneficiaries facing thousands of dollars in unexpected expenses.
Unlike traditional Medicare, Medicare Advantage plans are already required by law to provide enrollees with an annual out-of-pocket spending limit for hospital and physician services.
The absence of a cap leads roughly 43% of traditional Medicare enrollees to purchase supplemental insurance, commonly known as Medigap, to protect against catastrophic costs.
Medigap premiums have risen sharply in recent years and can cost thousands of dollars annually, placing a particularly heavy burden on retired couples living on fixed incomes.
A $5,000 cap could save enrollees an average of about $1,200 a year, both in direct savings and through reductions in Medigap supplemental insurance premiums, according to research cited in the proposal.
Just over 11% of traditional Medicare beneficiaries, approximately 3.2 million people, would directly benefit from such a cap if it were implemented in 2028.
Over a 10-year horizon, just over 52% of all traditional Medicare beneficiaries would exceed the $5,000 threshold at least once, highlighting the long-term financial exposure many enrollees face.
Lead author Andrew Ryan, a professor at Brown’s School of Public Health, said analysts estimated such a cap “could cost over $50 billion annually, which is a lot of money” to add to the federal balance sheet.
Separate estimates project that adding the cap would increase total Medicare spending by $38.8 billion in 2023 terms, representing a 7.8% rise in aggregate traditional Medicare expenditures relative to current law.
Critics argue that any cap “is generally going to increase expenses for the program without adding a lot of benefits to enrollees,” raising concerns about long-term fiscal sustainability.
Supporters counter that funding mechanisms exist, and that “any policy that’s going to cost money, there will be an argument over where the money is coming from,” as research associate Brian Keyser of the Center for American Progress put it.
Keyser co-authored a Medicare paper suggesting lawmakers could fund changes to traditional Medicare by reducing government payments to Medicare Advantage insurers, noting that Advantage would cost the government $76 billion more this year than if the same enrollees remained in the traditional program.
Medicare Advantage has historically enjoyed strong Republican support for its private-sector structure, additional benefits such as eyeglasses and hearing aids, and has now attracted more than half of all Medicare enrollees nationwide.
The program has also drawn increased scrutiny in recent years over concerns about service denials and the difficulties some consumers encounter when attempting to switch back to traditional Medicare coverage.
