Financial Effects of an Out-of-Pocket Cap in Traditional Medicare.

Authors

Andrew M Ryan, Meehir N Dixit, Mathew M Maughan, David J Meyers, Fangli Geng

Published in

JAMA health forum. Volume 7. Issue 10. Pages e263386. Oct 02, 2026. Epub Oct 02, 2026.

Abstract

Traditional Medicare (TM) exposes beneficiaries to substantial financial risk because, unlike Medicare Advantage (MA), there is no out-of-pocket (OOP) maximum for medical spending. Policymakers have proposed introducing an OOP cap, but its fiscal and behavioral effects are uncertain.
To estimate the financial impacts of introducing OOP spending caps of $3000, $5000, or $10 000 annually in TM on beneficiary costs, enrollment patterns, and Centers for Medicare & Medicaid Services expenditures between 2026 and 2034.
This economic evaluation using principles of microsimulation analysis projected enrollment, spending, and health care use outcomes under baseline (no OOP cap) and 3 alternative cap scenarios using publicly available national Medicare and insurance data from 2020 to 2024 with projections through 2034. The model incorporated elasticity-based behavioral responses, including beneficiary switching between TM and MA, changes in service use, and increases to MA benchmarks and spending. Sensitivity analyses varied model assumptions probabilistically.
Introduction of annual OOP caps for Parts A and B in TM at $3000, $5000, or $10 000.
Projected changes in beneficiary enrollment by coverage type, mean annual beneficiary OOP and premium spending, and annual Medicare expenditures.
Between 2026 and 2034, a $3000 OOP cap was projected to reduce mean annual beneficiary expenditures by $1568, compared with $1138 under a $5000 cap and $707 under a $10 000 cap. Corresponding increases in annual Medicare spending were estimated at $96 billion (90% simulation uncertainty interval [SUI], $80-$114 billion), $70 billion (90% SUI, $55-$85 billion), and $39 billion (90% SUI, $29-$50 billion), respectively. OOP caps, especially at lower thresholds, would substantially shift beneficiaries from MA to TM.
Results of this study suggest that implementing an OOP spending cap in TM would provide meaningful financial protection for beneficiaries but impose substantial fiscal costs on Medicare.

PMID:
42826031
Bibliographic data and abstract were imported from PubMed on 03 Oct 2026.

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