The AARP is advocating for Congress to pass the Medicare Cost Cap Act of 2026. This proposed legislation, known as S. 4886, aims to introduce a $5,000 annual cap on out-of-pocket expenditures for Medicare Part A and Part B services starting in 2028. This change would affect about 34.3 million individuals enrolled in original Medicare.
Capping out-of-pocket costs in Medicare Part A and Part B would protect these Americans from the kind of catastrophic medical bills no one should face,” said Nancy LeaMond, AARP’s chief advocacy and engagement officer, in a letter to the bill’s sponsors.
Why It Matters
Millions of Americans currently face unlimited out-of-pocket costs under traditional Medicare, which can lead to overwhelming bills if they become seriously ill or require extensive treatment. Unlike many private insurance plans and Medicare Advantage, traditional Medicare lacks an annual cap on deductibles, copayments, and coinsurance costs.
What To Know
The legislative proposal seeks to implement a spending limit for beneficiaries of traditional Medicare. AARP, a major advocacy group for older Americans, has emphasized the measure’s potential to provide essential financial protection for seniors and individuals with disabilities, addressing a key discrepancy between traditional Medicare and Medicare Advantage plans.
While Medicare Advantage, Medicare Part D, Medicaid, employer-sponsored coverage, and individual marketplace coverage have various caps on out-of-pocket expenses, original Medicare places no limit on annual expenditure,” LeaMond stated. “Those with chronic conditions or significant illnesses could face tens of thousands in personal expenses.”
Under the bill, costs such as deductibles, copayments, coinsurance, and other cost-sharing expenses would count toward the $5,000 limit, while monthly premiums would not. Once the cap is reached in a given year, Medicare would cover 100% of additional covered costs for that year. The cap would likely rise in future years based on Medicare spending growth.
Kevin Thompson, CEO of 9i Capital Group, expressed concern that aligning traditional Medicare with Medicare Advantage caps could push Medicare toward privatization. “By making the two programs look and operate more similarly, beneficiaries may be incentivized to choose private plans,” Thompson told Newsweek.
Medicare Now and Under the New Bill at a Glance
How Much Money Could Seniors Save?
Proponents of the bill argue that potential savings are significant. Brown University researchers estimate beneficiaries could save an average of $1,255 annually. The policy intends to shield seniors from catastrophic bills due to hospitalization or severe illness. However, Thompson warned about potential tradeoffs, such as narrower provider networks, fewer choices, and administrative hurdles.
Your primary care physician may be in-network while the hospital is not, leading to unexpected costs,” Thompson mentioned. “Or you may require multiple prior authorizations that could delay care.”
Senate Democrats supporting the bill estimate that 3.2 million Medicare beneficiaries would benefit directly from the cap in 2028. Over ten years, more than 52% of traditional Medicare beneficiaries may exceed the proposed $5,000 limit at least once.
Donald Trump and Republicans have significantly reduced our healthcare options, leaving many unable to afford necessary care,” said Senate Democratic Leader Chuck Schumer. “Senate Democrats are fighting back; our legislation to lower out-of-pocket costs is crucial. No one should face bankruptcy from medical care.”
How Does This Compare With Medicare Advantage?
Medicare Advantage plans already offer annual out-of-pocket limits. Enrollment in these plans nearly doubled between 2017 and 2026, driven partly by reduced out-of-pocket costs.
If the act takes effect, the $5,000 annual cap would offer financial protection for people facing cancer or other serious illnesses,” Alex Beene, a financial literacy instructor, told Newsweek. “It also makes traditional Medicare more competitive with Medicare Advantage.”
The cap would align traditional Medicare more closely with Medicare Advantage by providing similar protections against catastrophic costs, though it may conflict with administration interests in public vs. private Medicare.
The current administration may not want these programs on equal footing,” Drew Powers, of Powers Financial Group, remarked. “Medicare Advantage is the path toward privatizing Medicare, a primary goal of the right.”
This proposal complements recent changes in Medicare prescription drug coverage, which will also see annual out-of-pocket caps over the coming years.
What Happens Next
The bill is currently in the Senate, referred to the Senate Finance Committee, but has not yet progressed to a vote. Its passage faces challenges, particularly regarding its cost to the federal government. Shifting more expenses to Medicare could increase federal spending significantly.
Is it likely to pass? Don’t count on it,” Michael Ryan of MichaelRyanMoney.com told Newsweek. “It’s newly introduced, has no CBO score, and lacks identified funding. Bills like this often die in committee.”
Leave a Reply