Senator Ron Wyden and 14 Democratic co-sponsors plan to introduce legislation on June 25, 2026, to cap out-of-pocket costs for beneficiaries in traditional Medicare at $5,000.

Traditional Medicare currently has no limit on what a beneficiary could pay in cost sharing. Enrollees in traditional Medicare pay a 20% share of Medicare costs for medical services after meeting deductibles. In contrast, the out-of-pocket cap for Medicare Advantage plans is currently $9,250. More than half of all Medicare enrollees are in Medicare Advantage plans.

Wyden stated that other health insurance plans, including employer coverage and those under the Affordable Care Act, incorporate such caps. "Everyone else in the health insurance neighborhood has one — employer coverage, the Affordable Care Act, all of them have a cap," Wyden said. He added, "There's no good, common-sense reason why the flagship health program doesn't have the same protection."

Under the proposed legislation, Medicare would pay any amounts over the $5,000 limit. The proposal specifies that payments made by Medigap plans or retiree health plans toward beneficiaries' care would count toward the cap. About 43% of people enrolled in traditional Medicare purchase separate insurance, often called Medigap.

The proposal includes provisions to eliminate an asset test to qualify for special programs that help reduce costs for older people with lower incomes. A Brown University study estimates a $5,000 cap could save enrollees an average of about $1,200 a year in direct savings and reductions in Medigap supplemental premiums. The study estimates that just over 11% of traditional Medicare beneficiaries, about 3.2 million people, would directly benefit from a $5,000 cap if it was implemented in 2028. It also projects that just over 52% of all traditional beneficiaries would exceed a $5,000 cap at least once over the next 10 years.

Andrew Ryan, a professor at Brown's School of Public Health, said analysts estimated a $5,000 cap "could cost over $50 billion annually, which is a lot of money" to add to the federal balance sheet. Jackson Hammond, a senior policy analyst with the Paragon Health Institute, said any cap "is generally going to increase expenses for the program without adding a lot of benefits to enrollees."

Wyden also anticipated potential debate in the Senate. "I suspect it will come up on the floor of the Senate that Democrats want to give a fair shake to people on traditional Medicare and Republicans want to help billionaires," Wyden said. The Medicare trust fund is scheduled to start falling short of funding in 2033.

Why It Matters

The proposed legislation aims to address a gap in coverage within traditional Medicare, which currently lacks an out-of-pocket spending limit. This initiative seeks to provide financial protection for beneficiaries, potentially saving some individuals thousands of dollars annually. Proponents highlight the consumer benefit, while critics raise concerns about the potential cost to the federal budget and its impact on the Medicare trust fund.